CARY, N.C. -

It was an impressive season for the certified pre-owned industry.

The summer included the best August the segment has ever seen, according to Autodata Corp., and that was followed by a CPO sales increase in September to cap the strongest quarter on record for the certified market.

In the midst of this record-breaking hot season, Auto Remarketing reached out to dealers around the country to get a feel for what they were expecting this fall, as well as how their CPO departments are shaping up and their predictions for the rest of the year.

Based on what they told Auto Remarketing last month, it seems dealers are riding the recent success of the CPO market and hold high hopes for the fourth quarter.

When asked what expectations were for the rest of the year, Mark Hebert, president of Hebert’s Town and Country in Shreveport, La., noted, “I really do think it will continue to be strong; I look forward to a great fourth quarter.”

The Chrysler dealership has seen CPO business increase year-over-year, and Hebert noted the market “looks to be really strong.”

John Jestice, pre-owned sales manager at Bill Brown Ford in Livonia, Mich., which also serves the Detroit area, chimed in with similar predictions for the fourth quarter.

“Our numbers are up from prior year. Ford is now running some ads for us that I think are helping. And it’s been a gradual build-up,” Jestice told Auto Remarketing in September.

“We have gone from the 200 CPO sales a year range in 2007–2008, up to the mid-600’s last year, and we will most likely be up 10 percent for CPO sales this year, with sales in the low 700’s,” he said, explaining that the CPO side of the store has grown consistently over the past few years.

Jestice also said the most popular CPO sales for the dealership mirror new-car sales, with the Fusion, Escape and Focus coming in as the dealership’s top three best sellers.

And Mike Darrow, president and chief operating officer of Russ Darrow Group, attributed some of the CPO market success to consumers putting a little more effort into vehicle research before purchasing a new ride.

“Consumer confidence has strengthened not only in our brands, but in our sales staff over this last year in certified pre-owned. And quite frankly, consumers of today’s market are more savvy and always looking for better value,’’ Darrow said. “What better way to do so than buy CPO, backed with not only our support, but the factory’s, as well.’’

Fuel for Market Growth

So, what exactly is pushing these recent CPO sales records and dealership success stories?

Hebert said he thinks the state of the economy might have something to do with it.

“I think there is enough demand, and there are still people that are being a little conservative in buying a quality used vehicle versus a new one,” Hebert shared, noting cautious shoppers in the light of a stagnant economic recovery may still be hesitant to invest in a new unit.

Jestice, from the Ford dealership, noted that selling the CPO name to a consumer is easy when you have confidence in the OEM program.

“You are trying to sell the CPO car almost as a new car. You are trying to give your customer the warranties and confidence they get by buying a new car,” Jestice stressed.

“We certify 95 to 98 percent of the cars that are eligible by mileage and age; we certify the cars that meet our standards — we have very high standards. We really want to separate the CPO car as a better car,” he continued, adding that if you uphold the quality of the CPO ride, sales will flourish.

CPO Evolution Pushes Sales

The industry has changed considerably since the onset of the CPO market, according to Lenny Checheris, general manager of Luther Bloomington Hyundai in Bloomington, Minn.

And Checheris says this evolution has pushed CPO sales into the forefront at his dealership. The 29-year veteran of the auto industry says things have changed more in the past three years than in the 20 previous.

“The dynamics of the industry have changed, and the Internet has changed us quite a bit, too,” Checheris said. “It’s all about customer service; customers expect more.

“We want to offer a good, comfortable atmosphere, and help them make their decision. If you’re in the game, and can get a customer into a certified vehicle, why wouldn’t they buy from you? It’s who they feel most comfortable doing business with,” he continued.

Checheris also said that the “like-new” quality of a CPO ride has become increasingly attractive to customers.

“If people can save thousands of dollars on a vehicle and get a strong warranty, the perception is that they’re getting a like-new vehicle that’s been inspected well, and is backed by Hyundai,” he added.

Competition Driving Sales     

And most every dealership  Auto Remarketing spoke with shared that competition continues to push CPO sales, as more and more stores buy in to the lucrative market.

“It is a very competitive market, and the fact that we do offer CPO products, it helps us to drive that business,” Hebert pointed out, noting that if a store offers CPO rides, they already have a leg up on the competition.

And some stores really have to make sure they stand out, as the concentration of dealers offering CPO units in their areas continues to grow.

“We have stores really close to us; we are in the middle of probably 15 Ford dealers and three or four Lincoln stores that are all within a 10 to 12 mile radius of us,” Jestice explained.

“Within a 25-mile radius, we have about 29 Ford stores, and out of those we have 13.5 percent of CPO sales within that radius. We are concentrated here, and you try to set yourself apart. We normally carry between 80 and 100 certified vehicles, and again, we buy in the whole way and get more exposure when we certify them upfront and advertise them as certified,” he continued.

“Also, Ford is placing our cars in more spots with the certified cars instead of just used cars and helping us out there. Also, we are just offering an alternative for someone who isn’t looking for a new car but wants the same benefits,” Jestice added.

For Checheris, it’s all about customer service — and the selling point of OEM and factory-backed warranties sure doesn’t hurt either.

He also explained what sets his dealership’s staff apart from the competition.

“The culture instilled in our dealership is probably a little bit different from most. We recognize that the certified customer will eventually hit our service department,” Checheris said, noting that the dealership is seeing an increase in service and parts gross profit because “we are now seeing so many of our CPO back onto the service drive.

“Our fixed operations are a big part of our success here. If we’re trying to get the customer back in, we have to be in the game,” he continued.

“We’ve seen a 30-plus percent increase in our service gross year-over-year, with parts and accessories seeing similar growth as well. We’ve seen exponential growth and success in both parts and operations, and year to date we’ve had significant increases. It’s good for the store,” Checheris went on to say.

Checheris also explained that a dealership’s CPO department can feed its finance department, as well.

“Our biggest grossing vehicle is our finance department, and we’re able to wrap the warranty. Our F&I gross profit is about 20 percent higher on CPO than on non-certified. We’ve seen service contract sales increase and we’re doing good job,” he said.

“All in all, it’s the culture (here). We’ve had good buy-in from staff, and it’s easy for them to sell a certified product. I’m pleased with our performance and the way they’ve embraced certified,” Checheris noted.

Darrow echoed similar best practices in the CPO world, noting that meeting the needs of a dealership’s particular community is crucial to certified sales success.

‘’The diversity of the people and the fact that we’ve assembled the right franchises to match them, all the while being held accountable to meet their wants and needs for a total one-stop group for even the toughest demands of metro shoppers’ budgets,” Darrow stated, describing what has pushed CPO success in the dealership group’s markets.

 “As far as market conditions are concerned, I would have to say (they are) aggressive. The competition today is fierce and we have to stay on our ‘A’ game. We strive to stay ahead of the competition with new data to help us to be the best in our market without changing our message too often, which can lead to confused consumers and sales staff,” he continued.

And what has Russ Darrow Group done to try and stand out?

“We’ve developed ongoing product knowledge training for our sales staff so we can offer a wealth of information to consumers on a personal level to help them make the best educated decision on their CPO purchase. It’s a perfect formula for happy customers and helps them feel even more confident in their decision making,” Darrow concluded.

Editor's Note: This story, which was written by Staff Writers Nancy Pardue and Sarah Rubenoff, can also be found in the Oct. 1531 print issue of Auto Remarketing, plus much more analysis on the certified pre-owned market.