CPO Business Booms In '08

Dearborn, MI — New-car sales losses this year apparently are gains for certified pre-owned (CPO) vehicles sold through auto makers' remarketing programs.

Dealers say deliveries are particularly brisk for such off-lease vehicles that are inspected, reconditioned as necessary and sold with factory warranties.

“Our CPO sales are up 57% this year,” says Francis Lynch, pre-owned sales manager for Vista BMW in Coconut Creek, FL. The dealership sells the most certified pre-owned BMWs in the nation.

Speaking at an Auto Remarketing CPO conference here, Lynch and representatives of other brands' No.1 pre-owned stores say business is booming at a time when new-car deliveries are off.

“We've seen a difference in CPO sales because of the changing economy,” says Ashley Antonio, marketing director for Paragon Honda in Woodside, NY. “People still want a good car with lots of features, but many of them now are buying certified used cars rather than new.”

Pioneered in the late 1990s as a marketing tool to sell off-lease vehicles, auto makers' CPO programs now collectively represent a third category of vehicles, positioned between new and traditional used.

From 2003 to 2006, CPO sales have doubled, going from 623,000 units to 1.27 million.

“We tried certified cars here and there, but when we put our foot in all the way it made a real difference,” says Gregg Basset, a used-car manager at Power Chrysler Jeep Dodge in North Phoenix, AZ.

The dealership sold 1,670 certified vehicles last year. “It has really increased our market share,” Basset says.

Although dealership managers at the conference agree CPO programs are a great strategy, they differ on tactics, such as who should do the selling.

Lynch says 30% of Vista BMW's certified-vehicle sales come from the new-car sales force. The dealership has separate pay plans for new- and used-vehicle sales.

“We knocked the walls down, showing the new-car sales people that it is not torture to sell a CPO,” he says. “It's a simple process that we walked them through.”

In contrast, Sewell Lexus in Dallas maintains a separate CPO sales staff, so lines between new and the nearly new vehicles are not blurred in the selling process.

“If sales people are not dedicated to pre-owned, a lot of times they are trying to switch the customer to a new vehicle, saying, ‘Hey, I can sell you a new car for the same price,’” says Roger Yiu, Sewell's used-car manager.

Sales presentations for CPO and new vehicles are similar, Basset says. “The difference is that with a certified vehicle you have to present the history of the car.”

Lynch says one of the keys to Vista's CPO success is the store treats certified vehicles on par with new BMWs.

“When that CPO car comes up front, you can't have any excuses about how it looks,” he says. “It has to be standing tall from reconditioning. We require three sign-off signatures saying, ‘Yes, this car is front-line ready.’

“Other than the difference in model years, you can't tell the difference between a new and certified BMW at our dealership.”