2022 Could Be a Strong Year for CPO Vehicles…Here’s Why & How to Be Ready
2022 is going to be an interesting year. The automotive market is dealing with overlapping issues that it’s never seen before. A lingering pandemic (though things do seem to be getting better thankfully), off-the-chart supply chain issues that have been slow to correct itself, and inflation riding at a 40+ year high.
When looking for potential bright spots and opportunities for the average dealer (new or used), one thing comes to mind…an increase in CPO programs. Certified Pre-Owned is always an attractive way to purchase a car and offers the customer strong protections and in many cases, a better long term ownership experience.
Most new car dealers have OE CPO programs available bolstered in large part by lease turn-ins but larger independent dealers can benefit in this climate now, too. There is no reason not to offer a robust CPO program as a way to compete with other stores in the market. Depending on where you’re buying inventory, you could even have a bit of an advantage and be able to offer great units that carry high margins.
Why is 2022 looking good for dealers who are considering an in-house CPO program if you don’t already have one? A couple of reasons…
- High prices are pushing customers to buy cars that were not their first choice so there is a greater need to have mechanical protections as well as appearance protection to help insure a higher trade when the new car inventory catches up. These ‘placeholder’ buyers will want top dollar to put into a deal for what will arguably be a very expensive new car.
- 2018-2019’s are coming in off-lease which means there should be a solid wave of well-cared for cars to choose from that make perfect CPO units for any dealer. Add to that the variety of popular makes/models that are scarce now and you should have no problem moving them as CPO units.
If a buyer can’t find a 2021 RAV4 for instance, but you are able to buy one off-lease that’s a loaded 2019 with a strong residual, they can come in and grab it right away at a healthy profit based on today’s values. And we all know how the book values have changed in just the last year alone. Plenty of easy profit to be made.
- Prices are projected to rise again in 2023 for new and used. CPO sales now can satisfy buyers who don’t want to play the ‘wait and see’ game and just want something as close to what they really want as possible. Add a strong CPO package and you have an easy way to get buyers to make a move now when so many may be simply giving up on getting anything newer due to rising prices and low inventory.
- F&I can enjoy benefits from a CPO program in two ways. One, more high quality used units at current prices mean longer terms and longer terms means higher finance reserve which is the biggest part of a healthy PVR. Second, CPO vehicles help to tee up an easy VSC upsell that gives deeper protection beyond just powertrain. GAP can be offered too if there is room in the payment. Again, higher prices make all of these products more of a necessity rather than a luxury.
If CPO is new to your dealership, here are some tips to make it a success and an easy way to help increase the “Why Buy Here” value proposition in your local market:
- Leverage Social Media - Assuming your dealership has a social media presence, using that channel to help highlight your new CPO program is the ideal way to reach your local market and beyond. Leverage every channel to let shoppers know that even though you may be light on new cars, your store has late-model used cars that are fully inspected and protected. Give every detail on the process and show videos/photos about your due diligence procedure.
- Shine a Spotlight - As you either have car shoppers stop by the lot or reach out online, make the new CPO program the first topic of conversation if possible. Make sure sales enthusiastically describes the advantages of buying a CPO unit and train them to focus on the benefits rather than features of the program.
- Don’t Forget the Ancillaries - Ancillary products should be a part of the program but make sure it’s the products that make sense or there will likely be objections. Consider an ancillary bundle that is reasonably priced so that it doesn’t interfere with the opening for VSC or GAP. Focus on appearance ancillaries like interior/exterior, PDR, windshield, and add key replacement for extra value. Preload it as a standard part of your CPO program and most customers should be happy to have it.
- White Label It - F&I providers like truWarranty encourage white labeling all of the products you offer. CPO is no different. Brand it to your dealership and market it as every bit as valuable as the OE store down the street. Be bold and make sure your local market knows your units are in the best shape and offer the same peace of mind.
Contact us here at truWarranty today to see how easy it is to work with a provider that understands exactly what you need to launch your own profitable CPO program. We are an F&I provider designed by dealers, for dealers.
If your dealership has ever considered building out a white labeled CPO program, now may be the right time to consider it.
What if you don’t have a CPO program to lean on? Simple….start your own.