New NADA guide lists CPO values
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NADA Used Car Guide has added manufacturer-certified used-vehicle retail values to its guidebook.
Jonathan Banks, an analyst with NADA guide, says the values reflect the typical premium added to the retail value of a used vehicle sold under a factory-certified used-vehicle program at a franchised new-car dealership.
The values will help dealers and lenders as they try to secure financing for their certified used-vehicle customers, he says. That's because lenders typically don't allow a premium for certification when they finance certified used vehicles, which results in the customer having to make a larger down payment.
"Now the banks have some guidance if they want to add for that premium," Banks says. The premium is "only for when a consumer is buying a certified vehicle from a franchise dealer."
The guidebook company offers a certified premium for every used vehicle eligible for factory certification. The premium is listed as an add-on under the guide's optional equipment listing.
Banks says NADA guide determines the value of certification based on key factors such as vehicle age, certification program requirements and depreciation rates.
NADA guide also uses actual sales transaction records for certified and noncertified vehicles from the manufacturers that provide those data. The company's analytical model allows it to determine certification premiums for all companies' certified pre-owned programs, including those that do not provide actual transaction data, Banks says.
Also influencing the premium are factors such as the level of a program's dealer engagement -- both in terms of the percentage of dealers participating and how actively those dealers promote those sales -- and the degree to which a manufacturer markets its certified used vehicles, he adds.
"That all changes how much the [certified pre-owned] premium is, so we wanted to be able to address it by manufacturer," Banks says. "We'd like to get data from every CPO program." He declined to identify the companies that provide the data.
According to the NADA guide, factory certification adds $1,000 to $3,200 to the price of a used vehicle.
For instance, the guidebook assigns a value of $1,525 for certification of a 2011 Ford Focus sedan and $2,300 for certification of a 2011 Lexus LS sedan.
The certified premium for lower-priced vehicles tends to equal a higher percentage of the vehicle's price than the premium for higher-priced vehicles. In part, Banks says, that may be because the higher-priced vehicles have longer original warranties. "Maybe consumers have more confidence in that brand," he says, "or it's that the price is already high."
You can reach Arlena Sawyers at asawyers@crain.com.
