When it comes to repeat business for automotive makes and models, customer loyalty associated with the certified pre-owned vehicle market significantly outperforms those associated with traditional used-vehicle offerings. However, dealers who want to push the CPO product are challenged by a lack of consumer awareness.

New data from J.D. Power shows that, on average, buyers of mainstream CPO cars traded in vehicles for the same nameplate 35 percent of the time in Q3 2018. This contrasts with buyers of non-certified mainstream used vehicles, who traded in their vehicles for the same make/model 30 percent of the time.

Put another way, CPO buyer brand loyalty is stronger than it is for the typical used vehicle buyer. Keeping more consumers in the brand fold is critical to the fortunes of automakers and the dealers who represent them. Also, the current owners of CPO vehicles exhibited greater willingness to buy a CPO vehicle in the future compared to the current owners of the used or new vehicles.

Consumers purchased more than 2.6 million CPO vehicles in 2017, according to the Automotive News Data Center. Through the first 11 months of 2018, total CPO sales in the U.S. rose 2.2 percent with sales specifically fueled by off-lease vehicles.

At J.D. Power, we conduct these surveys on a regular cadence to assess:

— Consumer awareness of CPO programs;

— Future CPO purchase considerations; and to

— Understand the premiums that customers are willing to pay for the perceived benefits associated with CPO vehicles.

We also found that 39 percent of respondents indicated a willingness to pay a premium of up to $1,000 for a CPO vehicle. Another 30 percent of our respondents reported that they would be happy to invest over $1,000 more for the privilege of owning a CPO vehicle.

Auto industry needs to raise awareness of CPO programs

That said, there is clear room for improvement to further optimize CPO performance. One of the clear opportunities, unveiled by our most recent results, revolves around the low level of awareness of CPO programs and their benefits. Many important demographic sectors do not even know these programs exist.

Around 65 percent of consumers told us in the survey process that they are not familiar with manufacturer certified pre-owned initiatives, with lowest awareness levels reported by our youngest respondents. (In this context, it is also interesting to note that younger consumers exhibited a greater motivation to cross-shop all vehicle types — a further indication of low brand loyalty in an increasingly important segment of the consumer base.)

This highlights an imperative to learn much more about younger buyers, and to develop targeted education initiatives about the various benefits of CPO offerings for this segment. It will play a critical role in influencing the future buying patterns of a new generation, and inform dealers and OEMs on how best to connect with this age group.

Specific actions that J.D. Power believes will contribute to helping dealers optimize CPO offerings include:

— Separating CPO and non-CPO vehicles on lots and in merchandising programs

— Ensuring that sales staffs are up to date on CPO program details and are equipped to share this information with customers

— Highlighting the maintenance plans and programs that accompany CPO vehicle initiatives

On this latter point, our survey found that almost half of respondents considered the extended warranty that accompanies a CPO vehicle to be the most important factor in the buying process. It helped to significantly differentiate CPO offerings from conventional used vehicles. This, of course, is because future maintenance is a top-of-mind concern for buyers of used vehicles.

To get a full perspective on how CPO vehicles are going to market, and to access the J.D. Power perspective on how consumers are responding to offerings in the market, visit: https://www.jdpower.com/Cars/Certified-Pre-Owned.

Maya Ivanova is a senior quantitative researcher at J.D. Power. Auto Remarketing also recorded a podcast with Maya to discuss this column on CPO trends. That episode can be found below.