This year’s Vincentric Best Certified Pre-Owned Value in America awards were unveiled this morning, and leading the pack among OEMs were Ford and Toyota, each of which were represented by their respective brands’ vehicles in seven segment CPO category awards.
Named best CPO value passenger car brand once again was Honda, which also won the same honor in last year’s inaugural awards.
Meanwhile, the best CPO value luxury brand award and best CPO value truck brand winners were new this year: Buick and Chevrolet took those honors, respectively.
In all, there were 40 vehicles honored and 20 different brands recognized.
“The Vincentric Best CPO Value in America awards highlight the commitment of manufacturers to offer high quality used vehicles. Backed by extended warranties, these certified pre-owned vehicles provide great value to buyers,” stated David Wurster, president of Vincentric.
”In our CPO awards this year there were 20 different brands with winning vehicles. These results show that when manufacturers actively measure and manage total cost of ownership, value is provided to consumers throughout the lifecycle of the vehicle,” he added.
The awards highlight the best value CPO model in each segment; Vincentric does this by using a statistical analysis to measure which vehicles had lower than expected ownership costs given their market segment and price.
In configuring this year’s awards, the company used eight cost factors — including depreciation, fees and taxes, financing, fuel, insurance, maintenance, opportunity cost, and repairs — and analyzes more than 13,000 vehicle configurations.
Each certified model was analyzed in all 50 states and Washington, D.C. Tests are based on assumptions each car would be driven 15,000 miles annually, with the expectation that they will be driven an additional 15,000 miles per year over the coming five years.
Breaking down the OEM winners, the Ford brand’s Mustang, Explorer, E-Series Vans (two segment wins) and Transit Connect models plus Lincoln’s Navigator and MKX models were honored.
Vincentric noted that passenger cars highlighted Toyota’s wins, including two award winners from Lexus and a win by Scion.
Elsewhere, General Motors and Honda each took home six awards and Nissan was recognized with five.
Stay tuned to Auto Remarketing for more from Vincentric, as we talk with president David Wurster about how these brand winners reflect CPO value.
For only the second time this year, a truck model has cracked the national top 10 list of hardest-to-find certified pre-owned vehicles.
According to monthly scarcity data that AutoTrader.com provides to Auto Remarketing, the Ram 2500 was the fourth-scarcest CPO vehicle in the country during June. This marks the first time since January that a truck has made the national list of tough-to-locate CPO vehicles (the Cadillac Escalade EXT was No. 1 that month).
The Ram 2500 also ranked No. 6 on the CPO scarcity list for Los Angeles and came in at No. 3 for New York — it was on neither of those lists the previous month, the AutoTrader analysis said.
“Sales of new full-size and heavy-duty pickup trucks remain robust, particularly because trucks on today’s roads are so old,” said AutoTrader senior analyst Michelle Krebs. “This pent-up demand is no doubt fueling the scarcity CPO trucks like the Ram 2500.”
Overall, the hardest-to-find certified vehicle during June was the Pontiac Solstice. Despite that vehicle no longer being in production, AutoTrader said it was “likely due to its sporty, drop-top design.”
The CPO rankings include a combination of early- and late-model vehicles, but AutoTrader also carves out a list specifically for the scarcest late-model vehicles.
Ranking tops on that list nationally in June was the Porsche Cayman.
Brand Strength
Going back to the certified pre-owned scarcity list, AutoTrader spotlighted Mazda, Subaru and Toyota as being particularly noteworthy in June.
Subaru’s sporty Impreza WRX and BRZ models were among the scarcest CPO vehicles in several metropolitan areas, including:
Atlanta (WRX at No. 4)
Houston (WRX at No. 6)
Philadelphia (BRZ at No. 3)
Los Angeles (WRX at No. 5)
San Francisco-Oakland-San Jose (WRX at No. 5, BRZ at No. 9)
Washington, D.C. (WRX at No. 3)
“The Subaru brand has enjoyed a stunning sales surge, even through the recession and well beyond,” Krebs said. “Summer and sporty cars go hand-in-hand and even more so for affordable ones like the WRX and BRZ.
“The same could be said for Mazda’s sporty cars — the Miata and the MazdaSpeed3,” she added.
In fact, the Miata was fourth on the CPO scarcity list in Philly and ranked eighth in Atlanta. The certified MazdaSpeed3 cracked the top five of both Dallas-Fort Worth (No. 3) and Chicago (No. 5) during June. The Mazda CX-5 was the 10th hardest-to-find certified vehicle in the San Francisco-Oakland-San Jose area.
As for Toyota, AutoTrader said the used Sequoia remained challenging to secure, and the CPO variety stood out. It was No. 5 on the CPO list for both Boston and D.C., and it was No. 7 in Atlanta.
Additionally, the certified edition of the Toyota FJ Cruiser was No. 9 in Dallas-Fort Worth, AutoTrader said.
The complete rankings can be found below:
In recent months, an independent dealer has typically generated an average premium in the neighborhood of $700 when he or she chooses to certify a car with a non-OEM program versus not certifying the vehicle at all.
That’s according to June’s Retail Automotive Summary from CNW Research, which also said that more than four-fifths of non-automaker CPO vehicles are likely to be more profitable for the independent dealer than the same non-CPO car.
“There is little question that automaker certification programs for used vehicles generally move vehicles off of the dealer lot quicker, but also at a higher price compared to the same vehicles that aren’t certified,” CNW president Art Spinella said in the report.
“But what about independent dealers and the non-OEM certification programs? Do they work? The simple answer is ‘yes,’” he added. “They cut down on the number of days a vehicles remains on the lot, and they generate higher prices than the same make and model that isn’t certified.”
In June, for example, turnover for non-certified cars on an independent dealer lot was 45.02 days. For certified vehicles, it was 33.14 days. In May, the non-CPO turnover was 44.26 days; the CPO turn was was 33.14. Numbers in the last 18 months reflect much of the same.
And the CPO premium during June was $696. While independents were fetching certified premiums of more than $600 in each month since the beginning of 2013, the June level was the highest in the 18-month data set provided by CNW.
Granted, the premiums that franchised dealers fetched on cars within OEM CPO programs was much higher — they ranged from the low $2,400s to more than $2,900 in the past year-and-a-half. However, Spinella advised that should be looked at with some perspective.
“Considering Independent dealers work with less pricey vehicles, the premium amount is proportionately about the same as the OEM premium for franchised dealers,” he said.
It should be noted that franchised dealers are able to cut turn times nearly in half with factory CPO program — in June, non-CPO turnover was 42.95 days, while CPO turnover was 22.81 days — while independents have typically shaved 25 percent to 35 percent off the turn time when they run certified programs, according to CNW.
But keep this in mind: if an independent dealers keeps a keen eye on what it costs to run a CPO program, the profit potential is there.
“Profitable or not?” Spinella wrote. “Depending on how closely the dealer watches certification costs, the answer is 81 percent of these CPO units generate higher net profits than that made on a non-CPO vehicle.”
There were 2.11 million certified pre-owned vehicles sold in 2013, up from 1.83 million in 2012, and 2014 is expected to be an even bigger year for certified sales, with Manheim Consulting putting a target on the 4 million mark. Are you making the most of this growing market?
To help dealers answer that question and more, CarMark Certified is hosting a free webinar to highlight its warranty program that provides CPO warranties to all vehicle brands. The program is administered nationally by NAC (National Auto Care) of Westerville, Ohio.
The CarMark Certified brand is owned by POADA LLC and was launched in 2010 as a complement to manufacturer-based CPO programs. It currently is offered by dealers in 14 states.
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.
NAC regional sales manager Dave Stevenson will highlight more aspects of the program during the webinar titled, “A New Generation of Certified,” which is scheduled for 2 p.m. EDT on Aug. 5.
“Certified sales are on the rise as both dealers and consumers recognize the benefits of a certified pre-owned vehicle,” Stevenson said. “Certification means faster turns and higher profits for dealers; are you certain you’re certifying all the cars you can?
“Join us for this free webinar to find out how you can certify more vehicles on your lot with flexible, dependable, and profitable third-party CPO programs,” he continued. “Find out how a third-party CPO program might just be the missing piece in your CPO profit equation.
The all-new CarMark Certified Pre-Owned program is an excellent option for dealers — franchise and independent — looking for a flexible, dependable and profitable third-party certified program,” Stevenson went on to say. “With new options, new benefits and new terms, we’re certain the CarMark Certified program can be a good fit for your dealership.”
Dealers can register for the free webinar here.
For the first time in one-and-a-half years, monthly certified pre-owned sales fell on a year-over-year basis — but take that with a grain of salt.
Sales in June declined more than 2 percent, but there's more to the story.
CPO sales through the first half of 2014 beat prior-year figures by more than 8 percent, according to Autodata Corp., keeping the market on track for a fourth consecutive year of record numbers.
Autodata released industry-wide certified sales figures on Wednesday, reporting that dealers sold 181, 106 CPO vehicles in June. This marked a 2.4-percent slide from June 2013 and a 12.8-percent drop from May’s tally. The last time there was a year-over-year decline in certified pre-owned sales was December 2012, according to Autodata.
That said, the daily selling rate in June was 7,546, a solid 5.7-percent increase over the 7,136 sales rate in June 2013. And Kia, which sold 4,056 CPO units for the month, had its best month ever.
Not to mention, there have been 1.13 million CPO units sold this year, which beats the figures through six months of 2013 by 8.3 percent.
Early indications are that June was another solid month of certified pre-owned sales as the first half of 2014 drew to a close.
Hyundai, for example, had its strongest June on record for CPO, selling 7,324 vehicles — an 8.1-percent gain. Its 45,852 year-to-date CPO sales are up from 37,424 in the first half of 2013.
Over at Kia, dealers posted 4,056 certified sales in June for a 36.3-percent gain, and its first-half sales of 21,863 CPO cars are up 41.4 percent over last year.
Audi sold 3,649 CPO vehicles in June and has sold 21,827 certified units year-to-date. Those compare to 3,399 certified cars sold in June 2013 and 19,185 units moved in the first half of last year.
Volvo had 1,205 certified sales in June, up 40 percent year-over-year. Its six-month total is at 6,704, versus 5,545 CPO sales in the same period of 2013.
Next up, Volkswagen moved 7,102 CPO units in June (down 18.3 percent) and has sold 45,015 certified vehicles so far this year (down 9.5 percent).
Stay tuned to Auto Remarketing as more certified pre-owned sales results come in.
For Bill Luke Chrysler Jeep Dodge & Ram, the additional investment in reconditioning and getting its inventory retail-ready and qualified for certification is well worth it.
Jody Knaub — the dealership’s used-car director — emphasized the high expectations consumers often have for conditions of used cars, which can impact the level of investment that’s made in reconditioning.
And those recon costs are particularly high for this Phoenix dealership.
“Nowadays, I think the customer expects a (used) car to be a lot nicer than they did, say, even 10 years ago,” Knaub said. “People are really in a place where they expect that car to be almost perfect.”
In a recent comparison of reconditioning costs for Chrysler stores in the Phoenix area, Knaub said the average recon ticket at his store was around $900, versus a cost of about $450 for other Chrysler dealers in the area.
And that’s even with Bill Luke selling a good bit of current model-year, 1-year-old and 2-year-old used cars.
“If you consider that, you would think that the reconditioning costs, being at the level that we’re at, would be less than average, but that’s not the case,” Knaub said. “It’s actually a lot higher than everybody in Phoenix.”
And with the dealership being an Internet store, it is “price chasing,” as well. So, the dealership has to acquire cars at a low enough price that it can do all the reconditioning it needs too and still meet pricing justifications within its market.
But here’s one pay-off: customers are happy.
In fact, Knaub said that “our customer satisfaction ratings are so much higher because these cars are in good condition.”
CPO Focused
When it comes to its inventory of pre-owned Chrysler Group products, the store typically will only keep products that meet CPO guidelines.
That approach and other strategies the store puts into place seem to be working — as highlighted in Auto Remarketing’s “Best CPO Dealers in the USA” issue, Bill Luke Chrysler Jeep Dodge & Ram sold more CPO vehicles than any other Chrysler Group store in 2013.
In fact, its 1,520 certified sales last year were more than 500 ahead of the closest competitor.
And when looking at the investment needed for reconditioning and CPO, there is an interesting focus for the dealership, as Knaub illustrates.
“I think the way that the market is going now, it’s such a price-driven situation that we’ve taken the vehicles and put in the money that we need to get them to qualify at or even above the certification standards, but we’ve started looking at certified as being a great opportunity for the customer to have a good experience with a used car,” Knaub said. “It’s also an opportunity for us to possibly get them back for additional service and so forth, because they bought their certified car here.”
But the most significant area where CPO has helped, he said, is in marketing and branding, particularly with how strong a branding weight the term “certified” cars carries among consumers and how widespread it has become in the industry. It becomes a great branding tool.
“And so, we’ve turned it into almost a volume generator for us, not so much a gross profit center,” Knaub said.
In other words, instead of CPO simply being used primarily as a profit center for the dealership, it has become more of a marketing/branding tool, giving customers value and driving volume for the store.
“Our gross profit margins — our dollar per copy, if you will — are lower than probably what a lot of stores around us run. But we’re the No. 1 Chrysler store in the world, as far as volume. Honestly, it pencils out in making a few less dollars per car, but selling a whole lot more,” Knaub said. “Our profit margins and our bottom line have been dramatically increased.”
He credited a big part of that success to selling service contracts, which can be huge profit centers, he said.
“Just by increasing our volume, it’s more doc fees, it’s more service contract penetration … and all that ends up with a better bottom line,” he said.
Recon Steps
Once the car arrives on the lot, the dealership takes a full description of the vehicle, which is photographed immediately. The pictures — the dealership takes six or seven, depending on the car —are posted online prior to completing the car’s get-ready process.
The car is then checked into service, where a team of dedicated used-car technicians performs the necessary work.
There is a recon manager and an assistant, whose “sole goal is to have that car turned out of service in detail in seven days,” Knaub said.
“We’ve given them a cap on how much money they can spend. After that, then they get approval,” he said. “We pretty much let her decide whatever she wants to do anyway just for speed, because it’s so important now for that process to be as quick as possible.”
At that point, the vehicle is moved to the detailing department, then the dealership’s special photo room to shoot up to 30 or 35 photographs of the car (The store actually hired a photographer specifically for taking these vehicle pictures). And once the photography is done, the car hits the lot.
Interest among consumers in certified pre-owned vehicles continues to rise, including many Millennials and young professionals who may use CPO as an entry into the luxury car segment.
With that in mind, Kelley Blue Book released its "10 Best Certified Pre-Owned Luxury Cars Under $30,000" — a list that may come in handy for a dealer when such an aspirational shopper arrives on the lot.
Topping KBB’s rankings was the 2011 BMW 3 Series, followed by the 2011 Lexus ES and the 2011 Acura TL.
All vehicles on the list are 2011 model-year luxury cars with a Kelley Blue Book Certified Pre-Owned Price that starts under $30,000.
“CPO sales have increased nearly 11 percent so far in 2014 compared to this time last year, demonstrating consumers are interested in the value-add of a CPO model as their next vehicle purchase,” said Jack Nerad, executive editorial director and senior analyst for KBB.com.
“Today, many Millennials and young professionals are aspirational luxury car owners, and a CPO luxury model helps make that a reality sooner than they may be able to afford buying a new luxury car.”
The complete list is below, along with KBB CPO starting price for each vehicle. (KBB notes that “All starting Kelley Blue Book CPO Prices above reflect typical mileage and basic equipment, effective June 2014.”)
1. 2011 BMW 3 Series: $25,464
2. 2011 Lexus ES: $27,751
3. 2011 Acura TL: $23,943
4. 2011 Audi A6: $29,525
5. 2011 Cadillac CTS: $23,208
6. 2011 Infiniti G: $20,717
7. 2011Mercedes-Benz GLK-Class: $28,383
8. 2011 Cadillac DTS: $28,227
9. 2011 Volvo XC60: $24,297
10. 2011 Audi A4: $22,627
The 346 certified pre-owned vehicles that Paragon Honda sold in May was an all-time record for the brand, and the New York dealership’s leadership said the store should eclipse 3,300 CPO sales this year.
The dealership has sat atop Honda’s list of top CPO sellers for quite some time and earned Auto Remarketing’s inaugural CPO Dealer of the Year honors in 2010.
Brian Benstock, Paragon’s vice president and general manager, talked with Auto Remarketing about the record, saying the availability of off-lease vehicles was a big factor in helping the dealership achieve this mark.
What’s more, he anticipates this pipeline will continue growing this year, giving dealers greater opportunity to acquire these CPO-ideal cars.
That said, the CPO market in general is growing, meaning other dealers — including competitors — are seeing their certified sales blossom.
So how does Paragon distinguish itself from other stores, amid these widespread gains?
“Somebody asked me that the other day, and I said it’s like golf clubs,” Benstock said. “If I gave you a set of Ping golf clubs and I had a set of Ping golf clubs … and Tiger Woods had the same clubs, well, our results are going to be dramatically different.
“I would say the same is true in the certified used-car business. I think more people are getting into it; more people are using tools like vAuto and data-mining tools, but the reality is, people that use the tools the best will have a better result,” he continued.
To illustrate how he uses these industry tools differently, Benstock used another sports example: Formula 1 racing. In the 1950s and 1960s, he said, a solid pit stop would take 59 seconds to change two tires. These days, the bar has been raised: four tires changed in about 2.3 seconds.
“So, I think velocity, throughput, speed will continue to be the edge that the sharper dealers have,” he said.
And that, he said, applies to the speed at which dealers can get cars from acquisition to the frontline, turn the inventory and other efficiencies.
“These things will separate the winners from the losers going forward,” he said. “Everybody has time from acquisition to frontline-ready. Everybody has that time. For some dealers, it’s seven days. For some, it’s 14 days.
“In our case, we’re trying to get that down below 12 hours,” Benstock continued. “So, it’s the fresher the fish, the better the dish.”
And that also applies to things like responding to customer leads: the more efficient, the better.
“All of these things tie in,” he said, referring to tools, acquisition-to-frontline-ready speed and response time to customer leads. “All of these things lead to great turn, great velocity and great throughput.”
Going back to the CPO sales numbers, it’s not just additional supply that’s driving certified strength for Paragon.
For one, the dealership has had great success with its Vehicle Exchange Program, where a consumer can trade in a late-model Honda for a new Honda for a similar or lower monthly payment. Paragon Honda uses the service lane to target in-market drivers of late-model Hondas that are ideal for CPO.
And with increased competition in CPO, Benstock said his store has pushed itself to improve.
“The CPO market is heating up. There are more people involved in it, so we’re forcing ourselves to get better at it,” he said. “We’ve had dealers in our district that have increased their business by 30 and 40 percent. And I think the fact that we’re still up as a mature dealer speaks volumes to some of the changes that our team has made.
“Because we’re not in a static market. People are getting into the game, and things that took us five and six years to figure out, other dealers are able to replicate in a much shorter time. If we’re going to continue to have an edge, we’re going to have to continue to innovate and break down some walls,” he concluded.
The Nissan brand recently completed its best-ever month for certified pre-owned sales — and the program may not have even reached its peak yet.
According to Autodata Corp., there were 12,713 Nissan brand certified sales in May, which is nearly a 24-percent year-over-year increase. The CPO leadership for the automaker believes there is “potential to sell even more.”
“We are pleased with our all-time sales records for Nissan, and we have potential to sell even more,” Marty Gleason, senior manager of certified pre-owned at Nissan and Infiniti, told Auto Remarketing. “Our CPO program is one of the most competitive products in the market.
“It allows dealers to provide a customer with great value and the peace of mind that comes with a factory-backed warranty,” he continued. “Nissan is tracking well above the industry growth so far in 2014, and I anticipate this momentum will continue.”
The brand has moved 56,496 CPO vehicles through five months of the year, up about 20 percent from the same period of 2013, Autodata indicated.
Comparatively, the industry as a whole is up 10.6 percent year-to-date with 952,234 CPO sales through May, tracking toward another record year.
But May’s certified sales result wasn’t the only good piece of news on the pre-owned front for Nissan recently.
In the inaugural CarMax Used Car Shopping Report that was released earlier this month, the Nissan Altima was spotlighted as the model generating the most test drives and sales at CarMax.
“Consumers recognize the same appeal that makes Altima one of the best-selling new cars on the market. Altima provides a great combination of design, performance, fuel efficiency, technology and value,” Gleason said.
“Altima consistently ranks as one of the highest searched pre-owned cars on shopping sites like AutoTrader.com,” he added.
Not to mention, Gleason says the Altima is Nissan’s top-selling new and pre-owned model and commands a 30-percent share of the brand’s CPO sales mix.
“From a dealer’s perspective, the exciting part of Altima’s popularity is the retail traffic it drives. A high percentage of our CPO shoppers end up buying a new model. Our motto is ‘Used drives new,’” he added.
