As U.S. CPO sales fall to 8-year low, some brands make older cars eligible

Sales of certified used vehicles in the U.S. fell in 2022 to their lowest level in eight years as dealers grappled with a stunted supply of certifiable used vehicles returning to market and some customers switched back to purchasing new vehicles as production improved.

Last year, sales of certified pre-owned vehicles dropped to 2.49 million, down 9.4 percent from 2.75 million in 2021, according to the Automotive News Research & Data Center. It was the lowest annual volume since 2014, when 2.34 million certified sales were recorded.

Certified pre-owned vehicle sales rose to that robust level in 2021 as more customers exited their leases, realized they couldn't get a new vehicle because of tight supply and instead chose to buy out their old lease and get it certified, said Brian Danahy, director of variable operations in Florida for Ed Morse Automotive Group of Delray Beach, Fla.

"As to why [sales] dropped in 2022, I think you did have some [new-vehicle] inventory situations get better for some manufacturers," said Danahy, whose group has more than 30 stores in Florida, Texas, Oklahoma, Iowa, Illinois and Missouri that delivered 15,566 used vehicles last year — 4,404 of which were certified.

Most automakers saw their certified used-vehicle sales fall year over year, according to data compiled by the Automotive News Research & Data Center.

Toyota Motor North America's certified pre-owned vehicle sales fell 9.2 percent to 445,253 in 2022. The automaker remained the market leader in certified sales last year, capturing about 18 percent of the annual certified volume.

General Motors' certified used-vehicle sales declined 18 percent to 289,571 vehicles. Ford Motor Co.'s certified used-vehicle sales ticked up 3.4 percent to 228,799, fueled in part by stronger dealer participation in its Blue Advantage certification program. American Honda's certified used-vehicle sales fell 2.2 percent to 303,766. And certified used-vehicle sales for Stellantis fell 18 percent to 240,485.

Certified pre-owned sales were strong in 2021 because they were partly fueled by a "very good" supply of off-lease vehicles, said Dan Rodriguez, manager of auto remarketing at American Honda. For the automaker, the majority of certified sales occur in 3- to 4-year-old vehicles that are coming off lease, he said.

Dealerships also grappled with tight new-vehicle supply in 2021, which manifested after the onset of the coronavirus pandemic in 2020 kicked off supply chain problems and snarled vehicle assembly lines. When dealerships couldn't get new product, they optimized and gravitated to selling certified used-vehicle inventory, Rodriguez said.

But 2022 was a different story. After fewer vehicles were manufactured and sold because of COVID-19-related problems, fewer vehicles existed that year to age into used inventory and be traded in.

"There's a symbiotic relationship between new and used, so as production became challenged that means there's less new cars being sold," Rodriguez said. "That means less trade-ins, and the customers who were coming off lease who could get into a new lease now couldn't because they had to wait an extended period of time to get a new car."

In 2022, American Honda saw a "big spike" in customers who would simply purchase their off-lease vehicle at the end of the term instead of getting into another one, Rodriguez said.

For some automakers, certified used-vehicle sales rose in 2022. Company executives who spoke with Automotive News partly attributed the gains to increasing the pool of used-vehicle inventory eligible for certification.

Some automakers offer more customer-facing and dealer-facing incentives that help boost overall sales, said Ben Bartosch, a manager of CPO solutions at J.D. Power. But some automakers also have circumvented a used-supply inventory problem by expanding certification parameters, he added.

Hyundai Motor America's certified sales rose 24 percent to 95,962 in 2022. Fred DePerez, Hyundai's senior vice president of global product line management, told Automotive News that gain was partly fueled by the fact that Hyundai in February 2022 allowed for more vehicles to be certified.

What Hyundai constitutes as certifiable inventory changed to include 6-year-old vehicles or vehicles with up to 80,000 miles — one year or 20,000 miles more than what was previously allowed, DePerez said.

"To me, that was the biggest thing because all of a sudden your inventory pool increases significantly from what the dealers had to deal with the inventory issue," DePerez said.

Hyundai also dropped the "Hyundai certified pre-owned" designation from its program in favor of "Hyundai certified used" after the company saw research that indicated customers understand that terminology more than CPO, DePerez said.

Those changes were set in motion, DePerez said, because the automaker saw a chance to leverage the used-vehicle market as economic uncertainty began to seep in because of COVID-19.

"It kind of creates this need for value," DePerez said.

Automakers that have expanded certification parameters place their own limitations on age and mileage and what type of warranty a vehicle may get.

Ford launched a second-tier certification program, Blue Advantage, in 2021. Inventory is backed by warranties under two certification levels: gold and blue. General Motors launched CarBravo, its own solution for scaling used inventory, in January 2022.

"One of the recent enhancements we just did was we increased for Blue Certified; it now includes units in the 120,000 to 150,000 category on miles," said Christopher Thornton, manager of U.S. sales strategy at Ford Motor Co. "We're expanding that opportunity in terms of what our dealers are able to sell, increasing to a larger percentage of their used inventory."

About 1,500 dealers now participate in the Blue Advantage program, Thornton told Automotive News. That's up from roughly 1,400 in November.

It's fair to say some dealers may have chosen to skip certifying used vehicles in 2022 due to additional costs, such as inspection and insurance, Thornton said.

Dealers "may think 'OK, what benefit am I getting out of that by adding that certification fee? I don't need to go through that. I can still sell the unit,' " Thornton said. "But then that's where we come in and talk to those advantages."

Hyundai's DePerez also noted used cars became more scarce in 2022 as leasing rates fell and more customers kept their vehicles for affordability's sake.

Used-vehicle supply is still tight and leasing for the last 24 months has been slower, said Gregg Ciocca, CEO of Ciocca Dealerships of Allentown, Pa., northwest of Philadelphia. The group has 40 dealerships in Pennsylvania and New Jersey. It sells on average about 280 certified used vehicles and about 520 non-certified used vehicles per month.

Customers are buying out their leases, which not only results in the missed sale of the new vehicle they might lease or buy but also means the dealership group won't have the aged vehicle to certify and sell on its used-vehicle lot, Ciocca told Automotive News.

One of the ways his dealership group grew its certified inventory was through its loaner fleets, Ciocca said. Those were "perfect" for certifying because they were about 1 year old or less or had 40,000 miles or fewer. Ciocca Dealerships would take those out of circulation and sometimes presell them in the certified business market, then replace them with another loaner, he said.

The dealership group began keeping them in its fleets longer because it didn't have the supply to be able to replace the car. Fleets "got a little bit older and smaller," Ciocca said. The group is trying to build that inventory back.

"Our inventories are up, but not anywhere near where we have free flow now or [are able] to turn over our loaner cars and put them right into our used-car inventories," Ciocca said.

Ed Morse Automotive Group's Danahy said supply also remains tight at his dealership group.

"We have to be more efficient in our acquisitions of our pre-owned cars and getting our inventory available to sell, to get its presence online as quickly as possible so that we can turn [it] as quickly as possible," Danahy said.

Certified sales likely won't swing upward in 2023, said Ron Cooney, manager of Toyota Motor North America's certified used-vehicle program. The automaker has about 1,238 U.S. dealerships and in any given month, more than 1,000 participate in the Toyota certified program, Cooney said.

Certified sales that have been strong in the first quarter may level out in the next month or two, Cooney said.

"I don't believe we're going to hit 2.8 million or 2.75 million" annually, Cooney said. "It's definitely not going to be that high. It's probably going to be very similar to where it was last year."