CPO Gets Its Own Showrooms

Three new dealership showrooms are the first devoted exclusively to certified pre-owned (CPO) vehicles.

Millions of dollars have been invested in the state-of-the-art facilities at JM Lexus in Florida and two Penske Auto Group dealerships in Indianapolis, Penske Honda and Penske Chevrolet.

JM Lexus is the largest Lexus store in the U.S. and its $3.14 million CPO showroom and service department across the street from its main store in Margate, FL, is the first CPO-dedicated store created by any Lexus or Toyota dealership.

“The ability to sell all brands of certified pre-owned cars is proving an attraction for a younger market,” says Jim Dunn, JM Lexus' general manager.

“We view the new facility as aimed at a younger market for the Lexus brand,” he says. “Our two new IS models are sportier than the ES or GS models, but pre-owned certified — all our preowned vehicles are certified — are less pricey and extend our image to the younger generation.

“In addition, with our new-car sales flat this year because of Florida's housing recession, the pre-owned certified store expands our penetration into a lower-income population.”

The dealership's dedicated CPO facility in a former Dodge dealership is 51,000 square feet and has its own sales and finance and insurance personnel.

The Penske Honda and Chevrolet dealerships in Indianapolis are pilots for a CPO initiative that is being pursued by the publicly owned Penske Automotive Group.

Demonstrating the pulling power of dedicated CPO facilities, Penske Honda and other Penske Midwest stores boosted used retail sales 38% from a year ago in the third quarter, says Bruce Heath, central area vice-president for the Penske network.

“Our CEO, Roger Penske, wants to take pre-owned to the next level,” says Heath, interviewed in the Penske Honda pre-owned store. “This building has 12 dedicated salespeople, three sales managers and two F&I managers. All models for sale are factory-certified.

“Our reception in the Indianapolis market has been much better than we expected. Shoppers looking for bargains are greeted like they are at our Penske Honda store next door.

Pat Ryan Jr.'s First Look consulting group, headquartered in Chicago, specializes in certified pre-owned sales training and is working with the central region dealerships of the Penske network, as well as with the privately owned Hendrick Automotive Group.

“First Look has done in-depth training classes to focus on the different approaches needed for pre-owned customers,” Heath says.

The modern showroom impresses visitors. Penske is looking at certified pre-owned as a marketing development with “great future potential,” said Heath.

The Penske Chevrolet building down 96th Street has located its pre-owned operation in an annex showroom and allows its 23 sales associates to sell both new and CPO — testing whether that approach might be better than having salespeople handle pre-owned only.

The CPO trial fits in with the increasing volume of Internet-sourced shoppers, said Ryan.

“They shop trade-in and off-lease values on the Web, and our appraisers have to be sharper than ever in the pre-owned stores,” he says.

Ryan, son of Pat Ryan Sr., the legendary creator of the dedicated F&I department, says 45 Hendrick Group stores are using First Look's inventory-management software, while Penske is looking at a rollout of First Look through other regions.

“Pre-owned cars are the higher-profit cars these days,” Ryan said. “And Penske's central area dealerships in this pilot boosted their pre-owned profits in the third quarter by 34%. The used-to-new ratio rose to 40%, with certified pre-owned leading the upturn.”

Certified pre-owned vehicles are enjoying another boost at the newly launched used-car superstores of publicly-owned Lithia Motors, according to Sid DeBoer, CEO of the Oregon-based dealership chain.

“We opened the first three ‘L2’ superstores in 2007 in Loveland, CO, and Amarillo and Lubbock, TX,” he says. “The ability to sell factory-certified vehicles at the superstores was one of the motivations for investing in separate pre-owned facilities.”

Heath says, “With pre-owned certified, dealers can make money on a larger package of operations.”

CPO as a used-vehicle sales tool was founded by Toyota and Lexus in 1993.