Certified Vehicles Act as ‘Bridge’

Various types of consumers are considering buying certified pre-owned vehicles offered by dealers through auto makers’ remarketing programs.

It helps dealers to know who those types of shoppers are, says Rick Wainschel, AutoTrader’s vice president-automotive insights.

Better yet, it helps to know which other groups might be tempted to buy cars through CPO programs in which off-lease vehicles are inspected, reconditioned as needed and sold with warranties at prices that are higher than those of conventional used cars.

In this age of pent-up demand, many people are buying a car because they need one, not necessarily because they want one, Wainschel says. That points lots of former new-car buyers in the direction of used cars. Certified vehicles particularly appeal to them.

Based on an AutoTrader certified pre-owned study, Wainschel points to four specific strategies that dealers might wish to consider.

One is to appeal to new-car shoppers. Asked if they were considering CPO because of the economy, 60% of new-car shoppers said “yes.” And 29% were doing so for the first time.

“CPO can keep shoppers from defecting” to other brands, Wainschel says at a National Remarketing Conference.

As an example, shoppers for a new GMC Acadia cross/utility vehicle also are likely to look at General Motors counterparts such as the Chevrolet Traverse and Buick Enclave.

What are the benefits of CPO? Nearly 70% of shoppers cite peace of mind, followed by a better warranty (52%). Close to four out of 10 say they can afford a new vehicle, but don’t want to pay the price. Nearly as many like the idea of letting a previous vehicle owner take the biggest residual hit.

A second CPO selling strategy is to appeal to used-car shoppers, Wainschel says.

Sixty percent of surveyed used-car shoppers consider CPO, but the likelihood depends upon the model.

With Nissan’s Altima, for example, 16% of people looking at non-CPO vehicles also look at CPO versions. But for Honda’s Accord, it’s 34%. As for CPO benefits sought by used-car buyers, 71% seek peace of mind, 61% like the warranty and 58% cannot afford a new car.

A third selling strategy is to retain existing CPO buyers. “Once you secure a CPO customer, try hard to keep that person’s loyalty,” Wainschel says. AutoTrader data indicates 47% of those people are likely to come back for another CPO vehicle. Sixty-five percent say they’d like to stay within the same brand.

Fourth, Wainschel recommends using multiple channels to educate consumers because many aren’t exactly sure what a certified pre-owned program vehicle is.

“Automotive shopping is complicated enough,” he says. “So it’s vital to explain certified programs clearly.”

Of new-vehicle shoppers, 71% say they are “very familiar” with CPO. But for used-car shoppers, only 47% acknowledge that level of understanding.

Not everyone understands who backs up a CPO program. Nearly two-thirds of used-car shoppers surveyed and 77% of CPO-leaning consumers thought it’s the dealership, rather than, in fact, the auto maker.

To get CPO information, 64% go to a dealer’s website and 61% to the dealership itself. Forty percent rely on word of mouth from friends and family. Sixty percent of the shopping process is done online.

Successful dealers must “communicate the value proposition of CPO,” Wainschel advises. He cites four common reasons people don’t buy certified vehicles:

How much of a premium are shoppers willing to a pay for CPO? AutoTrader surveys suggest an average of $1,411. Nearly two-thirds of CPO owners are more likely to return to the dealership for service.

AutoTrader.com searches for CPO vehicles rose 41% between 2009 and 2010, though the growth rate has slowed a bit since then.

Virtually every auto maker operates a CPO program to remarket off-lease vehicles, cultivate loyalty to the brand and introduce people to the brand in hopes they may ultimately buy a new vehicle.

The certified market also may serve as a step up for regular used-car buyers who want something better. 

“CPO can often act as a bridge,” Wainschel says.