More favorable terms on certified vehicles is one reason, particularly when it comes to incentivized interest rates from captive finance companies on CPO vehicles, McCarthy said.
Another benefit is the warranty coverage, which makes it easier to sell to customers who believe they're getting more value from the purchase. "It's inherently F&I friendly," he said.
With certification, most automaker programs include an extended powertrain warranty.
For McGee Toyota, maximizing scant inventory on the automaker site is critical. The dealership had just nine new vehicles in inventory last week and 65 used, compared with about 250 new and 150 used vehicles in a typical year.
"Like everybody else, we're struggling," Quenneville said. "The market is crazy."
Though dealers may bemoan the reconditioning and certification costs, Cooney said the profits have the potential to reap rewards long after the initial transaction.
Toyota's CPO vehicles have a 74 percent service retention rate, Cooney said, meaning the majority of CPO customers return to the dealership for routine and scheduled maintenance — even without pre-paid maintenance packages as part of the sale.
And many CPO customers return to the dealership to purchase a new vehicle, he said.
"That's the reason why the standards are very high," Cooney said. Some dealerships are passing on certification amid abysmal buying conditions. As inventory remains tight and the pandemic rages on, some dealerships say reconditioning costs on top of inflated acquisition costs are weighing down profit potential on used-vehicle sales.
Joe Opolski, used-car finance director at Roy O'Brien Ford in St. Clair Shores, Mich., said dealers are either swearing by — or swearing at — CPO right now. His dealership tends to fall in the middle, he said. Currently, his used-car lot has only a handful of CPO vehicles.
"We're weaning off CPO," he told Automotive News, citing rising reconditioning costs, a lack of available inventory and an unusual upswing in lease extensions. "It's costing a whole lot more to get the inventory and then add those extra fees on top. It just doesn't make a lot of sense for us right now."
Still, Opolski notes some of the advantages that come with CPO sales. Most certified pre-owned customers tend to finance, and because they're cognizant of the age of the vehicle, many immediately ask about how to best protect their purchase.
"I have a captive audience," he said. "A lot of those customers begin talking about F&I products to me even before I begin a presentation."
While some dealerships claim to be pulling back, many say the CPO trend will continue to boom, especially with new-vehicle pricing trends pushing buyers out of the new-car market.
"The trend will rise as more and more vehicles come off lease, as those vehicles are perfect candidates to be turned into CPO," McCarthy said.
Cooney in particular anticipates more landmark years for CPO sales.
"It's not like the dealers are going out of their way across the entire industry to push CPO — because they can't keep up with it," Cooney said. "But more and more customers are demanding it."