Consumer awareness aids CPO sales and prices
Certified used-vehicle sales are expected to grow this year and next year in lock step with increases in the supply of late-model used vehicles, the latest issue of Perspective, a monthly report by NADA Used Car Guide that highlights industry trends, says.
The report, released this week, also says that premiums paid for certified used vehicles are below the premiums expected by consumers who say they are willing to pay more for a certified vehicle than a like make and model noncertified used vehicle.
The supply of late-model used vehicles, described as vehicles up to 5 model years old, is expected to grow 8 percent this year and another 9 percent in 2015.
That’s good news for dealers who are increasingly engaged in used-vehicle sales as a profit source that contributes to customer loyalty.
“Not only do you have supply increasing, but awareness of CPO is increasing as well and we should continue to see ongoing growth for certified pre-owned sales,” says Larry Dixon, an analyst at NADA Guide.
Dixon declined to predict how much certified sales would grow in 2014 and 2015.
The NADA Guide report says many consumers don’t understand that a certified used vehicle comes with an extended warranty and has undergone extensive reconditioning, which explains why those consumers are unwilling to pay a premium for the vehicles.
Citing an AutoTrader.com study, the NADA Guide report says that 62 percent of new-car buyers are willing to pay a premium for a certified vehicle, compared with just 34 percent of used-car shoppers.
In 2013, new-car shoppers who were willing to pay more for a certified vehicle said an average premium of $2,940 was acceptable, up from an average of $1,245 in 2011. Used-car shoppers who were willing to pay more said an average of $2,163 was acceptable, up from $1,292 in 2011.
But sales data obtained by NADA Guide from nonluxury and luxury manufacturers show that 75 percent of certified transactions have premiums ranging from $500 to $2,000, the report says.
“This disparity implies that CPO’s value proposition actually exceeds consumer expectations,” the report states.
It adds: “In the end, cultivating consumer familiarity and understanding will play a lead role in dictating how quickly and how high CPO sales grow.”
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