Skip to content
  • Thursday, August 11, 2022

Portoalegre2002

Automotive

  • AUTO BUY/SALE
    • sale car
    • top automotive companies
    • used cars
    • world auto
  • AUTO CONCEPT
    • auto group
    • auto logo
    • auto market
    • auto sales
  • AUTO MANUFACTURE
    • automotive engineering
    • automotive industry
    • automotive news
    • automotive products
  • AUTO TECH
    • auto site
    • auto update
    • automaker
    • automobile
  • AUTO TOOLKIT
    • automotive solutions
    • car manufacture
    • car manufactures
    • mechanic
  • Home
  • Certified pre-owned vehicles are a ‘necessary evil’ for automakers
auto logo

Certified pre-owned vehicles are a ‘necessary evil’ for automakers

September 11, 2020
[email protected]_84

  • Certified pre-owned vehicle sales hit a record 2.8 million vehicles in 2019, nearly double the volume at the beginning of the decade. 
  • Cars bought through these programs often have factory warranties, low mileage, and cost less than a new automobile. 
  •  But the programs have an unfortunate impact for automakers: they cut into the sales of new cars.
  • Visit Business Insider’s homepage for more stories.

When it was time for Dan Prescott to replace his increasingly unreliable old jalopy, he figured he could scrape together enough money to buy a base-model Toyota Camry. But after doing a bit of homework, he said, “I realized I could have a gorgeous Mercedes coupe, instead.”

Granted, he had to accept that where the Toyota would have been brand new, his Mercedes-Benz E 350 would have 25,000 miles on it. But it was still in great condition, had undergone a thorough inspection, with service items like tires and wiper blades replaced, as needed, and, most importantly, said the San Diego-based technical writer, it carried a like-new factory warranty.

In a typical year, Americans buy anywhere from two to three times as many used cars as new, according to industry data. Prescott is just one of the millions of American motorists who, in recent years, have turned to a booming segment of used cars, the certified pre-owned (CPO) programs now offered by virtually every automaker.

CPO sales hit a record 2.8 million vehicles in 2019, nearly double the volume at the beginning of the decade, according to Cox Automotive, one of the country’s largest auto auction and tracking services. Prior to the coronavirus pandemic, which has slammed overall US car sales, Cox analysts saw the certified market on track to set another all-time high in 2020.

You won’t find one at an independent used car lot. They’re only available at the appropriate franchise dealers and typically are late models in good condition with low mileage. The majority recently came off lease, meaning they likely were well maintained to avoid penalties when turned in. They’ve gone through extensive inspections and, where needed, have been brought up to virtually new-car levels. And while there are plenty of aftermarket warranties available, these products carry more inclusive factory warranties.

Like regular used cars, CPO models will be cheaper than similar new products because they’ve already taken the biggest depreciation hit. That said, they do run a little more money than a non-certified offering — Prescott spent an extra $2,000 over a regular used Mercedes. But he felt the included warranty alone was worth the difference.

Frank Startari, who works in the produce business in northern New Jersey, “usually purchased new” before discovering the CPO programs at Subaru and Mazda. Now he’s on his fourth certified vehicle and is “not likely to go back.” It was the extended warranty, on top of the savings that convinced him, said Startari.

While CPO sales may dip along with the rest of the auto market this year, such vehicles could yet capture another record share, according to industry analysts such as George Augustatis, director of economic and industry analysis at auto sales website CarGurus.

“We know that the current recession is hitting people in the lowest price buckets hardest,” he said during a recent media webinar. “These are consumers who have not fully returned to the new car market,” often because of strained household finances. For them, the lower price of a CPO vehicle can make all the difference, while still offering that like-new warranty.

“Many buyers have to stop and think whether to buy a new car or save cash” with a CPO model, said a senior marketing executive at Ford, who asked not to be identified due to the sensitivity of the topic.

Another boost for CPO programs, said Jeremy Anspach, the CEO of PureCars, is that the pandemic-induced, months-long shutdown of North American assembly plants has limited the supply of new vehicles, especially popular pickups and SUVs.

While CPO programs might be the exclusive purview of franchised dealers, they offer little financial benefit to automakers. So, why would these companies tolerate — never mind promote — something that could cut into new vehicle sales?

“There is definitely a trade-off,” said Raghu Iyengar, director of CPO and remarketing operations for Volkswagen of America.

The programs do have several benefits. They popped up several decades ago, around the time the industry started pushing leases as a way for buyers to get more vehicle for less money. With new car prices now at or near record levels, leases have become more important than ever, said Iyengar. 

The challenge has been to figure out what to do with millions of cars that annually come back off-lease, typically two to three years after a customer first grabbed the keys.

“The more cars you lease, the more cars you have to deal with at the end of the lease,” and if you don’t have a program in place to get them resold, their residual — think trade-in — values will plummet, Iyengar said. Certified pre-owned programs have become “the necessary evil” that props up leasing, even if it cuts into overall new vehicle sales.

How many sales are lost to CPO programs? No one has a hard number, said Michelle Krebs, principal automotive analyst for Cox Automotive. But there is clearly a significant impact, according to industry analysts. One can see it in the fact that while new car sales hit an all-time record during the height of the current economic cycle, the peak was below where many felt the trendline would have gone in another era.

If even a quarter of last year’s CPO sales were pulled from the new car market, at last year’s average vehicle price of around $32,000, that would’ve translated into a loss of more $22 billion for automakers – the equivalent of nearly three factories’ annual output.

Still, automakers contend that while CPO programs can win over new car customers, they have also become a step up for traditional used car buyers. And, because of all the benefits, including the inspections, repairs and warranty, “CPO customers are almost twice as loyal (to a brand) as used car customers,” said VW’s Iyengar.

Eventually, the hope is that some of these loyal motorists will decide it’s time to buy new, and if they’re trading in your brand’s CPO car, there’s better odds that it will be one of your new models they come back for.

Source Article

Tags: automakers, Certified, evil, preowned, Vehicles

Post navigation

Donald Trump makes false claims about auto industry at Michigan rally
5 Solid Steel Stocks Worth a Wager on Industry’s Recovery

Recent Posts

  • Automotive Engineering Service Providers (ESP) Market Size And Forecast to 2029
  • Dealer group roundup: Van Horn’s online used-car platform & Gee acquires Ariz. store
  • Mechanic behind mileage tampering denies knowledge of used car scam
  • BlackBerry and BiTECH Build Digital LCD Instrument Cluster for Changan’s Next-Generation High-End UNI-V Coupe
  • What Is a Mechanic’s Lien and How Do You Get Rid of It?

Archives

  • June 2022
  • May 2022
  • April 2022
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • October 2020
  • September 2020

Categories

  • auto group
  • auto logo
  • auto market
  • auto sales
  • auto site
  • auto update
  • automaker
  • automobile
  • automotive engineering
  • automotive industry
  • automotive news
  • automotive products
  • automotive solutions
  • car manufacture
  • car manufactures
  • mechanic
  • sale car
  • top automotive companies
  • used cars
  • world auto
August 2022
M T W T F S S
1234567
891011121314
15161718192021
22232425262728
293031  
« Jun    

Tags

Analysis Auto Automatic Automobile Automotive boost Business Car cars China COVID19 demand Electric engineering Forecast Global Group Growth Impact Industry Insurance Key Market Mechanic Million News Opportunities Pandemic Parts Recovery report Research sale sales September Share show Size System Tesla Top Trends USD Vehicle World

About Us

  • Advertise Here
  • Contact Us
  • Privacy Policy
  • Sitemap

You may Missed

automotive engineering

Automotive Engineering Service Providers (ESP) Market Size And Forecast to 2029

June 14, 2022
[email protected]_84
auto group

Dealer group roundup: Van Horn’s online used-car platform & Gee acquires Ariz. store

June 14, 2022
[email protected]_84
mechanic

Mechanic behind mileage tampering denies knowledge of used car scam

June 14, 2022
[email protected]_84
automotive solutions

BlackBerry and BiTECH Build Digital LCD Instrument Cluster for Changan’s Next-Generation High-End UNI-V Coupe

June 13, 2022
[email protected]_84
Copyright © 2022 Portoalegre2002
Theme by: Theme Horse
Proudly Powered by: WordPress
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent.
Cookie SettingsAccept All
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT
Go to mobile version