Three luxury importers expect their sales of certified used vehicles to keep rising. BMW, Lexus and Mercedes-Benz say the buyers generally are younger and less affluent than the brands' new-car buyers, so the certified programs bring newcomers into showrooms.
Gregg Goolsby, manager of pre-owned vehicles at Mercedes-Benz USA Inc., expects sales to rise as high as 30,000 units in 2000. The numbers will keep increasing in 2001 and 2002 as leased vehicles sold as new during the past few years of hot sales are returned, he said. 'We'll start to see an explosion of cars coming back into the marketplace,' Goolsby said.
Dealer David Spisak, president of Bill Smythe European Inc. in San Jose, Calif., said Mercedes' Starmark certified pre-owned program has increased his average used-car gross. But he hasn't had a big jump in unit sales.
'It might be because we haven't spent as much as we should have on national advertising,' he said.
SPREADING THE WORD
That's about to change. All three companies said they plan to increase their ad budgets in 2000.
'We plan to boost our unit sales next year, and we will try to be more aggressive in marketing,' said Bill Bates, pre-owned marketing manager at BMW of North America Inc. The company's first-ever national ad program for the certified cars started in the third quarter. Publicis in New York did the all-newspaper push.
Bates said BMW plans to increase national media spending by 42 percent next year, regional spending by 33 percent and matching co-op funds for individual dealers by 25 percent.
Marv Ingram, national certified pre-owned and fleet manager at Lexus Division, said media spending for certified vehicle advertising in the fiscal year that started Sept. 1 will be 7 percent higher than in the prior year. Spending will be heaviest in cable TV. He declined to discuss specifics.
Lexus plans to spend 20 percent more on ad production than in the prior year and increase its marketing budget by 25 percent. The marketing budget includes deals on low financing rates, usually promoted for 60 days at a time. Team One Advertising in El Segundo, Calif. handles Lexus.
Lexus changed its media buy in fiscal 1999 to reflect the changing face of buyers. In 1998, Lexus advertised its certified pre-owned vehicles in eight magazines. This year, only two of those titles were bought among 11 magazines, Ingram said.
That's because Lexus sees its buyer profile changing. More women are buying certified pre-owned Lexus vehicles, he said. Female buyers now account for about 48 percent of all used Lexus sales, vs. about 42 percent a year ago. Most sales are ES 300 models.
The median household income of pre-owned buyers fell to between $100,000 and $125,000, from $125,000 to $150,000. That has expanded the base of prospects, Ingram said.
The average age of a certified Mercedes buyer is about 48, roughly five years younger than the age of an average new Mercedes buyer. The average annual household income of certified customers is roughly $100,000, vs. $150,000 for new Mercedes buyers.
Mercedes' national advertising started in late 1998 from the company's former ad agency, Lowe Lintas & Partners in New York. The ad campaign has been mostly newspaper, with some spot TV and radio via regional programs.
The company's new agency, Merkley Newman Harty in New York, is working on a campaign for 2000. Goolsby said that although the 2000 ad budget isn't finished, it will be substantially bigger than this year's. And the media buy will expand to national TV, with regional buys continued.
NO HARM TO NEW-CAR SALES
All three executives said certified used vehicles aren't cannibalizing new-car sales.
Ingram at Lexus said about 62 percent of his buyers also have new models on their shopping lists - Honda, Toyota, Nissan and Infiniti. Goolsby at Mercedes said his shoppers also are considering certified used BMWs and Lexus models.
All three officials said they treat their certified owners the same as new-vehicle owners.
Mercedes' certified owners are more satisfied than the company's new-vehicle owners, Goolsby said.
'I think it surprises them because they're treated just like they bought a new vehicle,' he said. 'Our strategy is to get customers at a younger age, treat them like a new-car customer and, if we take care of them, hopefully, they will come back.'