Used-car certification programs are all about three things: bolstering resale values, improving customer loyalty and bringing first-time, entry-level customers into a brand.
Lexus Certified Pre-Owned, introduced in 1993, quickly became a used-car certification benchmark among manufacturers. Other car companies have followed Lexus' example and treat certified vehicles as an additional brand at the dealership.
Lexus has redesigned its program in an effort to regain its industry leadership. It has made the program simpler for dealers to administer and easier for customers to understand. TV commercials for the new program be-gan airing on April 27.
At the heart of the new offering is a simplified, more generous warranty Lexus hopes will be difficult to emulate. Previously, Lexus gave customers two levels of warranty protection: Vehicles with fewer than 58,000 miles received a six-year, 70,000-mile warranty; vehicles with more than 58,000 miles got 12-month, 12,000-mile coverage.
Now Lexus has switched to one warranty. All Certified Pre-Owned vehicles will be warranted to three years from the date of purchase or 100,000 total miles.
The warranty's Customer Care Package includes a complimentary oil and filter change 90 days or 5,000 miles after purchase, a free loaner vehicle and Lexus 24-hour roadside assistance. Vehicles eligible to be certified include 1993 through current-model vehicles with less than 60,000 miles.
All Certified Pre-Owned Lexus vehicles will be eligible for Lexus Financial Services' new-car finance rates and terms.
Lexus offers an owner loyalty coupon as an incentive to get Certified Pre-Owned customers to step up to a new Lexus when they trade in any vehicle, whether or not it is a Lexus. The coupon is worth $2,000 on the purchase of a new LS 400 or $1,000 on any other new Lexus. Lexus believes its Certified Pre-Owned owners will want to hang on to their Lexus vehicles but will be willing to part with other vehicles in their garages.
'We're hoping for conquest sales,' said Marv Ingram, Lexus national Certified Pre-Owned and fleet manager.
Lexus has kicked off a 12-month TV, radio and print ad campaign for the pre-owned program. Previously, ads have appeared only during the summer selling season.
Lexus has increased the ad budget 65 percent this year and the marketing budget 100 percent, said Ingram.
He declined to give dollar figures.
As part of the program, Lexus will supply dealers with standardized window labels created by Kelley Blue Book's Karpower software.
And starting in July, Lexus will integrate Polk used-car market data to tell dealers what kinds
of used vehicles are selling in their primary market areas, said Ingram.
With the new data, dealers can stock their used lots with hot sellers, whether they are Lexus or another make.
DEALERS SAY 'AMEN'
Dealers cheered the changes.
'They just presented us with this, and we said 'amen,'' said Barry Pryor, president of Sewell Lexus in Dallas and chairman
of the Lexus National Dealer Advisory Council.
'Lexus was one of first to come out with a real solid certified program,' said Mike McGrath at McGrath Lexus in Westmont, Ill. 'They just took a leadership role and upped the ante.'
McGrath said a Certified Pre-Owned Lexus will fetch about $700 more in gross profit than
a noncertified Lexus. Pryor said certified vehicles are grossing $300 to $400 more at Sewell Lexus.
The increased profits come in spite of the fact that dealers must spend more to get a certified Lexus to pass muster.
Jon Lancaster, the owner of Lancaster Lexus in Madison, Wis., said his dealership usually spends about $2,000 to get a car up to snuff for certification.
'You'd better be sure you've got the right car,' he said.
Ingram said all of Lexus' 178 dealers signed up for Certified Pre-Owned.
Lexus dealers sold 38,000 used vehicles last year. Of that number, 60 percent were Certified Pre-Owned.