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Since re-tooling its certified pre-owned program in early 2012, the strides Ford has made in CPO sales have been as rapid as they have been steep.

In the first three quarters of 2013, the automaker sold 170,397 certified vehicles, which was nearly a 33-percent improvement over the same period of 2012.

That’s quite an impressive feat considering 2012 ended up being Ford’s best year for certified since 2006 and its second strongest of all time.

“The key to our success these last two years is that our Ford and Lincoln dealers have a competitive program — and I would underscore the involvement that our dealer council played in revamping our program. They were very much at the forefront of helping us develop a more competitive program,” Ford’s national CPO sales manager Todd Fites told Auto Remarketing this October.

“We worked with the dealer council to come up with the right set of benefits to make our program fully competitive in the industry,” Fites said. “We continue to believe that we have the best dealer body in the industry, and the CPO sales growth these last two years is a key proof point that backs up that statement.”

The automaker knew that giving its dealer body “a competitive set of tools and a program like we have today” would lead to quick results, Fites said.

“That’s exactly what’s happened,” he added.

The automaker announced these upgrades to both the Ford/Mercury and Lincoln certified programs back in February 2012, with the most prevalent changes coming on the Ford/Mercury side.

In what the automaker described at the time as the crown jewel of the expansion, the comprehensive warranty for Ford/Mercury CPO was extended to 12-month/12,000-mile coverage, up from a three-month/3,000-mile warranty under the previous plan.  And that was later upgraded further this year.

Additionally, the powertrain warranty was increased from a six-year/100,000-mile package to a seven-year/100,000-mile deal.

The upgrades for each program also included consistent low APR support from Ford Motor Credit and Lincoln Financial Services for all CPO eligible vehicles.

Among several other enhancements throughout its two programs,  the Ford/Mercury inspection process was upgraded from 169 points to 172 points to cover technological amenities that are now common in late-model pre-owned vehicles, and Lincoln’s were increased from 169 to 200.   

And the list goes on.

Most of the legwork and collaboration with the dealer council to develop the revamped program took place in 2011, Fites said. Since then, ongoing discussions with the council have led to “more evolutionary changes” to bolster the CPO offering.

For instance, Fites said, they made the 12-year/12,000-mile comprehensive warranty for the Ford/Mercury brand CPO program a little more enticing this year.

When this warranty plan was rolled out in 2012, it started at the date of sale for the customer, he explained.

“Neither the customer or the dealer was getting the full benefit of the 12-month/12,000 mile warranty if there was time and mileage left on the new vehicle warranty,” Fites noted. “In 2013, we changed the 12-year/12,000 mile comprehensive warranty to tack on to the end of the new-vehicle warranty.

“That was a big win for the consumers,” he continued. “It was a small change that we agreed to make after talking with our dealers  that resulted in more sales, more value to the customer and an influx of younger vehicles into the CPO program. The younger vehicles are exactly the vehicles we want to have in the certified program to help us drive residual values.”

The proof of benefits from this particular move and the automaker’s overall CPO upgrades can certainly be seen in the sales growth this year and last.  But Fites isn’t ready for the momentum to stop.

“Our long-term goal is to grow our certified share of the industry to the level of our new-vehicle share which is about 15 percent.  There is no reason our brands can’t command that type of share in the certified industry given their overall strength,” he said.

“We think about 300,000 sales per year would put us at the 15-percent market share level based on our future industry forecasts. How are we going to get there? We will continue to work with our dealers to consistently improve our programs and help those dealers that are not fully participating in the program reach their sales potential so that they can reap the rewards of selling Ford and Lincoln certified vehicles.” Fites continued.

“The company has a long term plan to continue to invest in the right amount of fixed and variable marketing resources into the program to grow the business,” he added.

“It is incumbent on our team — the CPO brand managers and area sales managers, and our regional sales, service and Ford Credit field teams — to help the dealers understand the opportunity that CPO provides to them in terms of strengthening their business,” Fites continued. “We have good dealer engagement today, and it continues to improve each month, but what’s really going to get us to 300,000 sales and the 15-percent market share goal is to have all of our Ford and Lincoln dealers participating in this business.”

And there has been “great progress” made in this area, he said. But again, there’s room to grow — particularly among more rural dealerships. Fites believes it comes down to increased one-on-one engagement with the dealers.

“The key step to driving dealer engagement is to have one-on-one conversations with dealers and present the facts about what’s occurring in the industry, what the results have been for our dealers that are participating, and sharing with them not only the short-term benefits — which I would describe as very favorable and strong for the dealer — but also the long-term benefits to their franchise and the Ford and Lincoln brands,” he said.

Fites emphasized that a phone conversation is not necessarily the path a dealer should or would even want to take towards making a decision about participating in CPO.

“It usually takes — and it should take — a face-to-face meeting.  Prior to implementation, we want all dealers to thoroughly understand the details of the program, understand the core processes that it takes to be successful, and how they can best succeed given their local market dynamics. And that’s just a challenge,” he said, particularly being able meet face-to-face with the roughly 3,200 dealers in the automaker’s network.

“We continue to make progress on the dealer engagement front, and we’re going to continue that focus.”
Within Ford’s dealer body, about 2,600 are enrolled in CPO, Fites said.  There is somewhat of “an 80-20 principal at play,” he added, noting that the top 20-25 percent of dealers account for 70 to 80 percent of the sales.

To achieve its market share goal, Fites said Ford dealers need to have CPO sales command 20 percent to 30 percent of their used sales volume.

“And of course, if you look at the industry data this year, one out of five vehicles sold by all franchised dealers will be a certified vehicle. So we think that’s a fair goal to set for our dealers and a good benchmark for them to target … we’ve got good participation; we’ve got the majority of our dealers enrolled,” he added. “It can always be higher, but our most important focus is getting every dealer to operate at that 20 to 30 percent (level).”

Lastly, Fites emphasized again how instrumental Ford’s dealers have been to the program’s success and how much the company values feedback from its dealer body.

“I couldn’t underscore enough the appreciation and respect the company has for our dealer body. And our dealer council process in all aspects of the business, particularly the certified arena, has just been a great partnership to develop the right approach, develop the right program and develop the right support,” Fites said.

“When you work collaboratively in that type of environment, good things usually happen,” he added. “We believe we still have a lot of opportunity here and our dealers believe that, as well.

“We’re very confident in our plan, and we’re going to stay focused until we achieve our goals of having our market share in the CPO industry equal or better than our new-vehicle market share.”

Domestics Grab Nearly 36 Percent of CPO Market

Looking at the most recent certified results, Ford’s brands combined to sell 19,615 CPO units last month (up 36 percent year-over-year) and they have moved 190,012 units year-to-date (up 33.2 percent) through October.

Combined CPO market share for its brands in October was at 11 percent, up from 9.8 percent a year ago. Year-to-date, it was at 10.8 percent, up from 9.3 percent through October 2012.

Overall, the Big 3 increased their share of the certified pre-owned market by nearly 4 percentage points in October, as their CPO sales climbed more than 35 percent year-over-year and edged the year-to-date sum closer to 600,000 units.

That’s according to Autodata Corp., which shared a brand-by-brand breakdown of certified sales data as well as industry-wide results.

Specifically, domestic brands sold 62,578 CPO vehicles last month, a 35.5-percent uptick from October 2012, Autodata indicated.

Through 10 months of 2013, they have moved 595,969 certified units, which beats the year-ago period by 23.5 percent.

The Big 3 commanded 35.2 percent of the CPO market in October, up from 31.3 percent in October 2012.  The year-to-date market share for domestics is at 33.8 percent, compared to 31.5 percent through 10 months of 2012.

Certified sales for the Buick, Chevrolet, GMC, Pontiac and Saturn brands came in at 30,592 for October (up 40.5 percent), with 288,769 sales year-to-date (up 24.6 percent).

Cadillac moved 1,519 certified vehicles last month (up 18.9 percent), and its dealers have posted 15,275 CPO sales so far this year (up 11.2 percent).

Chrysler Group’s brands (excluding Fiat) sold 10,852 certified vehicles in October (up 24.3 percent), with year-to-date sales hitting 101,902 (up. 8.2 percent).

 

Joe Overby can be reached at joverby@autoremarketing.com. Continue the conversation with Auto Remarketing on both LinkedIn and Twitter.