For Volvo Cars, 2019 has been a banner year for certified pre-owned sales — up 28 percent through September, compared with a 2.4 percent increase for the overall luxe segment.
"We have the fastest growing luxury CPO program," Brian Palmer, Volvo senior portfolio manager of pre-owned sales, told Automotive News.
But to get there, Volvo had to revamp its pre-owned sales program, which had been ignored by dealers for being a money-making dud.
"There was no profit potential for the dealers," said Matthew Haiken, former Volvo Retail Advisory Board chairman. "It gave away too much to the customers."
Volvo listened to dealer feedback and last November rebooted the program, making a critical tweak: It shrunk the warranty term from 7 years to 5 years. The initial warranty term was "a little bit too rigid," Palmer said.
Warranty length was a sore point with Volvo dealers, who described it as "too rich a benefit" and shied away from the program. It made it impossible for the F&I department to sell lucrative service contracts beyond the warranty, Haiken said. And extended warranties are lucrative, with margins ranging from $500 to $1,500 per vehicle, the dealer said. Without that profit stream, Haiken said, "it made no sense for us to certify Volvo cars."
Under the revised shorter warranty program, dealers can customize coverage using 6-, 7-, 8-, 9- and 10-year service contracts from Volvo Car Financial Services.