Though perhaps not always discussed in great detail, there certainly are ties between the certified pre-owned and F&I segments of a dealership’s business.
Auto Remarketing looked into these interwoven departments during our annual “Best CPO Dealers in the United States” special edition this winter.
How has the availability of financing helped you move more CPO metal? That’s the question we posted to Golling Chrysler Dodge Jeep Ram, which had 755 certified sales in 2014, seventh among all Fiat Chrysler Automobiles dealers in the U.S.
“Not only have lenders made credit readily available again, they are also competing for the business. The competition between them has created better rates and better terms for our customers,” said Adam Hayford, pre-owned director at Golling Auto Group.
“Lenders have also realized the value that a certified car brings to the equation. Lenders have realized their risk is greatly reduced on a factory certified car and to entice dealers to certify their cars they have started offering higher advances for cars, that are certified over cars that are not,” Hayford added. “Good partnerships with lenders that offer flexible programs allow us an opportunity to sell more certified cars.”
Turning to another Big 3 dealer, we asked Beau Townsend Ford Lincoln Inc. — the Ford brand’s 10th-ranked CPO dealer last year with 195 sales — how certified pre-owned vehicles have opened the door for additional F&I income.
“The Ford CPO program is paramount to creating an exceptional ownership experience at Beau Townsend Ford Lincoln. F&I profitability is increased by having reduced cost for Ford, especially extended terms and mileage available to meet our customers’ needs,” said Larry Taylor, owner of Beau Townsend Ford.
Staff Writer Nick Zulovich contributed to this report.
Used-car supply has bounced back in recent years, but simply having greater access to inventory might not be all it takes to get the right certified pre-owned vehicles on your lot.
So, as part of our annual “Best CPO Dealers in the United States” special edition this winter, we asked top General Motors dealers to share some of the sourcing strategies they use to make sure there’s enough CPO-worthy inventory at their stores.
“We place emphasize on getting a vehicle traded for at the door. Our objective is to provide our customer with the highest trade value possible while they are here at the dealership,” — Carl Moyer, the owner of Karl Chevrolet.
Moyer’s store ranked as the No. 1 certified pre-owned seller for GM (Chevrolet, Buick, GMC) in 2014 with 1,791 CPO sales.
“As your dealer for life, we also see added value in the quality of a car that was purchased here, serviced here and traded for at Karl Chevrolet,” Moyer said. “We do outsource vehicles like any other dealer, but if there’s an opportunity to get that same vehicle from a customer, we put every effort into getting that done.”
Coming in at No. 2 on GM’s list was Al Serra Chevrolet, which posted 1,730 CPO sales last year.
The members of the Al Serra Auto Plaza Used Vehicle Management Team shared their thoughts on how to get the right CPO cars: “When we have the opportunity to trade for or acquire an eligible CPO unit, we go and get it! In addition, we certify everything we possibly can right up front.”
The trust factor and peace-of-mind are major parts of the foundation of the certified pre-owned business, but they’re also big selling points for why CPO may be ideal for many consumers.
Couple that with the growing importance of transparency and consumer reviews — particularly in today’s increasingly digital auto shopping environment — and it’s clear that reputation awareness and management are vital to CPO success.
Look at Infiniti's top-ranked certified pre-owned store, for example, whose leadership stressed the role positive reputation plays in driving CPO business.
Steve Camp is executive manager at Infiniti of Naperville, which was the brand’s top-selling CPO dealer in 2014. The store sold 650 certified cars last year.
And as part of our annual “Best CPO Dealers in the United States” special edition this winter, we asked Camp the following:
What role does a positive reputation among consumers play in driving your CPO business? In other words, what impact does the positive consumer experience have on your CPO sales?
“Consumers want a hassle-free experience,” Camp said. “They also want a product and process that they can trust. CPO programs allow transparency and consistency throughout the dealer network. Consumers know that the manufacturer is standing behind the inspection, reconditioning, extension of warranty and special financing, etc.
“We are proof that a manufacturer’s CPO support allows consumers to trust us at an exponentially higher level than a non-CPO dealer,” he continued.
“You might ask how a few CPO dealers outperform their CPO counterparts. It comes down to the second part of your question, reputation. It’s incumbent for CPO dealers to maintain the highest online and off line reputation,” Camp said. “Successful CPO dealers must be efficient, cost effective and transparent. We must deliver what customers want. It all comes back to a hassle free transparent experience with a product and process they can trust.”
Consumers who shop for certified pre-owned vehicles may have unique needs in a vehicle that are different from those of shoppers looking for a new or non-certified used vehicle.
So as part of our annual “Best CPO Dealers in the United States” special edition this winter, we reached out to top dealerships — Lincoln stores, in this case — and asked them about best techniques they use to market to and reach this niche audience.
Here is what a couple had to say for this year's feature:
“Our dealership has always invested heavily into reconditioning used vehicles, which has allowed our sales staff to confidently sell. Our pre-owned vehicles have been ‘certified’ for years; the Lincoln CPO program has allowed us to offer an increased value to our customers with the extended warranty,” said Rick Jacobs Jr., general manager of South Hills Lincoln.
“In the words of our pre-owned manager Dan Bonomi, ‘Cheaper is only a price. Value is priceless.’ This philosophy must be established within the dealership to maintain CPO sales,” he continued.
South Hills Lincoln, located in Pittsburgh, sold 225 CPO vehicles in 2014, according to the automaker, and ranked ninth among all Lincoln stores nationally.
“A large portion of our CPO business is by word-of-mouth, because we stand behind our pre-owned vehicles. All of the necessary service work is completed prior to the vehicles going on the lot, to make them ‘like new.’ No excuses are needed when everything is done prior to the customer seeing the vehicle,” Jacobs told Auto Remarketing.
Over at Bayway Lincoln — a Houston dealership that moved 376 CPO units and ranked fourth nationally among Lincoln stores — Nathan Dawson offered a few marketing strategies, as well.
“The best ways we have discovered to market is by utilizing the advertising tools provided by the manufacturer, maximizing CPO exposure with third-party vendors and having all departments recognize CPO vehicles as a third brand between new and traditional used-vehicle sales,” Dawson said.
“At ground zero, our service advisers create value in a CPO for potential clients and renew vehicle confidence to customers bringing in their CPO vehicle for service by reminding them of the peace-of-mind they get from owning a CPO vehicle,” he added. “We also maintain a vast selection of CPO vehicles with several option package to provide the customer variety, like they would have within our new-car department.”
Editor's Note: Staff Writer Sarah Rubenoff contributed to this report.
A CPO vehicle often serves as an entry-point into a particular brand — for those shoppers looking to secure a particular nameplate, without doling out what it takes to buy new.
And this rings particularly true for luxury automakers. Perhaps this trend, as well as OEM investment, played a role in the results of Autotrader’s recent quest to find the best CPO programs, which revealed luxury brands dominate the top 10 best certified programs out there.
According to Autotrader analysts, Porsche topped the list, when the site’s team analyzed CPO programs across the board to see which offer the best combination of amenities for certified shoppers.
“Porsche's certified pre-owned program is easily the best in the industry,” Autotrader Site Editor Brian Moody said. “Like many luxury-car certified pre-owned programs, it offers six years or 100,000 miles of bumper-to-bumper coverage for any vehicle that's still under factory warranty. But if a used car's factory warranty is expired, Porsche will also offer an additional two years or 50,000 miles of coverage — something no other automaker does. They also offer a long list of perks that make a CPO vehicle very compelling.”
Porsche was followed by Lexus and Volvo, respectively, and the only non-luxury nameplates to make the cut were Hyundai, Kia and Mitsubishi.
When analyzing the different programs, Autotrader primarily took a look at warranty length, whether warranties were transferrable, and which programs had little or no deductible for covered repairs.
“Many brands offer additional perks, like a free service loan vehicle, trip interruption coverage and special financing – we considered those to be a bonus as opposed to a must-have. But these are things that many of the best-of-the-best programs offer,” Moody says.
In ranked order, Autotrader experts say the best CPO programs are:
- Porsche
- Lexus
- Volvo
- Hyundai
- Kia
- Volkswagen
- Jaguar
- Land Rover
- MINI
- Mitsubishi
In addition to the top ten CPO programs, Autotrader editors selected another ten “honorable mention” programs. In alphabetical order, they include:
- Acura
- Audi
- BMW
- Honda
- Infiniti
- Mazda
- Mercedes-Benz
- Nissan
- Subaru
- Toyota
“These programs are still above average, but are very similar in what they offer, which is why they’re unranked,” Moody explained. “When shopping for a CPO vehicle, it’s important to understand the details of what the program offers, and make sure the benefits offered fit your lifestyle. That will help make the cross shopping much easier.”
Count Lexus among the handful of brands posting best-ever years for certified pre-owned sales in 2014. And count on this: Lexus has its sights set on another record year in 2015.
With 6,049 CPO sales last month — its best-ever February — Lexus has now recorded seven straight monthly certified sales records, said Paul Rohovsky, certified pre-owned manager at Lexus. In other words, each month starting with August has been a record for that particular month.
“Lexus CPO continues on a record sales pace as we have developed new resources and programs to support our dealers to achieve new record sales results,” Rohovsky said.
“February 2015 CPO results represented a record for the month of February and the seventh consecutive monthly CPO sales record result. Lexus is committed to the CPO program and supporting our dealers pre-owned operations, and we anticipate another record year in 2015,” he added.
The February sales figure was up 5.6 percent from a year ago, and pushed Lexus’ year-to-date tally to 12,705 certified sales. That beats the 2014 pace by nearly 14 percent.
And in good news for the overall CPO business, Lexus was not alone in its February success.
After news broke that powertrain warranties on 2016 model-year Chevrolet and GMC vehicles were being reduced from 100,000 miles to 60,000 miles, Kelley Blue Book’s Eric Ibara weighed in on how this may impact resale values for these vehicles.
Rest assured: there probably won’t be any measurable fallout. In fact, Ibara said, the certified pre-owned option will offer consumers a similar confidence otherwise found in a longer warranty.
Plus, he said, investing in areas like vehicle performance, fuel economy or amenities may prove more fruitful on the residual front than the warranty.
“GM decided that the 100,000-mile warranty did little for sales and has therefore made a business decision that their money should be invested elsewhere, most likely in the direction of product development,” said Ibara, KBB’s director of residual values.
“Resale value for the 2016 model-year vehicles will likely be unaffected by this decision as consumers will have the option, in many cases, to choose a certified used vehicle, which will deliver the same peace-of-mind,” he continued. “Delivering a vehicle with more performance or fuel economy or compelling features will likely go further in helping GM raise residual values for their vehicles.”
Speaking of certified, GM is certainly on a hot streak to start 2015, along with its Big 3 peers.
According to Autodata Corp., certified sales for the Buick, Chevrolet, GMC, Pontiac and Saturn brands came in at 39,086 units in February, a 21.9-percent year-over-year increase. Through two months, these brands have moved 74,448 CPO vehicles (up 22.9 percent).
Cadillac sold 1,885 CPO vehicles in February, which beats the year-ago sum by 21.7 percent. It has sold 3,758 CPO units in two months (up 21.8 percent).
News of the powertrain reduction was part of a story initially reported by Automotive News.
Used Truck Value Movements
Elsewhere, Ibara also provided some perspective on the overall truck segment, discussing residual trending for new 2015 models.
It's a bright future for the segment, he said.
“Trucks have been trending upward for some time now, in both sales volume and in resale value,” Ibara said. “Although residual values on trucks can vary quite significantly depending on the configuration of the truck (crew cabs and extended cabs hold their value better than regular cabs), the future for used-truck values look good given the improving economy and the prospect of moderate gas prices.
“Consumers’ acceptance of aluminum trucks will likely play out over the coming months and Kelley Blue Book will be monitoring this trend,” he added. “The moderate fuel prices now projected raises the stakes for higher priced vehicles as the break-even period is stretched out further.”
Asian and European brands notched gains in certified pre-owned sales during February, and the respective groups are up year-to-date through two months, as well.
According to Autodata Corp., there were 86,530 CPO sales among dealers for Asian OEMs during February, which is up 3.9 percent year-over-year.
Through two months, these dealers have sold 174,156 certified units, beating the year-ago pace by 7.3 percent.
European-brand dealers sold 34,529 certified cars in February for a 13.6-percent year-over-year hike. Through two months, they have moved 68,927 CPO units for an 18.9-percent improvement.
Several import brands shared unique accomplishments for the month. Among those:
- Kia reported 4,887 certified sales for the month, which was its second-best month ever.
- Over at Hyundai, the automaker announced its best February ever with 7,128 CPO units sold. This is up 4.8 percent from the 6,804 sold in February 2014.
- Volkswagen pointed out February marked the 12th consecutive month the automaker has sold over 7,000 CPO units.
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Paul Rohovsky, certified pre-owned manager at Lexus, said: “Lexus CPO continues on a record sales pace as we have developed new resources and programs to support our dealers to achieve new record sales results.”
The most recently completed month was a February record, he said, extending Lexus’ streak of consecutive monthly CPO sales records to seven. Each month since August has been a record for that particular month.
“Lexus is committed to the CPO program and supporting our dealers pre-owned operations and we anticipate another record year in 2015,” Rohovsky added.
More of these accomplishments can be found here.
Domestic brands continued to move upward in the certified pre-owned market during February, increasing their CPO sales by more than 17 percent year-over-year, according to Autodata Corp.
The firm indicated that the Big 3 sold a combined 76,481 certified vehicles for the month, which beats February 2014 figures by 17.1 percent. Through two months of 2015, domestics have sold 149,322 CPO vehicles, which is ahead 19.5 percent over last year’s pace.
The month was a best-ever sum for Fiat Chrysler Automobiles.
The Chrysler, Dodge and Jeep brands combined to move 14,357 certified vehicles in February for a 24.8-percent year-over-year gain. With Fiat sales included, their sales were at 14,416 units, a 25.0-percent hike.
(The aforementioned Big 3 monthly and year-to-date totals for February do not include Fiat sales).
With regards to year-to-date sales for the group, the Chrysler, Dodge and Jeep brands have sold 27,249 CPO vehicles (up 22.6 percent) and Fiat has moved 109 certified units (up 81.7 percent).
At General Motors, the Buick, Chevrolet, GMC, Pontiac and Saturn certified sales came in at 39,086 units for a 21.9-percent uptick. Through two months, these brands have moved 74,448 CPO vehicles (up 22.9 percent).
Cadillac sold 1,885 CPO vehicles in February, which beats the year-ago sum by 21.7 percent. It has sold 3,758 CPO units in two months (up 21.8 percent).
Ford’s brands moved 21,153 certified vehicles in February (up 4.7 percent), with year-to-date sales at 43,867 units (up 12.3 percent).
Auto Remarketing has learned of new leadership within the pre-owned operations of General Motors.
There is a new position — manager of used-vehicle strategy — that is being filled by Douglas Kaczmarski, who led the rental sales team for GM Fleet and Commercial over the past seven years, according to the automaker.
In the new role, Kaczmarski will aid in strategy to boost residuals, brand experience and improve the GM CPO certification program for its dealers, the automaker said.
Additionally, Jennifer Costabile has a new title of general director marketing, rental sales and used vehicle activities for GM Fleet and Commercial.
