EDITOR'S NOTE: Updated to correct  statistics on CPO familiarity. Auto Remarketing apologizes for the error.

Interviews with three luxury automakers’ certified pre-owned managers tell a similar story about their brands’ expectations for their dealers’ CPO sales. How much brighter might their outlooks be if consumers were more aware of these programs and understood how CPO vehicles differ from other used cars?

“CPO sales never really quite take off the way you expect it will, especially given that some of the programs are actually quite good,” Brian Moody, executive editor for Autotrader, told me. “It doesn’t seem, to me, that these certified pre-owned programs really have the full communications backing of the manufacturers.”

This disconnect is not lost on the OEMs who responded to requests for interviews for this story. Those automakers were Lexus and Eric Schuttee, Lexus sales support manager; Volvo and Jeff Pugliese, director, commercial sales for Volvo Car USA; and, Dan Rodriguez, manager, auto remarketing, certified pre-owned at American Honda Motor Company, Inc.

“We did research a year and a half ago, specific to Lexus CPO owners and CPO intenders, and most interesting to us is everybody knew that all the major luxury brands had a certified pre-owned program, and it was assumed that all the programs are exactly the same,” Schuttee said. “It’s hard to cut through the clutter.”

“Awareness is really the top thing,” Rodriguez said. “Consumers, I believe, feel the programs are ubiquitous. And our challenge is differentiating that Acura advantage.”

Even so, it seems dealers and consumers view these cars as neither fish nor fowl, a category not easily marketed or understood.

For instance, in a 2018 CPO Online Shopper Survey, J.D. Power survey of 10,000 consumers showed that 43% where somewhat familiar or not familiar at all with manufacturer CPO programs. Only 14% were “extremely familiar.”

To make their CPO program coverages and amenities easier for consumers to understand — and dealers to communicate — these OEMs are tweaking their programs.

For example, in 2018 Volvo met with its Retail Advisory Board on this topic, among other issues, and as a result rolled out its Certified by Volvo program. Pugliese described it as simplified for improved consumer comprehension — and presumedly for dealers to communicate and market.

“It is designed to motivate the retailers to become engaged in the business and view CPO as one profit opportunity and to say to dealers not engaged to reconsider and see the value in the business,” Pugliese said.

CPO volume increased in 2019 for these three luxury vehicle manufacturers, and the overall category enjoyed its ninth straight year of record sales. Citing Cox Automotive data, Auto Remarketing reported 2.8 million pre-owned vehicle sales last year, up 4% from 2018. Cox forecasts 2.8 million sales for this year.

In a December press release, the National Automobile Dealers Association noted that 2019 off-lease returns topped 4 million units — and should be as much again for 2020. NADA said the volume will help increase CPO inventory and sales by franchised dealers.

For 2019, Lexus CPO sales were up 2.8%. Volvo CPO sales grew 25% year-over-year. “And I’d like to add that we were the fastest-growing luxury CPO program in the industry,” Pugliese said. Acura reported 2019 growth north of 4.5%.

“We’ve had four years of year-over-year growth, and CPO overall just makes so much good business sense for the customer in its affordability and reliability, and CPO is profitable for dealers,” Rodriguez said.

Acura’s CPO marketing initiative, Rodriguez said, focuses on digital, looking to make it easier for its targeted Millennial audience to find Acura CPO vehicles on dealer and third-party websites. 

American Honda in 2017 launched its “Integrated Certification Engine,” a unique feature in the industry at the time, providing consumers a 182-point inspection checklist that links digitally to its CPO cars on its dealers’ websites and third-party listing sites.

“CPO is a great way to bring new people to the brand, and that’s the biggest opportunity for us,” Rodriguez said.

Doing so remains a challenge for luxury brands. Autotrader’s Moody offered an interesting perspective.

“Maybe this is on us, but the manufacturers and the (automotive) media haven’t done a great job differentiating what a certified pre-owned car backed by the manufacturer is,” Moody said. “It’s not apparent to the average person what’s the big benefit they get from buying a Hyundai certified car versus a certified car they found on the corner car lot.

“Let’s be honest, cars are more reliable now, and it’s hard in some cases (to differentiate) when these companies have built their reputations on reliability, and consumers are asking, ‘I’m supposed to pay extra for a warranty because I’m concerned about reliability?’ That story doesn’t always make sense’,” Moody said.

For luxury brands, he added, CPO makes more sense. “Luxury CPO does make more sense, because luxury products depreciate faster and these vehicles have more high-technology and performance and can be expensive to repair,” Moody said, adding that luxury-make certified advantages can be more appealing to these consumers.

Lexus’s CPO marketing efforts include working with its retailers to improve lead response.

“When they (dealers) get a lead for a certified vehicle, in many cases the customer’s asking about, say, a blue ES, but might not have noticed that the vehicle is a certified vehicle,” Schuttee said. “It’s early in the lead response that there’s opportunity to identify for customers that the vehicle is certified and share with them the benefits they get from buying that vehicle.”

Still, Schuttee said, consumers visiting dealerships to shop used Lexus models aren’t coming in looking for certified, he said. Those who do are former CPO buyers who understand the CPO value proposition.

“You’re touching on a lot of really hot buttons for the CPO industry, which is how do we separate those cars. Why is that car priced $1,500 to $2,500 or more than the other blue ES sitting next to it?” Schuttee said.

Sales training and consumer education are part of the awareness solution.

“On that, if they’re (dealers and their salespeople) not paying attention, then perhaps the retailer isn’t seeing the value in a certified pre-owned sale,” Volvo’s Pugliese said. “So, interestingly, to that point, what we’re looking at with our dealers, selectively, are opportunities to enhance the CPO customer experience. We think that’s a valuable discussion to have so we can develop training modules that address opportunities for improvement. We’ve commissioned a third party to survey our customers (to help identify training hot buttons).”

Autotrader’s Moody summed up the CPO awareness challenge.

“Like most things in life, the more people know, the more takers you’re going to have,” Moody said.