When you have to recondition a vehicle for your certified pre-owned inventory, what are your best practices?
How many cars should you certify in the first place? What do you expect to get out of CPO, and what is your commitment to the program?
Some dealers struggle with getting store-wide buy-in to CPO; what strategies work best for you?
How do operations differ between dealer group’s import and domestic CPO offerings, and their luxury and mainstream CPO offerings?
Based on feedback from the dais of experts participating, these are just a few of the questions you may hear — and examples of insight you may learn — during the “Top 10 Best CPO Ideas” panel discussion at next month’s CPO Forum.
Moderating that general session is Jasen Rice, owner of LotPop.
Joining Rice will be:
Todd Hoagey
Chief Executive Officer
Auction Direct USA
Don Luke
Principal
Bill Luke Chrysler Jeep Dodge Ram
2015 Auto Remarketing CPO Dealer of the Year
David Nelson
Director, Pre-Owned Vehicle Operations
Hendrick Automotive Group
Danny Papakalos
Used Car Director
AutoNation
Rod Rowley
Vice President, New and Used Vehicle Inventory
Larry H. Miller Group
The session, sponsored by AutoAlert, is scheduled for 10:30 a.m. on Nov. 17. The CPO Forum is part of the Used Car Week conferences happening Nov. 16-20 at The Phoenician in Scottsdale, Ariz.
The CPO Forum kicks off at 9 a.m. on Nov. 16 with a full day of concurrent workshops, networking opportunities, the CPO Dealer of the Year presentation and a keynote address from Joe Derkos, director of consulting and analytics at J.D. Power.
The next day, the CPO Forum shifts to general sessions, including the Top 10 Best CPO Ideas discussion and many others, plus OEM CPO award ceremonies from both Vincentric and IntelliChoice.
So, you’ve got a shopper on your lot that wants all the technological bells and whistles typically associated with new cars.
Turns out, you may be able to get them many of those same amenities on a used car, particularly if it’s a late-model, certified pre-owned ride.
Edmunds.com has put out an analysis and some consumer advice for used-car shoppers indicating that many of the high-tech features they would find in a new car can be had for a smaller price tag in a used car.
Among those: Bluetooth, blind-spot monitoring and back-up cameras, Edmunds pointed out.
“Many shoppers will be surprised to learn how many used cars currently available are loaded with advanced technology,” says Edmunds.com senior consumer advice editor Ron Montoya. “Buyers looking at certified pre-owned cars or those in the 2- to 3-year-old range, for example, are very likely to find technology that’s comparable with what can be found on a new-car lot.”
How’s that for a selling point to the tech-savvy shopper at your store?
And while this next point of advice from Edmunds’ news release is also presumably meant for consumers, dealers may be wise to pay attention to it, as well: “The key to zeroing in on high-tech used cars is to identify the years when these technologies hit a critical mass. That way, shoppers can set a baseline model year to better manage their expectations of finding cars equipped with these technologies.”
The site shares “minimum” model years where these technologies are mostly likely to be found:
Bluetooth: 2009
Back-Up Cameras: 2010.
Blind-Spot Monitoring: 2013
Adaptive Cruise Control: 2013
Dual-Zone Climate Control: 2006
More info can be found on Edmunds' website.
Auto Remarketing has revealed its 2015 CPO Dealer of the Year, presented by NCM Associates, and taking home the award, now in its sixth year, is Bill Luke Chrysler Jeep Dodge & Ram.
The Phoenix dealership was the automaker’s top certified pre-owned seller in both 2013 and 2014, and it holds the No. 1 spot through three quarters of 2015, as well.
Led by Don Luke — the president and chief executive officer of Bill Luke Dealerships — the store sold 1,771 CPO units in 2014, after moving 1,520 CPO vehicles the year before.
The dealership has posted 1,577 certified sales year-to-date through September, putting it at the top spot yet again.
“Congratulations to Don Luke and his team at Bill Luke Chrysler Jeep Dodge & Ram. They have consistently ranked at the top of Chrysler’s CPO sales leaders, and we’re honored to have them join us at the CPO Forum and Used Car Week,” said Auto Remarketing publisher and Used Car Week chair Bill Zadeits.
“We look forward to hearing Don share his CPO and used-car strategies at Used Car Week and applaud their CPO leadership,” Zadeits added. “Bill Luke Chrysler Jeep Dodge & Ram join a legacy of outstanding dealerships to have won this award, including Hyundai of New Port Richey (Fla.), Galpin Ford (Calif.), Paragon Honda/Acura (N.Y.), Karl Chevrolet (Iowa) and Longo Toyota (Calif.).”
Don Luke and the dealership will be presented the award at 4:05 p.m. on Nov. 16 during the CPO Forum, which is one of four industry-leading conferences making up Used Car Week in Scottsdale, Ariz.
Trevor Robinson — director of detail solutions, training & development at NCM Associates — will present the award.
NCM president and CEO Paul Faletti Jr. offered his congratulations to the dealership.
“Congratulations to Bill Luke Chrysler Jeep Dodge & Ram for receiving the 2015 CPO Dealer of the Year Award. As the automaker’s top-selling certified pre-owned dealer in 2013 and 2014, and leading the pack again through three quarters of 2015, this is a well-placed honor,” Faletti said. “Thanks for continuing to set the pace in CPO!”
Luke will also be among the panelists for the “Top 10 Best CPO Ideas” discussion taking place at 10:30 a.m. on Nov. 17 during the CPO Forum.
And at the National Remarketing Conference portion of Used Car Week, Luke will participate on “The National Panel: Opportunities and Hurdles Facing the American Used Car Industry in 2016.” That panel is scheduled for 11:15 a.m. on Nov. 19.
“On behalf of all of us at FCA, I want to congratulate Don and his entire team on receiving this award,” said Eric Swanson, who heads up certified pre-owned at FCA US. “This dealership demonstrates leadership, dedication to doing things the right way and a passion to sell certified every single day.
“This level of success isn’t easy to achieve — Don and his team just make it seem that way, and I’m proud to see them get recognized for the outstanding work they do!”
With even the highest-performing dealership possibly hitting a ceiling of how fast its inventory can turn, Cox Automotive chief economist Tom Webb took the opportunity to reinforce why the certified pre-owned slice of the market is becoming even more important.
Webb acknowledged metrics from the seven publicly traded dealership groups show their gross margins in their used-vehicle departments are ticking lower after each successive quarter. But yet most, if not all, of these companies are seeing profits at record levels because, as Webb pointed out, their throughput and efficiencies are greater — all while their F&I income levels continue to remain strong, too.
“I would expect that the margins would start to level off simply because the increased efficiencies that they have gained, but at some point you reach a limit,” Webb said. “A lot of these dealers are turning their used-vehicle inventories in 30 days. Some even less than that. You really can’t do much better than that. There are basically physical limits on how fast you can turn your inventory.”
With those limitations in play, insert the appeal and profit potential of CPO units as the vehicle — pun intended — for how managers can generate the most performance out of their stores.
“The fact that the dealer gets added gross on the unit and turns it faster, has higher F&I penetration rates with service contracts wrapped around, it’s a bigger profit opportunity for the dealer,” Webb said. “To the extent that the dealer is buying on the potential profit opportunity, some of that goes into what they’re willing to pay for these units.
“There are some instances where depending on the brand and the CPO program, where the gross margin different might not be all that great so you might not be doing as much,” he continued. “But for some, it’s nice dollar amount, and more importantly, the vehicle does in fact turn fast and have more F&I income than a typical unit would.”
Webb also mentioned it’s not just dealers who have luxury brands under their rooftop who are getting the most of the CPO market. He acknowledged that luxury brands have traditionally been slightly ahead of their CPO pack since they move a lot of new metal as leased units and have been doing “a good job of keeping end-of-term lease units at the dealership network.”
Webb added, “It’s my assumption and belief that the industry as a whole, the mainstream models, are moving more toward what the luxury vehicles are doing in terms of the off-leasing environment.”
That off-lease environment is expected to intensify during the remainder of this year, into 2016 and beyond. Cox Automotive already is thinking off-lease volume should approach 3 million units with the suspicion it should stay around that level, since Experian Automotive notes that around 30 percent of the new models rolling over the curb nowadays at franchised dealerships are attached to leases.
“We’re in much better position to handle the off-lease volume issue going forward than we were during the last peak in 2002,” Webb said. “The CPO programs at that time were in their infancy. Some of them were developed to handle and help support residual values. The remarketing practices are much better than what we had in the past.
“The CPO programs are working because there’s greater consumer acceptance. They do well for the dealers and the captive lessors,” he continued.
“I would never go far as to say a CPO is the panacea to protecting residual values. But it sure helps,” Webb went on to say.
So could CPO be the catalyst to where dealers can turn their inventories even faster than 30 days?
“CPO volume going forward is really dependent upon how much money and marketing efforts that the manufacturers want to put behind the programs,” Webb said.
More discussion about the importance of certified pre-owned units is the focus of the CPO Forum, the opening segment of Used Car Week. The CPO Forum brings together dealers and services to mingle about best practices and network to bolster your CPO program.
Used Car Week is set for Nov. 16-20 at the Phoenician in Scottsdale, Ariz.
For more details about the CPO Forum in the agenda and registration, go to www.usedcarweek.com.
How much is the Volkswagen diesel engine emission controversy impacting its certified pre-owned program?
It may be too early in the process to tell.
On an EPA investigation update section of the Volkswagen of America website, VW said: "Right now, we’ve put a stop sale on all 2.0L 4-cylinder TDI equipped vehicles (new and certified pre-owned), and we’re working with the responsible agencies to obtain approval for the MY16 2.0L TDI vehicles. We are working very hard to get our 4-cylinder TDI business re-started as soon as possible."
As far as the latest CPO numbers, year-to-date figures were still up slightly (1.8 percent) through nine months, and monthly CPO sales in September were down 16.8 percent year-over-year.
But news regarding VW’s issues was public knowledge for only the last 13 days of September, so again, perhaps it’s too early to gauge the overall impact to the automaker’s certified pre-owned program.
At any rate, for any manufacturer’s CPO program, trust and perceived quality are paramount. So, where does VW go from here?
At the time of this writing, representatives from Volkswagen were not available for comment.
However, Alec Gutierrez, Kelley Blue Book’s senior market analyst of automotive insights, shared his thoughts on VW’s CPO program, especially with sales of its TDI (diesel) models affected by the news.
“I think there’s obviously going to be challenges there, especially as it relates to certified pre-owned TDIs,” Gutierrez said in a KBB and Autotrader conference call with reporters last week. “And we know that makes up a pretty good chunk of sales overall for Jetta, and certainly I think it makes up more than 80 percent of Jetta SportWagen sales. I think those models, in particular, are going to be in for a tough time until we know what the impact of the recall is going to be.”
Pricing impact?
Looking at the Cars.com national inventory price figures from just before the VW news broke on Sept. 18 compared to average asking prices at the end of September, the company found a few interesting price changes in TDI listings.
Noting that the prices were set by private sellers and not dealers, just about every model of VW Jetta, Jetta SportWagen, Golf, Beetle and Passat – all VW models that offer both diesel- and gas-powered variants – suffered an average price hit. To be exact, of the 48 different used models investigated, 44 of the models saw average price drops in the 13-day span (of the 24 TDI variants, 22 saw price drops).
Michelle Krebs, senior analyst at Autotrader, had her team investigate the issue on their own site to see if people were listing VW diesel models for cheaper at an attempt to ditch the models.
“At the moment, we saw that private sellers are generally sticking with their prices on the VW diesels that are listed on our site,” Krebs said in the aforementioned call with Gutierrez. “They’ve dropped a little bit, specifically on VW Beetle diesel and the Audi A3 diesel. It looks like what private sellers are trying to do is get as much money as they can. I think what will be interesting to watch is do we see more listings of people wanting to get out of those vehicles? That is something that we’re going to be paying a lot of attention to.”
Gutierrez doesn’t think that values will drop too dramatically.
“I think one thing to consider, too, especially as it relates to the used-car market, is that any given car is only as good as its next monthly price substitute,” Gutierrez said. “I think there is a floor in terms of what’s going to happen with Volkswagen’s values, assuming that they can overcome some of the perception issues that obviously they’re going to have in the near term.
“But ultimately, if it gets to a point where you’re choosing between a relatively full-equipped Jetta or you’re looking at, say, a Corolla or Civic or something else, I don’t think the Jetta’s ever going to drop to a point where it’s a $3,000 priced discount versus a vehicle that offers similar performance and similar utility,” Gutierrez added. “Again, I think there’s always been an expectation that values are going to drop 20 or 25 percent or some huge number, but there is a floor based on competition.”
As Auto Remarketing shared this week, recent data from Kelley Blue Book and Autotrader indicated that VW consumers are trying to get more information about what their vehicle might still be worth, as well.
In what turned out to be a solid month to close the second-best quarter ever for certified pre-owned sales, domestic and Asian automakers lifted CPO numbers by more than 12 percent, while European brands climbed more than 9 percent.
That’s according to the latest rundown of monthly CPO sales figures by Autodata Corp.
Starting with the Big 3, those brands sold 76,160 certified vehicles for September (up 12.8 percent from September 2014), and they have moved 705,319 for the year (up 15.1 percent).
Ford’s brands moved 26,064 certified units in September (up 10.0 percent), with the yearly tally at 221,804 units (up 8.9 percent)
At General Motors, certified sales for its Buick, Chevrolet, GMC, Pontiac and Saturn brands were at 32,382 units for the month (up 6.9 percent) and 325,731 sales year-to-date (up 14.1 percent).**
There were 2,024 Cadillac CPO sales for September (up 17.7 percent), pushing the year-to-date sum to 19,241 sales (up 24.6 percent).
At Fiat Chrysler Automobiles, its September CPO sales (not including Fiat) totaled 15,690 units, beating the year-ago sum by 32.7 percent. The nine-month sum is at 138,543 sales (up 28.1 percent).
Fiat, whose sales are included in the European figures, sold 100 CPO units for the month (up 31.6 percent) and it has moved 685 year-to-date (up 48.6 percent).
Next up, Asian brand CPO sales came in at 99,126 units in September (up 12.7 percent), and year-to-date numbers have reached 888,406 units (up 7.8 percent).
Among the more notable gains for September were Acura (up 29.7 percent year-over-year with 4,105 sales) and the Nissan brand (up 30.7 percent with 14,851 sales).
European brands sold 35,797 certified units in September (up 9.2 percent). They have moved 335,145 CPO vehicles through nine months, beating last year’s pace by 8.7 percent.
Volvo had the most significant gain among Europeans for the month, with its sales climbing 48.0 percent to 1,784 units.
**Note: There were no Saturn CPO sales in September, but the year-to-date total is at 23 units, according to Autodata.
The certified pre-owned market is on pace for yet another record year. In fact, the last three months represented the second-strongest quarter for CPO sales ever, according to Autodata Corp.
And that’s certainly good news for franchised dealers. But the benefits, apparently, go beyond retail.
Discussing the record year expected for CPO in his latest video report (which can be seen in the window above), ADESA’s Tom Kontos said: “That’s been driving a lot of strong demand in the auction lanes and online in the wholesale channel.”
Demand for CPO vehicles was also one of the factors helping mitigate the downward pricing pressure from increased supply in the wholesale market, Kontos said.
Of course, there have been “signs of softness” in wholesale prices — for example, August showed the first drop in overall auction prices this year — and those signs are likely to continue, he said.
Just one month after posting the first year-over-year decline since June 2014, the certified pre-owned market closed the second-best quarter on record with more than 211,000 sales in September.
According to Autodata Corp, the estimated 211,083 CPO cars sold during the month represented a 12.1-percent year-over-year increase. That pushed the third-quarter figure to 653,383 units, beating the year-ago sum by 6.9 percent.
Not only that, the Q3 total was only 1.1 percent less than the number of CPO vehicles sold in the second quarter, which ranks as the strongest quarter of all time, according to Autodata.
Through September, year-to-date sales stand at an estimated 1.93 million, which outpaces last year by 10.6 percent.
So, in all likelihood, yearly CPO sales should hit 2 million units this month.
As for September, the daily selling rate for the month was at 8,443, up 7.6 percent year-over-year, Autodata indicated. The firm also noted that the daily rate for September was nearly even with August's, even though the monthly sales figure for September was 4.2 percent lower than August.
Breaking down the tally, the Big 3 sold 76,160 certified vehicles for September (up 12.8 percent), and they have moved 705,319 for the year (up 15.1 percent). Asian brand CPO sales reached 99,126 units in September (up 12.7 percent), and year-to-date numbers have reached 888,406 units (up 7.8 percent).
European brands sold 35,797 certified units in September (up 9.2 percent). They have moved 335,145 CPO vehicles through nine months, beating last year’s pace by 8.7 percent.
In the first half of the year, certified pre-owned sales represented more than 18 percent of franchised dealers’ used-vehicle sales, according to the latest Pulse report from ADESA Analytical Services.
The report, citing its own statistics and those from Autodata Corp., indicates the 18.5-percent share is up from the 16.9 percent of franchised used sales that CPO commanded in the first half of 2014.
Certified vehicles also represented 9.8 percent of retail used sales through the second-quarter, compared to 8.9 percent a year ago.
“Certified pre-owned vehicles have been a particular bright spot in the retail channel and have supported used-vehicle values in the wholesale channel as supply has grown,” Tom Kontos, the executive vice president of ADESA Analytical Services, wrote in the introduction to the report that was shared at last week's NAAA Convention in Orlando, Fla.
Granted, the most recently available monthly CPO sales data from Autodata showed a decrease during the month of August.
However, that was the first year-over-year dip in monthly CPO sales since June 2014. And year-to-date sales through eight months were still more than 10 percent ahead of the 2014 pace.
Not to mention, four brands posted best-ever sales results in August, those being Nissan, Infiniti, Mini and Porsche, according to Autodata.
Specifically, there were 220,416 certified sales in August, which was off 1.1 percent from August 2014, according to Autodata’s roundup. There was one less selling day in August of this year. The daily selling rate for this most recent month (8,478) beat the year-ago figure by 2.7 percent.
And through eight months, CPO sales have reached 1.72 million units, which is a 10.4-percent improvement over the year-ago time frame.
You can probably expect around an 800,000-unit increase in lease maturity volume next year, and those cars are likely to feed nicely into dealer lots as certified pre-owned units, says Joe Derkos of J.D. Power.
But as far as how many CPO cars J.D. Power believes will be moving off of dealer lots next year … well, you’re going to have to wait until Used Car Week like the rest of us.
That’s when Derkos and his team will announce their forecast for 2016 certified sales.
Derkos, who is delivering the opening day keynote at Used Car Week on Nov. 16, will go into everything from an overall industry overview and the parallels between the new- and used-car markets to the top factors driving the pre-owned market, like extended-term financing, lease maturities and the impact of younger buyers and more subprime buyers.
During his Used Car Week sessions in the past, Derkos — who is director of consulting and analytics at J.D. Power — has typically revealed the company’s projections for new-car sales in coming years, and of course, its CPO sales forecast.
He shared some of those plans Thursday afternoon during a Used Car Week sneak peek webinar hosted by Paul Potratz, chief operating officer of Potratz Advertising.
Among the tidbits he offered was the off-lease figure mentioned earlier, which is a looming figure the industry should take to heart.
“As I mentioned at the beginning, we expect another 800,000 or so to mature next year versus this year, which is by far the biggest year-over-year increase that we’ve seen in recent history,” Derkos said.
The fact that those cars often being low-mileage units in good condition coming back to the grounding dealer is an ideal mix for CPO, he said.
“There’s a number of factors that make those vehicles prime candidates for certification,” he said. “So as long as the dealer who’s receiving the vehicle at the end is in a position to certify the vehicle, inspect it and recondition it quickly, there’s a lot of opportunity to be had for those dealers to perform at faster turn rates, larger profits both in the F&I office and front-end gross, and a number of other benefits that serve the whole supply chain, both the dealer and the OEM — and that’s a loyal customer, (and) a likelihood that that customer is going to be a conquest source, and you can migrate that customer up into a new vehicle over the course of that vehicle ownership period.
“So, it’s a huge opportunity out there,” he added. “A lot of dealers are getting onboard; we see much better engagement across the clients that we work directly with and observing how their dealers are getting more and more engaged with their certification programs. But it would be good to see it grow a little bit faster.”
Catch the rest of Derkos' thoughts on the certified market during his address at the CPO Forum during Used Car Week. The annual conference series is being held Nov. 16-20 at The Phoenician in Scottsdale, Ariz.
