New-car incentives impact CPO’s overall sales pace

DETROIT  - 

Elevated new-vehicle incentives are helping to slow the overall sales pace of certified used cars and trucks, analysts said, but some automakers’ CPO sales are still thriving.

Industrywide sales of certified used cars and trucks in August dipped 1.4 percent to 230,013 but were up 0.3 percent to 1,798,711 units in the first eight months, according to AutoData Corp.

Sluggish new-vehicle sales are pressuring automakers to use incentives to move the metal, analysts said. Liberal incentives can bring new-vehicle transaction prices and especially their monthly payments, very close to certified used-vehicle prices. Certified vehicles typically command a premium to cover costs of reconditioning and factory-backed warranties.

These factors can cause some auto companies and dealers to take their eyes off of certified while they concentrate on new vehicles, analysts said.

Edmunds analyst Ivan Drury said August’s average new-car incentive of $3,377 was up 15.1 percent from August 2016 and the third highest for any month since January 2002.

“Like with (Chevrolet) Silverado, they are advertising something like 17, 18 percent off of MSRP,” Drury said. “When you have things like this it (discourages you) to certify your existing, 2- or 3-year old Silverados. Their prices are getting close to the prices of new trucks.

“It’s kind of bizarre that we have such strong residual values on trucks, and we also have large incentives," he added. 

Whatever the reason, some of the industry’s largest sellers of CPO vehicles are seeing their sales fall this year.

For example, the Toyota division’s CPO sales in August dropped 16.6 percent to 30,380 and slid 11.7 percent to 249,842 in the first eight months.

Toyota expects growth in 2018

In an email response, Scott Heyer, the Toyota division sales operations general manager, said the company will fall short of its sales record of over 400,000 units set in 2016, but expects 2017 to be “one of our best volume years in history. We are forecasting to get back to year-over-year growth in 2018.”

But despite the competition from new vehicle sales, CPO sales in general are still doing well, said Anil Goyal, an analyst at Black Book. “They are maintaining the level that we saw last year, which is high for certified,” Goyal said. “As an industry, we’re seeing certified (equal) about 15 percent of all new sales”

And some auto companies and dealers are confident the strong sales increases they’ve seen this year will continue.

Brian Benstock, vice president of Paragon Honda and Paragon Acura in Woodside, N.Y., predicts that CPO sales will continue to grow, especially for the Honda division.

Honda’s stringent certification guidelines makes the difference, Benstock said.

The company conducts monthly visits to most if not all dealerships to inspect vehicles registered as CPO to make sure dealers are doing the mechanical and cosmetic reconditioning as required, he said.

“Hopefully all dealers understand this puts everybody on a level playing field,” he said.

“We’re now getting customers that are multiple time repeat certified buyers.

In August, the Honda division’s CPO unit sales increased 2.7 percent to 22,896; its sales in the first eight months improved 5.2 percent 176,104.

Sights on sales record

Martin Gleason, senior manager of CPO at the Nissan division expects the company’s CPO sales to exceed 200,000 units this year, which would represent at least a 9-percent increase over last year and break last year’s record.

In August, the Nissan division’s CPO unit sales rose 7.5 percent to 18,596; its sales in the first eight months improved 13.4 percent to 139,079.

Gleason said the company’s consistent support of the program with attractive finance rates, dealership incentives and training, and a push for dealers to list every certified used vehicle for sale online, makes the difference.

“There’s nothing new,” Gleason said. “We’ve had all of these for the past three years.”

Eric Swanson, head of certified pre-owned at Fiat Chrysler Automobiles said FCA’s CPO program drives consumers to its dealerships, and when dealers convert those customers to new vehicles, that’s a good thing.

Swanson said his goal is to capture a chunk of the industry’s annual 40 million plus used-vehicles sales.

First new, then CPO

“What if there is a really great incentive on a new car? Move people over to those cars,” Swanson said. “There are a lot of people buying used cars, and I want them in FCA dealerships buying certified pre-owned cars.”

FCA’s August sales were up 18.4 percent to 22,134 units; its August year-to-date sales were up 13.9 percent to 169,529.

Jose Froehlich, senior manager, certified pre-owned, Hyundai Motor America, in an email response, said the company is seeing increased sales of CPO SUVs, and its future off-lease vehicles mix will better align with customer demand for those vehicles.

“Our CPO program continues to be a great entry point into Hyundai and drives incremental dealer traffic, where consumers may select a certified pre-owned vehicle or, perhaps, a new Hyundai, given the attractive in-market offers currently available,” he said.

Hyundai’s CPO unit sales in August dropped 14.4 percent to 7,140; its August year-to-date sales fell 11.9 percent to 57,958.

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