Dealers can derive big benefits from their certified pre-owned vehicle programs
Lexus and Mercedes-Benz were the first to offer certified pre-owned (CPO) programs back in the 1990s, but today almost every OEM has jumped on the bandwagon.
While the details of CPO programs are as different as the brands they represent, the premise is the same: to offer benefits previously associated only with new cars, on lower priced quality inspected used vehicles. But with these CPO programs, who has the most to gain?
The advantages for the consumer are both the most marketed and the clearest to see. The customer gets a higher quality used vehicle that has been professionally reconditioned to stringent standards.
But they may also enjoy additional perks like roadside assistance, special financing options, and the security of an extended vehicle warranty. Benefits like these give CPO vehicles a strong advantage over a similar used car, which is exactly what manufacturers want.
OEMs provide support
OEMs choose to subsidize CPO vehicle programs as part of their overall marketing strategy for several key reasons. First, they are able to drive greater resale values for their pre-owned vehicles which helps when selling a new vehicle with the highest possible residual values.
Additionally, it is an excellent way for a vehicle manufacturer to promote brand loyalty. The philosophy is that when a certified pre-owned buyer has a good experience, loyalty is born in the customer and they will eventually become a new car buyer of the same brand.
Dealers are an integral part of a successful CPO program, and probably have the most to gain. Unlike a standard used car sale, when the dealership completes a CPO transaction they are almost guaranteed to see that customer again. Most CPO programs include some form of extended warranties that bring customers back to the dealership, increasing customer retention when repair costs are on the rise. CPO sales also provide an excellent opportunity for dealers to upsell extended warranty protection, creating further peace of mind for the customer and increased dealer margins.
CPO programs also contribute directly to the dealership’s bottom line. Not only are they able to sell more vehicles (the primary function of a dealership), but they are able to do so at a premium as CPO vehicles demand higher values in the used car market.
While CPO programs vary widely, the underlying value remains for all parties involved. A quality, comprehensive CPO program is truly a win-win-win scenario.
