Growing Popularity Of Certified Pre-Owned Vehicles Offers Challenges And Opportunities To Dealers And OEMs

As the love for certified pre-owned (CPO) vehicles continues to grow among Canadian consumers, manufacturers and dealers are doing more to cater to the particular needs of this growing segment of the market.

With year over year CPO vehicle sales up by well more than 50 per cent for some manufacturers in 2019, according to published reports, the trend is not showing any indication of slowing down as the supply of vehicles coming off lease continues to be strong.

Further, as broad economic drivers such as consumer credit tightening and rising concerns over the health of the global economy and potentially rising interest rates push consumers into being more price conscious than they have been over the last several years, CPO vehicles are receiving wide acknowledgement for providing good value for the dollar.

For the most part, Canadian automotive dealers do a very good job of providing value to their customers through their CPO programs and work very hard to provide high quality service and value throughout the lifespan of the CPO relationship.

Besides being able to charge a premium on some inventory, another pay-off for dealers is that CPO buyers have been noted to spend fewer days in market than either new or used-vehicle buyers, thus helping to move inventory more quickly.

However, because the structure of CPO programs varies so widely from OEM to OEM, particularly around finance subsidies and warranty extensions, dealers often find themselves in hard negotiations with their OEM over CPO terms and conditions.

Usually, dealers are trying to avoid incremental program costs that either squeeze margins or drive up vehicle prices, either outcome creating an unwanted challenge in today’s hyper-competitive retail environment.

For some dealers, the alternative has been to offer their own ‘house-brand’ certification on their used car inventory. However, dealership vehicle certifications, rarely, if ever, offer consumers the same level of value, reliability and service support as OEM CPO programs.

This creates a ‘catch 22’ situation for dealers who want to be able to provide customers with the added value they expect from a CPO program but don’t want to cut into their already thin profit margins in so doing.

While there are lots of anecdotal stories in the news and on social media that CPO vehicles provide good value to those who cannot or do not want to pay the cost of a new vehicle purchase, or take on the full maintenance risk of an older used car, consumers are wise to examine CPO offers closely, given the wide variations in CPO offerings from different OEMs, and because of the cost premium of CPO over other used vehicles.

autoTRADER anticipated consumer demand and innovated in this area several years ago when it developed and launched Canada’s first online tool focused on enabling quick and accurate comparisons between various CPO offerings, helping move car shoppers closer to purchase.

The popular tool, which matches real-market CPO inventory with point-by-point information on each of two dozen CPO programs available in Canada, has proven to be an invaluable asset to consumers in helping compare and contrast the full value and trust proposition for each vehicle.

In today’s research-first environment, the more tools consumers have to make fair and accurate comparisons between different CPO offerings, the better equipped they are to make informed buying decisions and the more likely they are to become satisfied and loyal customers over time – something that benefits the entire industry.

Matt Lawson is vice-president, dealer software and OEM with autoTRADER.ca