Several brands have already reported all-time records for monthly certified pre-owned sales — and that may not be the last of it.
Starting things off with Chrysler Group, the company sold 13,760 certified vehicles in August, which was its best month ever for CPO sales.
Hyundai, which also posted its strongest certified sales month of all time, sold 9,254 CPO units in August for a 26.7-percent year-over-year hike.
Mazda sold 4,469 certified vehicles during August, marking a 22-percent increase. This was Mazda’s best-ever CPO sales total, says manager of CPO and remarketing Roger Basa, who indicated that “CPO Inventory levels are at historic all-time highs.”
Kia also had its best-ever month for CPO, selling 4,883 units in August. This marked a 36.83-percent increase.
Over at BMW Group in the U.S., the company is reporting the best August ever for its BMW brand’s used-vehicle sales (which include CPO and non-CPO used) as well as an all-time high for the MINI’s used sales (again, CPO and non-CPO combined). Those totals: BMW at 19,318 units and MINI at 2,561.
Certified pre-owned vehicles made up more than a fifth of franchised dealers’ used-car sales in the second quarter — and CPO may not have even yet reached its full potential.
Edmunds.com said in its Q2 Used Vehicle Market Report that 20.4 percent of used sales at franchised dealerships last quarter were certified units. The share of used site traffic commanded by CPO dipped for the second straight quarter, however, coming in at 4.9 percent.
“While CPO has seen a slight bump in share, there still is plenty of room for growth,” the company’s analysis noted. “This market helps bridge the gap for car shoppers buying used but still receiving some of the new-vehicle peace of mind.”
Part of certified pre-owned’s growth can likely be attributed to stronger lease returns.
For instance, Ford Credit’s lease return volume already eclipsed the 100,000-unit mark in just two quarters of 2014, according to data from Ford Motor Co.’s Q2 fixed income conference call that Manheim chief economist Tom Webb posted to his blog in July.
More specifically, off-lease volume for Ford Credit through six months of 2014 was in the neighborhood of 110,000 units — again, just through six months. For full-year 2013, it was around 114,000.
“Big increases in lease returns typically apply downward pressure on prices but create opportunities to certify and sell more CPO vehicles. Lease returns generally meet manufacturer's eligibility requirements for certification because of low mileage, condition and age,” the Edmunds report noted. “CPO sales command higher prices and minimize impacts to transaction prices.”
Case in point: franchised dealers had average used-car transaction prices of $16,781 during the second quarter, which is the highest amount Edmunds said it has ever recorded.
The average premium commanded by certified pre-owned vehicles appears to have dipped from its peak this spring, and turn times are a bit slower, but take that with a grain of salt: both metrics are in relatively solid shape.
Data from CNW Research going back to 2010 indicates that dealers are still fetching much higher premiums on CPO cars than even as recently as 2012 and the first half of 2013 — and CPO premiums are still more than twice as high as they were in 2010, when the economic recovery was in its early stages.
CNW estimated in its latest Retail Automotive Summary that CPO premiums in August have averaged $2,842. That’s down from $2,881 in July and a year-to-date peak of $2,944 in June. It’s also a shade less than August 2013, when certified premiums were at $2,887, and would be the lowest level so far in 2014.
But consider this from CNW’s data set: the average CPO premium has been above $2,800 in each of the last 14 months (counting August).
In 2012, the premiums ranged from just under $2,100 to a little more than $2,300. Last year, they ranged from the $2,400s early in the year before racing up to annual high of $2,903 in the final month of 2013.
Those high levels, as well as the numbers from this year, are considerably stronger than the CPO premiums from 2010. In August of that year, for example, the average amount was $1,283.
CNW also provided some data regarding CPO turnover, which it defines as the number of days a certified car stays on a dealer’s lot before being sold.
The estimated rate for August (23.07 days) isn’t as good as the preceding three months — 22.64 in July, 22.51 in June and 22.46 in May — or most of 2013, but it’s comparable to figures from early this year and early last year.
Also, if you took the average CPO turnover for each of the 36 months between January 2010 through December 2012, only one (June 2011) would have a better rate than August 2014.
KeyBanc Capital Markets likes the used-department outlook not only for the publicly traded dealerships groups its analysts watch closely, but also for the majority of franchised stores — especially the ones that move certified pre-owned vehicles.
According to its July Dealer Survey, KeyBanc said its industry observers continue to believe franchised dealers will outperform the overall used-vehicle industry.
The firm projected that franchised dealers will grow their used retail sales volumes in the mid- to high-single digits annually “for the next few years.”
KeyBanc explained that growth will be driven by the increasing supply of off-lease vehicles, estimated to increase by about 20 percent annually during the next several years. Analysts contend that should provide franchised stores with the inventory to spark CPO sales.
“Franchised dealers have the first hand pick at the highly desired, low-mileage, off-lease supply, and CPO sales are exclusive to the franchised dealers,” KeyBanc analysts said.
And franchised stores can increase their CPO inventory beyond what they can certify through their parent automaker by leveraging the capabilities of CarMark Certified, a warranty program that provides CPO warranties to all vehicle brands. The program, launched in 2010 as a complement to manufacturer-based CPO programs, is administered nationally by NAC (National Auto Care) of Westerville, Ohio.
The CarMark Certified limited warranty provides either a 12/month-12,000-mile warranty from sale date or a 72-month/100,000-mile warranty from in-service date. More details can be found at www.carmarkcertified.com.
Certified sales continue to be a growing portion of store performance. According to KeyBanc, 20 percent of used sales volume at Lithia Motors comes from CPO turns. It’s estimated to be even higher at Asbury Automotive (25 percent) and even more dramatic at Sonic Automotive (25 percent to 30 percent), Group 1 Automotive (30 percent), AutoNation (30 percent) and Penske Automotive Group (35 percent).
“We believe Lithia, Asbury, and Penske are likely to outperform the industry and their peer group average driven by company specific actions, such as the multi-sourcing of inventory, the retail-first approach, improved Internet presence, as well as an established track of proven execution on these initiatives,” KeyBanc analysts said.
Beyond just CPO sales, KeyBanc is bullish on the used market in general, again aided by an acceleration of off-lease supply relative to first half of the year. The firm arrived at that assertion despite CNW Research indicating a 6-percent year-over-year pullback in used sales in July, leaving the year-to-date reading flat compared to the same point in 2013.
“However, used-car demand drivers, such as the job market and financing availability remain on a positive trend supporting a positive used-car demand outlook,” analysts said. “We believe the relative weakness reported by CNW in the first half of the year was largely a result of the disruptive weather conditions during the winter months and elevated pricing during the spring months as demand began to recover.
“Based on our survey results, used-vehicle volume growth in July averaged in the mid-single digits,” KeyBanc continued. “Moving into the second half of 2014 and beyond, we anticipate an inflection in off-lease supply of late model used vehicles which would alleviate some of the pricing pressures and improve the availability of used cars in the supply-constrained used vehicle industry, all of which should drive volume. Off-lease volumes are expected to increase at an annual rate of 20 percent through 2016.”
Dealer survey results provided KeyBanc with the backing to make those assertions since 91 percent said they experienced used sales upticks in July. A total of 36 percent said that increase was between 5 percent and 10 percent while another 18 percent posted jumps of double digits.
And fueling those July sales is the availability of financing, which dealers told KeyBanc is becoming more available or at least remaining stable compared to the previous month.
A total of 55 percent of dealers told KeyBanc that they’re seeing commercial banks and finance companies becoming more aggressive with the remainder of dealers questioned seeing no change.
The story is similar in the subprime space, too, as KeyBanc’s survey showed just 10 percent of dealers noticing any tightening in underwriting practices to buyers with bruised credit histories.
American Honda Motor Co. and Carfax have extended their certified pre-owned partnership, which began 10 years ago.
As such, Carfax will continue to be a vehicle history information provider for the Honda and Acura certified pre-owned vehicle programs. Carfax Vehicle History Reports have been a major element in the Honda/Acura CPO programs the past decade, the companies said.
“We’ve continued to build two highly successful Certified Pre-Owned Vehicle programs over the last decade with the help of Carfax,” said Brian Butts, manager of auto remarketing at American Honda Motor Co. “Carfax Reports, along with Honda and Acura’s stringent certification procedures, help to ensure only the best Honda and Acura vehicles become certified.”
Offering the dealer’s vantage point, Pohanka Acura general manager Steve Waersch said: “What makes certified pre-owned cars a great value are the program benefits. Our Certified Honda and Acura vehicles come with two things our customers want — a Carfax Report and a thorough inspection. In fact, we make sure our on-the-lot and online shoppers get a free Carfax Report for every single car in our inventory.
“It builds their confidence and makes them more likely to buy,” he added.
Through seven months of 2014, the brand most shoppers have requested in the Costco Auto Program’s certified pre-owned offering is Toyota, according a list provided to Auto Remarketing by the company.
Placing second was Honda, followed by Ford, Chevrolet and Nissan, respectively.
That top five follows the same order of most-requested CPO brands for full-year 2013. When the most-requested list is broken down by manufacturer, Toyota, Honda, General Motors, Ford and Hyundai (in that order) top the list for year-to-date most-requested brands within Costco’s CPO program, and the rankings were the same for full-year 2013.
Check out the year-to-date 2014 rankings below and stay tuned for a more in-depth look at the Costco Auto Program's pre-owned vehicle operations and an update on how they have fared in 2014.
Most-Requested CPO Brands (January through July)
1. Toyota
2. Honda
3. Ford
4. Chevrolet
5. Nissan
6. Subaru
7. Lexus
8. BMW
9. Hyundai
10. Acura
11. Mercedes-Benz
12. Volkswagen
13. Jeep
14. Audi
15. Mazda
16. KIA
17. GMC
18. Volvo
19. Dodge
20. Infiniti
Most-Requested CPO OEMs (January through July)
1. Toyota
2. Honda
3. GM
4. Ford
5. Hyundai
6. Nissan
7. Volkswagen
8. Fiat Chrysler
9. BMW
10. Subaru
11. Mercedes-Benz
12. Mazda
13. Volvo
14. Jaguar Land Rover
15. Mitsubishi
16. SAAB
17. Suzuki
18. Isuzu
There were 20 different brands represented among the more than three dozen segment category winners in the second annual Vincentric Best Certified Pre-Owned Value in America awards released earlier this week.
That’s up from 17 different brands in last year’s inaugural list, but the key here, says Vincentric president David Wurster, is to compare this breadth of value in certified cars and the emphasis on the segment with five years ago.
More certified programs have come on board during this time period, he said, and along with that has been a great focus on the CPO market from these automakers.
Having 20 different brands with vehicles honored for offering a CPO value proposition this year says a lot about the automakers themselves.
“I think what it tells us is that the brands, the automakers, are all taking the CPO programs and customers very seriously and putting a lot of emphasis on making sure that these programs and these vehicles provide value to customers,” Wurster told Auto Remarketing in a recent interview.
“And I think they’re doing that because it’s good for their business, in terms of creating a market for their used vehicles, keeping residuals high. And it’s good for their dealers, and it serves a big need in the marketplace for consumers,” he continued.
One of the success stories in the last few years, Wurster said, has been Buick, which actually earned the best CPO value luxury award this year in the Vincentric awards program.
“I think Buick is a success story, competing in the premium segment. I think the fact that they offer a maintenance program is significant. I think that’s an area where you can distinguish yourself by providing a certain amount of free maintenance in the CPO marketplace, but it’s also an area that absolutely adds value to the whole concept,” Wurster said.
“We’re not really comparing CPO programs,” he added. “We’re measuring value behind CPO vehicles. And part of the concept of adding value is that you’re trying to get more for the money that you spend.
“The way we measure it is, we’re trying to look at comparable vehicles, and say, ‘If they cost the same amount to purchase, which one costs less to own and operate?’ And that’s the one with the greater value,” he continued. “A brand like Buick is trying to lower that cost of ownership, thereby, providing better value.”
That sends a positive message about CPO, Wurster says.
“I think other brands that allow their free maintenance programs to transfer over to the second owner are making good decisions, and I think that hits to the heart of why people have an interest in CPO vehicles to begin with: the fact that they can get a fairly new vehicle, but one that — even more so than an extended warranty — actually puts dollars back in their pocket by not charging for maintenance,” he said.
The Big 3 beat year-ago certified pre-owned sales by nearly 13 percent in July, and all continuous brands saw their numbers rise year-over-year, most by double-digit percentages.
That’s according to Autodata Corp.’s preliminary data set sent on Tuesday, which indicated that domestics moved 69,231 CPO units in July.
That was good for a 12.7-percent rise from July 2013, and put the year-to-date sum at 467,116 units, which is also up 12.7 percent.
The CPO programs at Ford moved a grand total of 23,000 units in July (up 15.3 percent) and have sold 154,958 cars year-to-date (up 18.1 percent).
For Lincoln, it was 2,213 certified sales in July and 14,575 sales throughout seven months.
There were 20,787 Ford/Lincoln CPO sales in July, and there have been 140,383 sales year-to-date.
At General Motors, there were 31,847 sales of certified Buick, Chevrolet, GMC, Pontiac and Saturn vehicles in July (up 6.5 percent), and these same brands have combined for 217,651 CPO sales so far this year (up 8.0 percent).
(Sales for certified vehicles of the discontinued Pontiac, Hummer and Saturn brands were the only ones of the domestics not to increase).
There were 1,759 Cadillac CPO sales in July (up 22.7 percent) and 11,872 certified sales through seven months (up 9.1 percent).
At Chrysler Group, its brands combined to sell 12,625 CPO vehicles in July (up 24.4 percent) and 82,634 certified cars year-to-date (up 16.6 percent).
That does not include CPO sales for Fiat, which moved 89 certified units in July (up 161.8 percent) and 292 through seven months (up 79.1 percent).
The certified pre-owned programs among many import automakers fared well in July — European-brand CPO sales were up 20.6 percent year-over-year, and Asian brands climbed 3.6 percent, according to Autodata Corp. — but one particular trio of brands enjoyed their strongest months of all time.
Autodata said in its preliminary set of data released Tuesday that Hyundai, Kia and MINI each posted best-ever months.
Hyundai moved 8,490 CPO units, which was a 26.1-percent year-over-year increase and pushed the year-to-date sum to 54,342 CPO sales (up 23.1 percent).
Kia sold 4,423 certified vehicles, up 38.3 percent year-over-year. Through seven months, it has moved 26,286 CPO units (up 40.8 percent).
MINI had 841 certified sales for a 42.8-percent hike. Its year-to-date sum is at 5,215 sales (up 41.4 percent).
Volkswagen, meanwhile, reported its best July ever for certified sales, despite year-to-date numbers being 8.6 percent lower. VW moved 8,126 CPO units for the month, compared to 8,114 certified sales a year ago.
Overall, Asian brands had 95,487 certified sales for July, with year-to-date sales at 633,583 units (up 4.1 percent). For European brands, July CPO sales came in at 35,232 units, resulting in a year-to-date tally of 232,816 CPO sales (up 12.9 percent).
There was just a shade under 200,000 certified pre-owned sales in July, according to preliminary results released this morning from Autodata Corp., which said this monthly sales figure is more than a 9-percent year-over-year increase.
Specifically, there were 199,950 CPO sales for the month, up 9.4 year-over-year but off 10.4 percent from June.
This monthly figure pushed the year-to-date total to 1.33 million, which is ahead of last year’s pace by 8.5 percent, according to Autodata.
In addition to July being a solid month industry-wide, three brands – Hyundai, Kia and MINI — each posted their best CPO sales month ever, Autodata said, noting that a few others were close to reaching best-ever marks, as well.
