Consumers See Value in Higher CPO Prices

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Used-car certification programs are available through all car manufacturers and are joined by numerous warranty companies touting their own versions of vehicle certification. The Certified Pre-owned (CPO) market has broken sales records for the past 5 consecutive years, and all data point toward 2016 being another record-breaking year.

Typically, a CPO program vehicle or off-brand warrantied vehicle will cost more than a used car that is not certified. Shoppers are willing to pay a premium for CPO, according to a 2015 Autotrader CPO study. New car shoppers are willing to pay an average of $2,174 more for a CPO vehicle while used car shoppers are willing o pay an average of $2,006 more. There are several reasons why CPOs command a premium in the used-car marketplace but, more importantly, increase perceived value for consumers.

Certifying a used car requires a financial investment by the dealership in the vehicle itself. With so many dealerships focused on price compression and turning vehicles faster, adding any additional cost to a vehicle becomes a critical financial decision for the dealership. Differentiating themselves from competitors and winning over the consumer has become essential to survival.

Wowing the consumer, while keeping the right vehicles on the lot, maintaining value and offering a fair deal is what turns vehicles faster and allows for profit to be made.

According to the 2015 Autotrader CPO Study, 89 percent of new car shoppers and 82 percent of used car shoppers have a positive view of CPO programs. And, once car shoppers understand CPO, their likelihood to consider it increases significantly.

In the automotive business, there are three major differentiators that move a consumer from satisfied to extremely satisfied at a dealership. These are:  vehicle inspection, extended warranty protection, and emergency service/roadside assistance. Let’s take a closer look at the value each of these differentiators affords.

Vehicle Inspection

A certified vehicle meets specified mileage and age requirements and has a clean vehicle history report (VHR). The vehicle is thoroughly inspected by a professional mechanic at the dealership. Any failed components are repaired or replaced, with the goal of making it as close to new condition as possible. The VHR and the report detailing the certified used-car inspection and reconditioning process are supplied with the vehicle at the time of sale.

Extended Warranty Protection

Many CPO programs extend the length of the original manufacturer’s warranty coverage. The extension typically includes the powertrain warranty (engine and transmission). It may also extend the original “bumper-to-bumper” limited warranty, which covers those components of the vehicle, other than the powertrain, that are not subject to normal wear and tear (tires, brakes, fluids, etc.). Alternatively, some CPO programs offer a separate warranty covering the vehicle against defects for a specific range of time/mileage.

Emergency Service/Roadside Assistance

In addition to extended warranty coverage, CPO programs often include 24-hour roadside assistance and may provide additional emergency service perks such as towing, key lockout, battery jump, or courtesy transportation in the event the vehicle requires repair for a covered item.

Value to the Customer

Buying decisions made by today’s automotive customers are influenced by several critical considerations:  Can they trust the dealer? Is the vehicle safe? Can they be secure in knowing that they’ll be able to maintain their lifestyle in case of an emergency?

Trust

When the consumer understands that the dealership took the time to inspect the vehicle, complete repairs and document them, this creates a level of trust with the dealership. If the dealer is willing to take the time to care for these vehicles, then the perception is that the dealer has put customer needs and satisfaction first, which leads to a higher transaction satisfaction. Additionally, research shows that 80 percent of current CPO owners say they will purchase from the same dealership again.

Safety

Today’s buyer needs to know that their car is safe. They want to be assured that their loved ones, as well as themselves, will be in a vehicle that was inspected, repaired and certified as safe to drive. Having access to a detailed and itemized checklist of all items that were inspected by a professional mechanic, and a car that has passed this inspection or has been brought up to those standards, appeals to today’s car buyers. Furthermore, backing the vehicle with a warranty adds additional peace of mind that the purchase is safe and reliable.

Security

American families judge themselves financially vulnerable:  almost half of Americans feel that they are unlikely to access $2,000 in 30 days in the event of an emergency. According to a Bankrate.com report, “Almost two in three Americans don’t have enough savings to pay for a $500 repair or a $1,000 emergency room bill.” In other words, if most people in the U.S. have a catastrophic breakdown, they would be unable to pay for repairs for a month! Car buyers are looking for the security of knowing that, in the event of an emergency, they would be covered and taken care of.

Whether or not paying extra for Certified Pre-Owned is worthwhile to the consumer is based on their needs and risk aversion. Peace of mind, warranty and affordability are the main reasons car shoppers consider CPO, according to the Autotrader CPO study. By offering consumers a higher level of trust, safety and security, Certified Pre-Owned sales continue to see record transactions and are filling a need demanded by a record number of car buyers.