Certified Pre-Owned

What June's CPO Sales Dip Won't Tell You

WOODCLIFF LAKE, N.J.  - 

For the first time in one-and-a-half years, monthly certified pre-owned sales fell on a year-over-year basis — but take that with a grain of salt.

Sales in June declined more than 2 percent, but there's more to the story.

CPO sales through the first half of 2014 beat prior-year figures by more than 8 percent, according to Autodata Corp., keeping the market on track for a fourth consecutive year of record numbers.

Autodata released industry-wide certified sales figures on Wednesday, reporting that dealers sold 181, 106 CPO vehicles in June. This marked a 2.4-percent slide from June 2013 and a 12.8-percent drop from May’s tally. The last time there was a year-over-year decline in certified pre-owned sales was December 2012, according to Autodata.

That said, the daily selling rate in June was 7,546, a solid 5.7-percent increase over the 7,136 sales rate in June 2013. And Kia, which sold 4,056 CPO units for the month, had its best month ever.

Not to mention, there have been 1.13 million CPO units sold this year, which beats the figures through six months of 2013 by 8.3 percent.

Strong First Half for CPO Sales

CARY, N.C.  - 

Early indications are that June was another solid month of certified pre-owned sales as the first half of 2014 drew to a close.

Hyundai, for example, had its strongest June on record for CPO, selling 7,324 vehicles — an 8.1-percent gain. Its 45,852 year-to-date CPO sales are up from 37,424 in the first half of 2013.

Over at Kia, dealers posted 4,056 certified sales in June for a 36.3-percent gain, and its first-half sales of 21,863 CPO cars are up 41.4 percent over last year.

Audi sold 3,649 CPO vehicles in June and has sold 21,827 certified units year-to-date. Those compare to 3,399 certified cars sold in June 2013 and 19,185 units moved in the first half of last year.

Volvo had 1,205 certified sales in June, up 40 percent year-over-year. Its six-month total is at 6,704, versus 5,545 CPO sales in the same period of 2013.

Next up, Volkswagen moved 7,102 CPO units in June (down 18.3 percent) and has sold 45,015 certified vehicles so far this year (down 9.5 percent).

Stay tuned to Auto Remarketing as more certified pre-owned sales results come in.

 

Investing in CPO & Recon: It Pays Off

PHOENIX - 

For Bill Luke Chrysler Jeep Dodge & Ram, the additional investment in reconditioning and getting its inventory retail-ready and qualified for certification is well worth it.

Jody Knaub — the dealership’s used-car director — emphasized the high expectations consumers often have for conditions of used cars, which can impact the level of investment that’s made in reconditioning.

And those recon costs are particularly high for this Phoenix dealership.

“Nowadays, I think the customer expects a (used) car to be a lot nicer than they did, say, even 10 years ago,” Knaub said. “People are really in a place where they expect that car to be almost perfect.”

In a recent comparison of reconditioning costs for Chrysler stores in the Phoenix area, Knaub said the average recon ticket at his store was around $900, versus a cost of about $450 for other Chrysler dealers in the area.

And that’s even with Bill Luke selling a good bit of current model-year, 1-year-old and 2-year-old used cars.

“If you consider that, you would think that the reconditioning costs, being at the level that we’re at, would be less than   average, but that’s not the case,” Knaub said. “It’s actually a lot higher than everybody in Phoenix.”

And with the dealership being an Internet store, it is “price chasing,” as well. So, the dealership has to acquire cars at a low enough price that it can do all the reconditioning it needs too and still meet pricing justifications within its market.

But here’s one pay-off: customers are happy.

In fact, Knaub said that “our customer satisfaction ratings are so much higher because these cars are in good condition.”

CPO Focused

When it comes to its inventory of pre-owned Chrysler Group products, the store typically will only keep products that meet CPO guidelines.

That approach and other strategies the store puts into place seem to be working — as highlighted in Auto Remarketing’s “Best CPO Dealers in the USA” issue, Bill Luke Chrysler Jeep Dodge & Ram sold more CPO vehicles than any other Chrysler Group store in 2013.

In fact, its 1,520 certified sales last year were more than 500 ahead of the closest competitor.

And when looking at the investment needed for reconditioning and CPO, there is an interesting focus for the dealership, as Knaub illustrates.

“I think the way that the market is going now, it’s such a price-driven situation that we’ve taken the vehicles and put in the money that we need to get them to qualify at or even above the certification standards, but we’ve started looking at certified as being a great opportunity for the customer to have a good experience with a used car,” Knaub said. “It’s also an opportunity for us to possibly get them back for additional service and so forth, because they bought their certified car here.”

But the most significant area where CPO has helped, he said, is in marketing and branding, particularly with how strong a branding weight the term “certified” cars carries among consumers and how widespread it has become in the industry. It becomes a great branding tool.

“And so, we’ve turned it into almost a volume generator for us, not so much a gross profit center,” Knaub said.

In other words, instead of CPO simply being used primarily as a profit center for the dealership, it has become more of a marketing/branding tool, giving customers value and driving volume for the store.

“Our gross profit margins — our dollar per copy, if you will —  are lower than probably what a lot of stores around us run. But we’re the No. 1 Chrysler store in the world, as far as volume. Honestly, it pencils out in making a few less dollars per car, but selling a whole lot more,” Knaub said. “Our profit margins and our bottom line have been dramatically increased.”

He credited a big part of that success to selling service contracts, which can be huge profit centers, he said.

“Just by increasing our volume, it’s more doc fees, it’s more service contract penetration … and all that ends up with a better bottom line,” he said.

Recon Steps

Once the car arrives on the lot, the dealership takes a full description of the vehicle, which is photographed immediately.  The pictures — the dealership takes six or seven, depending on the car —are posted online prior to completing the car’s get-ready process.

The car is then checked into service, where a team of dedicated used-car technicians performs the necessary work.

There is a recon manager and an assistant, whose “sole goal is to have that car turned out of service in detail in seven days,” Knaub said.

“We’ve given them a cap on how much money they can spend. After that, then they get approval,” he said. “We pretty much let her decide whatever she wants to do anyway just for speed, because it’s so important now for that process to be as quick as possible.”

At that point, the vehicle is moved to the detailing department, then the dealership’s special photo room to shoot up to 30 or 35 photographs of the car (The store actually hired a photographer specifically for taking these vehicle pictures). And once the photography is done, the car hits the lot.

10 CPO Cars to Attract Young Luxury Buyers

IRVINE, Calif.  - 

Interest among consumers in certified pre-owned vehicles continues to rise, including many Millennials and young professionals who may use CPO as an entry into the luxury car segment.

With that in mind, Kelley Blue Book released its "10 Best Certified Pre-Owned Luxury Cars Under $30,000" — a list that may come in handy for a dealer when such an aspirational shopper arrives on the lot.

Topping KBB’s rankings was the 2011 BMW 3 Series, followed by the 2011 Lexus ES and the 2011 Acura TL.

All vehicles on the list are 2011 model-year luxury cars with a Kelley Blue Book Certified Pre-Owned Price that starts under $30,000.

“CPO sales have increased nearly 11 percent so far in 2014 compared to this time last year, demonstrating consumers are interested in the value-add of a CPO model as their next vehicle purchase,” said Jack Nerad, executive editorial director and senior analyst for KBB.com. 

“Today, many Millennials and young professionals are aspirational luxury car owners, and a CPO luxury model helps make that a reality sooner than they may be able to afford buying a new luxury car.” 

The complete list is below, along with KBB CPO starting price for each vehicle. (KBB notes that “All starting Kelley Blue Book CPO Prices above reflect typical mileage and basic equipment, effective June 2014.”)

1. 2011 BMW 3 Series: $25,464

2. 2011 Lexus ES: $27,751

3. 2011 Acura TL: $23,943

4. 2011 Audi A6: $29,525

5. 2011 Cadillac CTS: $23,208

6. 2011 Infiniti G: $20,717

7. 2011Mercedes-Benz GLK-Class: $28,383

8. 2011 Cadillac DTS: $28,227

9. 2011 Volvo XC60: $24,297

10. 2011 Audi A4: $22,627

Paragon Dealership Sets Honda CPO Record

NEW YORK  - 

The 346 certified pre-owned vehicles that Paragon Honda sold in May was an all-time record for the brand, and the New York dealership’s leadership said the store should eclipse 3,300 CPO sales this year.

The dealership has sat atop Honda’s list of top CPO sellers for quite some time and earned Auto Remarketing’s inaugural CPO Dealer of the Year honors in 2010.

Brian Benstock, Paragon’s vice president and general manager, talked with Auto Remarketing about the record, saying the availability of off-lease vehicles was a big factor in helping the dealership achieve this mark.

What’s more, he anticipates this pipeline will continue growing this year, giving dealers greater opportunity to acquire these CPO-ideal cars.

That said, the CPO market in general is growing, meaning other dealers — including competitors — are seeing their certified sales blossom.

So how does Paragon distinguish itself from other stores, amid these widespread gains?

“Somebody asked me that the other day, and I said it’s like golf clubs,” Benstock said. “If I gave you a set of Ping golf clubs and I had a set of Ping golf clubs … and Tiger Woods had the same clubs, well, our results are going to be dramatically different.

“I would say the same is true in the certified used-car business. I think more people are getting into it; more people are using tools like vAuto and data-mining tools, but the reality is, people that use the tools the best will have a better result,” he continued.

To illustrate how he uses these industry tools differently, Benstock used another sports example: Formula 1 racing. In the 1950s and 1960s, he said, a solid pit stop would take 59 seconds to change two tires. These days, the bar has been raised: four tires changed in about 2.3 seconds.

“So, I think velocity, throughput, speed will continue to be the edge that the sharper dealers have,” he said.

And that, he said, applies to the speed at which dealers can get cars from acquisition to the frontline, turn the inventory and other efficiencies.

“These things will separate the winners from the losers going forward,” he said. “Everybody has time from acquisition to frontline-ready. Everybody has that time. For some dealers, it’s seven days. For some, it’s 14 days.

“In our case, we’re trying to get that down below 12 hours,” Benstock continued. “So, it’s the fresher the fish, the better the dish.”

And that also applies to things like responding to customer leads: the more efficient, the better.

“All of these things tie in,” he said, referring to tools, acquisition-to-frontline-ready speed and response time to customer leads.  “All of these things lead to great turn, great velocity and great throughput.”

Going back to the CPO sales numbers, it’s not just additional supply that’s driving certified strength for Paragon.

For one, the dealership has had great success with its Vehicle Exchange Program, where a consumer can trade in a late-model Honda for a new Honda for a similar or lower monthly payment. Paragon Honda uses the service lane to target in-market drivers of late-model Hondas that are ideal for CPO.

And with increased competition in CPO, Benstock said his store has pushed itself to improve.

“The CPO market is heating up. There are more people involved in it, so we’re forcing ourselves to get better at it,” he said. “We’ve had dealers in our district that have increased their business by 30 and 40 percent. And I think the fact that we’re still up as a mature dealer speaks volumes to some of the changes that our team has made.

“Because we’re not in a static market. People are getting into the game, and things that took us five and six years to figure out, other dealers are able to replicate in a much shorter time. If we’re going to continue to have an edge, we’re going to have to continue to innovate and break down some walls,” he concluded.

Nissan CPO Momentum May Just Be Getting Started

NASHVILLE, Tenn. - 

The Nissan brand recently completed its best-ever month for certified pre-owned sales — and the program may not have even reached its peak yet.

According to Autodata Corp., there were 12,713 Nissan brand certified sales in May, which is nearly a 24-percent year-over-year increase. The CPO leadership for the automaker believes there is “potential to sell even more.”

“We are pleased with our all-time sales records for Nissan, and we have potential to sell even more,” Marty Gleason, senior manager of certified pre-owned at Nissan and Infiniti, told Auto Remarketing. “Our CPO program is one of the most competitive products in the market.

“It allows dealers to provide a customer with great value and the peace of mind that comes with a factory-backed warranty,” he continued. “Nissan is tracking well above the industry growth so far in 2014, and I anticipate this momentum will continue.”

The brand has moved 56,496 CPO vehicles through five months of the year, up about 20 percent from the same period of 2013, Autodata indicated.

Comparatively, the industry as a whole is up 10.6 percent year-to-date with 952,234 CPO sales through May, tracking toward another record year.

But May’s certified sales result wasn’t the only good piece of news on the pre-owned front for Nissan recently.

In the inaugural CarMax Used Car Shopping Report that was released earlier this month, the Nissan Altima was spotlighted as the model generating the most test drives and sales at CarMax.

“Consumers recognize the same appeal that makes Altima one of the best-selling new cars on the market. Altima provides a great combination of design, performance, fuel efficiency, technology and value,” Gleason said.

“Altima consistently ranks as one of the highest searched pre-owned cars on shopping sites like AutoTrader.com,” he added.

Not to mention, Gleason says the Altima is Nissan’s top-selling new and pre-owned model and commands a 30-percent share of the brand’s CPO sales mix.

“From a dealer’s perspective, the exciting part of Altima’s popularity is the retail traffic it drives. A high percentage of our CPO shoppers end up buying a new model.  Our motto is ‘Used drives new,’” he added.

 

7 Brands Hit All-Time Highs in Best-Ever CPO Month

WOODCLIFF LAKE, N.J. - 

May represented a best-ever month for certified pre-owned sales, as dealers moved 207,371 CPO vehicles, beating year-ago figures by nearly 11 percent.

That’s according to numbers released Wednesday afternoon by Autodata Corp., which said May sales were “the highest ever” and beat April by 7.4 percent and eclipsed May 2013 by 10.9 percent.

What’s more, seven brands reported their respective strongest CPO months of all time, Autodata said. Those included Audi, Infiniti, Kia, Land Rover, Lexus, Mini and Nissan.

Additionally, the daily selling rate of 7,680 was the second strongest in history.                 

Through the first five months of 2014, there have been 952,234 certified sales, which is 10.6 percent ahead of the year-ago pace.

5 Mainstream & Luxury Brands Netting Most CPO Premium

McLEAN, Va.  - 

These days, certified pre-owned vehicles can command a wide spectrum of premiums, depending on the specific model-year, brand and other factors.

That’s according to NADA CPO value data included in the latest NADA Perspective report, which highlighted the mainstream and luxury brands generating the strongest values on their CPO models.

NADA gathered data from automakers to plot the distribution of CPO premiums, and in doing so, found that premium on three-fourths of certified purchases came in between $500 and $2,000.

The report suggests “this disparity implies that CPO’s value proposition actually exceeds consumer expectations.”

A vehicle’s brand, age, price and the competitiveness of its OEM’s program are the four key drivers behind differences in certified prices, NADA says.

NADA takes these four elements and couples them with CPO sales data to formulate its certified value methodology and the CPO values in its Official Used Car Guide.

“Generally speaking, CPO values are greatest for newer and more expensive models backed by programs that extend bumper-to-bumper and powertrain warranties out the furthest, while values are lower for older, less expensive and less competitive programs,” NADA said in the report.

When digesting average premiums based on model year and vehicle type, NADA’s data suggests quite a range, as well.

For instance, certified vehicles from the 2008 model-year have an average premium of $1,532, while those from the 2014 model-year year fetch an average premium of $1,737. The spectrum for average premium goes from $1,166 to $1,371 for mainstream brands and $1,992 to $2,381 for luxury brands.

NADA also dissected its analysis by looking specifically at the 3-year-old CPO vehicles from the 2011 model year.  What it found was that Ford had the strongest certified values among mainstream brands ($1,486) with GMC not far behind ($1,424). Third was Toyota ($1,284), followed by Chevrolet ($1,222) and Nissan ($1,190).

Mercedes-Benz topped the list of luxury brands ($2,909). Second on the luxury side was Porsche at $2,605, with Lexus third ($2,175), Jaguar fourth ($2,161) and Land Rover fifth ($2,068).

 

17-Percent Hike in Late-Model Supply to Push CPO

McLEAN, Va.  - 

It’s one thing for certified pre-owned demand to have grown in recent years. But to have had the supply of late-model cars simultaneously skyrocket makes for a rather fortunate one-two punch.

And it’s a combo that’s made CPO an emerging heavyweight in the used-car industry, as automakers continue to shatter certified sales records.

“The sharp increase in CPO demand that has occurred over the past two years has come at an opportune time for manufacturers,” NADA Used Car Guide said in its latest NADA Perspective report.

“After years of declines stemming from the falloff in new vehicle sales during the recession, late-model supply — or the primary pool from which CPO vehicles are derived — finally started growing again in 2013,” NADA added.

Interestingly, the growth in supply of CPO-friendly cars that began in 2013 occurred right after the certified market had just recorded two straight best-ever years.

With more bountiful supply of late-model units in 2013, the industry reached yet another record year for certified sales and appears headed that way again in 2014.

CPO sales in the year’s first four months were up 11 percent from the same period of record-breaking 2013, NADA indicated.

Jonathan Banks, NADA’s senior director of vehicle analysis and analytics, alluded to this growth during a press conference at January’s NADA Convention & Expo, when he said the record sum from 2013 would likely be “blown away” by what happens in 2014.

“The big story here is, there will be more availability for the franchised dealers for inventory for those CPO units, which is great for consumers and great for dealers,” Banks said during the press conference.

“We think that 2.1 million CPO sales (figure) … will be blown away, driven by the availability of lease returns that will inevitably come back in 2014,” he said.

That seems to be case, if NADA’s data on late-model supply is any indication. Citing NADA’s used-vehicle supply forecast, the report called for 8-percent growth in late-model supply this year topped off with 9-percent growth next year.

NADA said that “combined, the 17-percent increase in used supply through 2015 will act as an additional catalyst supporting a continued increase in CPO sales.”

To illustrate this notion, the report hammers home the fact that brands who have boosted their supply of late-model supply the furthest are also among those generating the most CPO growth.

Consider this: Kia (up 44 percent), Subaru (up 37 percent) and Hyundai (up 26 percent) are at the top of the list of year-over-year sales gains so far this year for mainstream brands.

“Not coincidentally, NADA estimates that late-model supply will grow the most for Kia and Hyundai this year, while supply growth for Subaru is expected to be among the industry leaders,” the report noted.

CPO Share Reaches 5-Year High for Q1

SANTA MONICA, Calif.  - 

The certified pre-owned market opened 2014 with the highest first-quarter share of franchised dealers’ used-car sales in five years.

That’s according to the latest Used Market Quarterly Report from Edmunds.com, which said CPO vehicles accounted for 19.7 percent of all used sales by franchised dealers in Q1. 

The last time the certified market made up that much of franchised dealer used activity in the first quarter was 2009.

What’s more, CPO share of franchised used was down 0.5 percentage points from the fourth quarter, but this represented the smallest Q4-to-Q1 share decline ever, Edmunds said.

Dealers sold 551,707 certified vehicles in Q1, which beat year-ago numbers by 14.2 percent.

Overall, there were 9.1 million used cars sold in the first quarter, including numbers from franchised and independent dealers as well as private-party sales.

This is down 6.7 percent year-over-year, but the entirety of that decrease is within independent sales and private-party transactions, Edmunds indicated. Franchised dealers sold 2.8 million used vehicles in the first quarter, which was an improvement of 5.7 percent from Q1 of 2013.

“As expected, there have been used sales gains at franchise dealers,” the company said in its analysis accompanying the data. “This pattern, driven by lease returns and trades, will continue through the next quarter and throughout the year.”

It added: “During this uneven economic recovery, lower income consumers are staying out of the market. This is why independent and private-party sales are down. Those with stronger purchasing power will facilitate used sales growth at franchise dealers.”

And part of that may include stronger CPO operations, as well.

Edmunds indicates that with high lease penetration rates, automakers are motivated to make a “long-term push” for certified among their dealers.

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