Cox Automotive Data Proves the Profit Potential of CPO Vehicles

 

"Frankfurt, Hessen, Germany - April 04, 2012: Car drives up a ramp made from coins."

11.15.2016 Press Release

A recent Cox Automotive study demonstrates that most dealers are not fully leveraging the profit potential of certified pre-owned (CPO) vehicles. According to the study, dealers underestimate the value consumers place on CPO vehicles, causing them to charge less than consumers are willing to pay. Additionally, CPO vehicles were shown to speed vehicle sales and increase turn, making a strong case for dealers to take advantage of the growing CPO market.

According to the Cox Automotive 2016 CPO Study, the average consumer is willing to pay $3,000 more for a CPO vehicle than for the same vehicle without a certification. However, dealers estimate that consumers will pay only $1,260 more for a CPO vehicle — $1,740 less than what consumers said they would be willing to pay. By underestimating the value of vehicle certifications, many dealers unknowingly sacrifice potential profit.

In addition, the study reveals that a CPO vehicle sells five days faster on average than a comparable non-certified vehicle, averaging 30 and 35 days respectively. CPO vehicles also increase a dealership’s average number of inventory turns per year, from 10.4 to 12. While the upfront cost of certifications may currently hold back some dealers from developing CPO programs, the combined value of higher price tags and faster turns more than counteracts this cost.

The data is especially timely given the recent growth in the CPO landscape. According to a new study from Cox Automotive, the number of consumers interested in CPO could reach 5.2 million, up from 3 million in today’s environment.1 This is due in part to the 4.6 million vehicles expected to come off-lease by 20202. Dealers who convert lessees into CPO customers — and certify returning vehicles before putting them up for sale — can harness the sales and profit that come with CPO vehicles.  Dealers who also precisely match inventory to their market and deliver exceptional customer experience could see CPO sales grow exponentially.

“CPO vehicles are a smart investment for any dealership,” said Scott Hernalsteen, senior director of research and market intelligence for Cox Automotive Media Group. “That said, CPO only accounts for 21% of used vehicle sales at franchise dealerships.3 This study proves that CPO vehicles are especially valuable for today’s consumers, and should encourage dealers to take advantage of untapped CPO opportunities.”

1 Source: Cox Automotive 2016 CPO Study

2 Source: IHS PolkInsight (2008 – September 2016 Rolling Year to Date data)

3 Source: NADA, Autodata/Motor Intelligence (2010 – September 2016 Rolling Year to Date data)

To learn more about the profit potential of CPO, interested dealers can attend Scott Hernalsteen’s presentation, “Evaluating CPO Shopper Perceptions,” at CPO Forum, November 15 in Las Vegas.

About Cox Automotive

Cox Automotive Inc. is transforming the way the world buys, sells and owns cars with industry-leading digital marketing, software, financial, wholesale and e-commerce solutions for consumers, dealers, manufacturers and the overall automotive ecosystem worldwide. Committed to open choice and dedicated to strong partnerships, the Cox Automotive family includes Autotrader®, Dealer.com®, Dealertrack®, Kelley Blue Book®, Manheim®, NextGear Capital®, vAuto®, Xtime® and a host of other brands. The global company has 33,000 team members in more than 200 locations and is partner to more than 40,000 auto dealers, as well as most major automobile manufacturers, while engaging U.S. consumer car buyers with the most recognized media brands in the industry. Cox Automotive is a subsidiary of Cox Enterprises Inc., an Atlanta-based company with revenues of $18 billion and approximately 60,000 employees. Cox Enterprises’ other major operating subsidiaries include Cox Communications and Cox Media Group. For more information about Cox Automotive, visit www.coxautoinc.com.