December: CPO’s golden month
College football bowl games. Your office holiday party. TBS showing “A Christmas Story” on repeat. Predictably, these things happen every December.
Lately, so does this: a used-car market that skews heavily toward certified pre-owned.
December has become the month where CPO’s share of franchised dealer used-car sales is at its annual peak.
In fact, says Edmunds.com, this has happened in seven of the last eight years.
Take December 2014, for instance. Certified vehicles made up 24 percent of used sales for franchised dealers, Edmunds said in an analysis alongside its Q3 2015 Used Vehicle Market Report.
Not only was this the highest CPO penetration of the year, it also currently ranks as the second-highest share of all time, according to the report (The record 25 percent was reached in May of this year).
So, why such strong CPO share in December?
A few factors are at play, says Jessica Caldwell, who is director of industry analysis at Edmunds.com.
For one, the end-of-year has traditionally been strong for luxury car sales, which tends to go “hand-in-hand” with CPO, a segment of the market that was honed on the luxury side before moving more broadly mainstream.
Additionally, she told Auto Remarketing on Tuesday afternoon, many leases wrap up at the end of the year. These cars can be plugged directly into the CPO inventory, so it “makes sense” these cars would be sold as certified units, she said.
Overall CPO strides
In the third quarter, nearly 22 percent of franchised dealers’ used sales were CPO. Never before has the CPO share been that high in Q3, Edmunds said.
Just five years ago, certified share was at 18.4 percent in Q3.
“More and more shoppers are opening their eyes to the benefits of certified pre-owned vehicles,” Caldwell said in the analysis. “These cars offer a unique value proposition to shoppers who want to pay used car prices but demand the peace-of-mind that comes with a new-car purchase.
“And while CPO used to be associated only with expensive luxury brands, we’ve seen every mainstream brand get into the game in recent years,” she added. “With more near-new cars coming off lease and making up a larger chunk of used car supply, shoppers can expect even more CPO vehicles on dealer lots in the coming months and years.”
Edmunds notes in the report that CPO sales are at all-time highs and will only grow in 2016. Caldwell emphasized the connection between leasing and certified, pointing out that with leasing rates as high as 28 percent these days, CPO growth may be on for the “foreseeable future.”
‘Opening their eyes’ to CPO benefits
Going back to Caldwell’s point in the analysis about consumers “opening their eyes to the benefits” of CPO, she emphasized that education and awareness have been crucial in that regard, and that dealers and automakers would be wise to continue those efforts.
Supply also plays a part, Caldwell said. There are more CPO cars available for consumers and with supply increasing, the price proposition for them is also better than when supply was short.
Just how much is CPO resonating with consumers? Consider some of these statistics Edmunds shared from a survey of 2,017 adults.
Eighty-eight percent of those folks said that if they were potentially going used, they would shell out more for CPO. Then among that crowd, 37.8 percent were willing to pay as much as $1,000 more, with 36.9 percent saying they would pay as much as $500 more.