‘Opportunity’ abundant in CPO, but there’s a ‘learning curve’ for consumers
In the Used Vehicle Outlook report from Edmunds is a graph with Google Trends data showing relative search interest for certified pre-owned vehicles since 2013.
While there have been ebbs and flows throughout the past six years, the general trend line has been a gradual climb in CPO relative search interest, according to the Google Trends data shared by Edmunds in the report.
But while interest in CPO itself is up, it doesn’t appear familiarity has quite gotten there yet.
For example, CPO car shoppers on the Edmunds platform viewed these pages the most, the company said:
- “What Are Certified Pre-Owned Vehicles?”
- “Certified Pre-Owned Cars Vs. Used Cars With Extended Warranties.”
In its report, Edmunds said: “We’ve seen growing interest in certified pre-owned vehicles, but there is a need to educate consumers as many are unfamiliar with the benefits of CPO vehicles and their differentiation from the rest of the used-vehicle market.”
Of course, there could be a big opportunity here for the industry.
“Many shoppers are unaware of the benefits of CPO vehicle programs, but given the tough financial conditions in the new market, it’s never been a better time to look into them,” said Ivan Drury, Edmunds’ senior manager of industry analysis, in a news release accompanying the report.
“Between more affordable prices, the assurance of an automaker warranty, and lower interest rates, CPO vehicles give car shoppers a way to enjoy many of the benefits of a new car and minimize many of the risks of buying a used car.”
There were 2.70 million CPO sales last year, according to Edmunds, among the 11.88 million used cars sold by franchised dealers.
“Certified pre-owned vehicles represent a small percentage of franchise used sales, but the opportunity to offer CPO vehicles to buyers priced out of the new-vehicle market will be important to dealers as well as automakers,” the company said in the report. “While consumer interest in CPO programs is mounting, consumers face a learning curve on the benefits and drawbacks of certified vehicles.”
As for the most recently completed month, Cox Automotive reported in Monday’s Auto Market Weekly Summary that there was a 3% year-over-year increase in CPO sales during March.
There was a 1.7% dip in overall used-car sales during the month, Cox Automotive estimated in the latest Manheim Used Vehicle Value Index report.
The seasonally adjusted annual rate for used-car sales was an estimated 39.0 million, compared to 39.4 million in February and 39.7 million in March 2018.
“Three-year-old vehicles had four straight weeks of price gains in March, which offset the price declines we saw in January and February,” Cox Automotive chief Jonathan Smoke said in a news release accompanying the index. “Used-vehicle prices are starting to experience the annual spring bounce, which is a positive indicator that demand is growing in the market.
“Affordability concerns, namely increased new-vehicle prices and loan rates, continue to shrink the pool of consumers able to purchase a new vehicle and lead to greater strength in the used market.”
The annualized rate of used-car sales in March was more than 39.5 million*, beating year-ago figures by roughly 200,000 units, Cox Automotive manager of economic and industry insights Zo Rahim said during a March 28 conference call on Cox Automotive’s Q1 Market Review.
(*This is a measure of annualized numbers, which provides a trailing 12-month view of sales, Cox Automotive clarified. This is different than the seasonally adjusted annualized rate, commonly referred to as SAAR)
There were 38.6 million used-car sales in 2016, followed by 39.4 million in 2017 and an estimated 39.5 million in 2018, according to the data provided by Cox Automotive.
It is forecasting 39.5 million used-car sales again this year, followed by 39.2 million in 2020.
“Like new, we started the year soft for used-vehicle sales but have since rebounded as we kick off the spring selling season and demand comes into the market,” said Rahim. “It is important to note that we expect total wholesale volumes to be down slightly this year, so supply constraints will impact used sales more than demand.
“The used-vehicle market is not expected to grow in 2019, as we peak into a plateau,” Rahim said. “But keep in mind, we expect 2019, like 2018, to be the strongest used environment of this expansion.”