3 factors likely to buoy CPO sales

DETROIT - 

Volkswagen’s diesel emissions scandal is in the industry’s rearview mirror, and Bob Cockerham is excited about selling repaired certified pre-owned Volkswagen turbo-diesel cars — the only VW CPO vehicles that come with a two-year, unlimited-mile warranty.

Cockerham said those emissions modified cars have already proven to be attractive to diesel aficionados and will help him sell more certified pre-owned vehicles in 2018 than he sold in 2017.

“So instead of two years, 24,000 miles, on the turbo diesels, it’s two years, unlimited-miles,” said the general manager of University Volkswagen and Mazda in Albuquerque, N.M.  

Counting both brands, Cockerham is tracking to sell about 20 CPO vehicles per month, which is more than double his average monthly CPO sales last year, and most of the growth is driven by VW TDI vehicles.

“We buy them, do the emissions modification, and we can place the vehicle back in market to sell,” he said. “Combine that with this new CPO warranty, and I’m pretty excited about the VW CPO business. It could be bigger than it’s ever been in my opinion. To get this kind of warranty on a TDI is pretty powerful.”

Industrywide sales of certified pre-owned vehicles set an all-time record in 2017 and will grow again in 2018 — but not much, Cox Automotive predicts.

It projects that CPO sales this year will hit about 2.7 million units. That’s up from about 2.64 million in 2017 which was a 0.1-percent increase over sales in 2016, according to Autodata Corp.

Though CPO sales gains are expected to be minimal, some dealers and manufacturers have solid plans to support and increase their CPO sales this year.

“Volkswagen will be supporting its dealers with communication of the two-year, unlimited-mile warranties through a supported local messaging campaign,” said VW spokeswoman Jeannine Ginivan. 

She said the two-year, unlimited-mile warranties cover repaired 2009-2015 Jetta, Passat, SportWagen, Beetle and Golf vehicles equipped with TDI engines that go through the VW certification process.

According to Autodata, VW CPO unit sales in 2017 increased 7.1 percent to 75,985.

Hyundai predicts CPO growth

Conversely, Hyundai’s CPO unit sales slid 12.5 percent in 2017 to 84,900.

“But we continue to preach the value of CPO to Hyundai dealers, and we see a little bit of growth for us as a brand,” said Jose Froehlich, Hyundai senior manager, certified pre-owned.

Helping that growth, Froehlich said, is Hyundai’s new, uncluttered, easier to navigate website, which debuted in December.

Unlike its previous site, which had its own web address, the new site is a page on Hyundaiusa.com and allows the company to see how shoppers switch between CPO Hyundai vehicles and new ones.

The site also adapts to browsing via desk top, lap top, tablet or mobile device.

Preliminary results in mid-January showed that daily site traffic was up about 60 percent, and 60 percent of that traffic came from mobile devices — up from 40 percent on the old site, Froehlich said.

“We’re now better in terms of the percent of customers who are using mobile to browse, which is a positive thing in our opinion,” he said.

Rick Case, owner of Rick Case Automotive Group, owns 16 dealerships including the top selling CPO Hyundai store in the country, Rick Case Hyundai in Plantation, Fla., which retailed 1,081 units in 2017 and four other Hyundai stores. His Rick Case Honda in Davie, Fla., ranks as the eighth-largest Honda CPO dealership in the country with sales of 1,248 units in 2017.

Some of Case’s dealerships sell “a lot of CPO” vehicles,” some do an “average amount, and some do virtually none,” he said.

Here’s why: Case offers his own 10-year/100,000-mile powertrain warranty on every used vehicle — excluding factory CPO vehicles — he sells that is up to seven years old and has fewer than 80,000 miles.

Also limiting CPO sales at some of dealerships, Case said, are new-car, stair-step incentive programs under which manufacturers pay dealers incentives that increase as new-car sales goals are met throughout the month.

CPO versus new?

He said his sales people, at the end of the month will focus on a new-car strategy that highlights low, monthly lease payments, special finance rates and longer monthly contracts to convert CPO customers to new car customers in an effort to reach new-car sales targets.

Case said manufacturers should make CPO programs less expensive and figure out a way to count CPO vehicles in stair-step incentive programs.

He said stair-step programs have limited CPO sales at some of his Hyundai stores and his stores that sell other brands, too.

“Pretty much, you can sell a new car to a CPO customer or you can sell a CPO car to a new-car customer,” said Case, “The dealership can move (customers) around.”

Hyundai’s Froehlich said it’s up to the dealer and customer to find the right vehicle to fit the consumers’ needs and if it turns out that is a new Hyundai instead of a CPO Hyundai, “I’d consider it, on our part here at CPO, a job well-done for having driven that customer to the dealership.”

Nissan increased its 2017 CPO sales 9.7 percent to 202,057 units. The company plans to maintain and continue its year-over-year CPO sales increase into 2018, said Jennifer Moser, the brand’s director of CPO.

She attributes Nissan’s strong CPO sales last year to an engaged dealer body that includes a “strong majority of our network.”

Off-lease vehicles, the bread-and-butter of CPO programs, have positive impact, too, she said. “With many of these off-lease vehicles, dealers have strong service records from their own service departments which builds value in the vehicles,” said Moser, in an email response.

Also assisting with CPO sales is the Costco Auto Program.

Last year, Costco members who were directed to Costco Auto Program participating dealers purchased approximately 66,400 CPO cars and trucks, said Gina Paolino, president of Costco Auto Program. She expects CPO sales purchased by Costco members through the program to grow approximately 3 percent this year.

“Over the course of a year, we added 7.8 percent more dealerships,” Paolino, said in an email response. “Along with the increase in the number of dealerships, we also have plans to further develop and grow our program this year.”



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