He's Finally Sold on CPO

I attended the National Remarketing Conference in Las Vegas where used-vehicle industry experts looked at that segment's this year and beyond. Ron Smith and his team put on a first-class event.

As many of you who follow my column may know, I was a late-comer to the factory certified pre-owned party. But now I'm on the front line exhorting the many benefits of this business.

As I listened to dealers and auto makers discuss their programs and results, I took many notes. As tough as this business has been for the past 15 months, any opportunity to improve sales and gross is welcomed. Following are excerpts from notes I made during the respective presentations:

One dealer says that “CPO is now a sixth operating department and touches or affects every other department” in his dealership.

Other comments:

“Historically, used-vehicle retail sales are more of a need purchase vs. new vehicle which are often discretionary.”

“CPO adds credibility to a used-vehicle purchase.”

“Sales personnel are often more comfortable selling a CPO unit vs. a traditional used vehicle.”

Through September, there have been 28.3 million used vehicles retailed versus 7.8 million new units.

For many dealers who have experienced decreased new-vehicle retail sales during the past two or three years and, a potential or real decrease in service and parts business resulting from the drop in units in operations, this business can provide much needed relief.

A representative from an Asian auto maker discussing its dealer body's CPO performance noted that “during September, volume increased 8.2% versus September 2008 and the average turn for CPO units was 27 days.” Wow!

This quick turning enhances gross profits, reconditioning revenue for the parts and service department and income for the finance and insurance office. This presents a compelling case to be in this business.

Looking into next year and beyond, a concern voiced by nearly all participants was the general constriction of the used-vehicle supply.

The impending decline in off-lease vehicles; a reduction in the numbers of late- model repossessed vehicles; the change in the rental-vehicle companies purchase policies and the inclination for customers to drive their vehicles longer all point to a supply issue.

What this lack of supply will do is keep wholesale prices higher and lessen the seasonality factor that so many of us in retail have traditionally used to our advantage early in the calendar year.

The one factor which could be a game changer as far as used-vehicle prices are concerned is the cost of fuel. The bottom line as one speaker notes is, “The days of large buckets of used vehicles (program cars) are over”.

No conference is complete without a discussion of technology and the impact it is having on our business.

Technology is not only a primary marketing tool to attract customers to our showrooms, today it is a primary source of dealership inventory acquisition. I'm amazed at the speed at which this business is changing in these regards.

One last conference tidbit: Little did I know, but fishing and the used-vehicle business have more in common than I thought.

For many years during tournaments, I've heard other anglers discussing up-stream, mid-stream and down-stream as it related to where they were fishing. I never suspect to hear those terms repeated and referenced so many times during a 3-day used-vehicle convention in Las Vegas, and no, there were no other analogies to fishing?

In closing, I want to wish you a great holiday season and successful new year.

Heading into 2010, first let's promise to never forget 2009, and second, use this knowledge we've gained firsthand to improve our businesses moving forward.

Good selling!

Tony Noland is a veteran dealership consultant. He is at [email protected].

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