Automakers build brands with CPOs

Automakers look to certified pre-owned vehicle sales as a way to build loyalty to their brands. And they don't seem afraid that more shoppers moving to these lightly used cars and trucks will steal sales from new vehicles.

"We don't look at it as cannibalization of new-vehicle sales because people that shop for used cars, shop for used cars. People that shop for new, shop new," said Ron Cooney, Toyota Motor North America's CPO sales operation manager. "Now, there is a segment of people that do shop both. But that's not cannibalization; that's what's best for my budget, what kind of car do I need, those types of things."

Toyota's lead-tracking system shows that 40 percent of Toyota's certified used leads resulting in a sale come from consumers who eventually buy a new Toyota. In other words, four out of 10 buyers who begin the shopping process for a Toyota CPO vehicle end up buying a new car or truck.

However, as new-vehicle prices rise and automakers show discipline on incentives, more consumers will go from a CPO vehicle to another CPO, rather than move from CPO to new, Cooney said.

Toyota has seen a slight increase since March in the number of consumers doing just that. "But they're not migrating away from new to used," he said. "Just don't see it."

For CPO sales, automakers see conquest opportunities, and not necessarily from competing brands. Eric Swanson, head of CPO vehicles at Fiat Chrysler Automobiles U.S., said that of the roughly 40 million in annual used-vehicle sales, only about a third are sold through franchised dealers. The other two-thirds go through private parties or independent car lots.

"I don't think I'm necessarily going after the guy that's shopping for a Honda," Swanson said. "I'd much rather go after the guy shopping for a 3-year-old Dodge Charger on another independent used-car lot, or somebody trying to sell it out of his driveway."

The CPO sales pitch to such a shopper, Swanson said, is that there are benefits if they go to a franchised FCA dealership. Those include professional salespeople who know the product, extra warranty coverage and that factory-trained technicians using Mopar parts have worked on the vehicle.

"As long as two-thirds of those sales are still happening outside of the franchise dealer system, I think we would all agree there's a lot of work to do," Swanson said.

In a market study, American Honda Motor Co. cited CPO sales as a crucial battleground to establish relationships with new customers. A good portion of buyers who purchase a certified Honda are new to the brand, said Dan Rodriguez, the company's manager of remarketing and certified pre-owned.

"And almost half of them come back and buy a new car four years down the road," he said.