Certified sales start year strong, up 11% in Jan.

Report: CPO sales could double in 3-5 years

Certified sales start year strong, up 11% in Jan.

Tom Webb: Automakers boost certified sales with special finance rates and consumer promotions.
Related Topics

U.S. new-vehicle sales slipped in January, but certified used-vehicle sales ushered in the new year with double-digit percentage increases.

And more growth is on the horizon.

Sales of certified used vehicles, which increased 15 percent to a record 2,112,761 units in 2013, could double within the next three to five years, the 2014 Manheim Used Car Market Report predicts.

The "CPO market has the potential to grow to more than 4 million units per year in short order," says the report, released last month at the National Automobile Dealers Association convention.

Tom Webb, Manheim's chief economist, describes "short order" as three to five years.

Certified used-vehicle sales got off to a strong start this year, rising 11 percent in January from a year earlier to 166,328 units.

In contrast, new-vehicle sales dipped 3 percent last month to 1,011,187 units. The slide was attributed largely to snow and bone-chilling temperatures that gripped much of the country.

Marketing muscle


Future growth of certified used-vehicle sales will depend on how much "marketing muscle" automakers put into the programs and whether dealers continue to earn good profits on the sales, the report says.

Webb says manufacturers boost certified used-vehicle sales with special retail finance rates and programs that raise consumer awareness.

"Manufacturers can help dealers in terms of reduced financing on the floorplan side," Webb says. "They have what we call carrots and sticks to get the grounding dealers [who accept off-lease vehicles on behalf of lessors] to buy end of term units. Those programs also feed into CPO sales."

Joe Spina, remarketing director at Edmunds.com, agrees that certified used-vehicle sales are driven largely by automakers and their captive finance companies.

He suspects that certified used-vehicle sales rose in January despite the severe weather because manufacturers and their captives are pushing hard to sell them as a buffer to the rising number of off-lease vehicles and trade-ins that are expected to return to the market this year.

NADA Used Car Guide predicts that the number of vehicles coming off lease this year will total almost 1.9 million, up from 1.6 million in 2013 and 1.4 million in 2012. The guide company projects that the off-lease volume will rise to more than 2.1 million units in 2015.

The manufacturers and their captives "know they have been leasing at historically high levels," Spina says.

Ricky Beggs, editorial director at Black Book, says dealers and consumers see value in certified used vehicles. That, coupled with some "slight hesitancy" about the economy, could have nudged new-car intenders into buying certified used vehicles instead, he says.

"The CPO buyer also sees the value -- less total price, with a matching or better manufacturer-backed warranty than new," he says.

Toyota's milestone


Toyota, the industry's best-selling certified used-vehicle brand, reached its own milestone in December when Dunning Toyota in Ann Arbor, Mich., sold the brand's 4 millionth certified used vehicle. Toyota celebrated in January by presenting the buyer with a check equal to the vehicle's purchase price.

Bill Fay, Toyota Division's general manager, who was on hand for the occasion last month, attributes the program's strength to the partnership among Toyota, its captive finance company and its dealers.

Toyota dealers' certified used-vehicle sales in January dipped 1 percent to 26,167 units, making Toyota one of a handful of continuing brands to register a sales decline last month. But Fay says the company this year will exceed its sales of 369,671 in 2013 by a factor "in the 5 to 10" percent range." Sales rose 12 percent in 2013.

"The used-vehicle market is very strong for the industry, and we see that continuing to grow this year," Fay told Automotive News.

"We sold 330,000 [in 2012] and we grew to 369,000 in 2013, so leveraging the strength of the used-car market and the momentum we have with the program, we expect it will continue to grow in 2014."

You can reach Arlena Sawyers at asawyers@crain.com.


advertising
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

Or submit an online comment below. (Terms and Conditions)




Rocket Fuel