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NOTE: UPDATED with additional OEM CPO incentive info.

The certified pre-owned vehicle segment has an array of consumer- and business-facing benefits, and the latter would certainly include automakers and their captive finance arms.

CPO can be a lever for captives to boost dealer demand for off-lease volume, through such perks as APR programs and extended warranties, says Jonathan Banks of J.D. Power Valuation Services.

And amid COVID-19, it appears many automakers are taking this to heart, sweetening the pot for CPO sales, a move that can help buoy some of the downward used-car price movement and drive consumer demand for certified.

“We wanted to look at, ‘are manufacturers changing their programs to help mitigate some of the declines in used-vehicle prices and stimulate demand for these very highly desirable vehicles?’” Banks said Wednesday during the weekly webinar on the J.D. Power Auto Industry Impact Report.

“What we found, in general, is that we have seen some programs come into play,” he said.

In presentation slides, J.D. Power compares the pre-virus incentives from February to March/April incentives of 23 CPO programs (citing data from its Autodata Solutions division).

In February, 13 of the 23 had what “no special offers.”

For March/April, only four of the 23 had no special offers.

“Numerous OEMs have enhanced APR offers to help stimulate demand for used certified pre-owned units. Some, particularly premium OEMs, have also added 90-day payment deferrals to further support demand,” J.D. Power said in its slides.

Referring to the chart, Banks noted: “You can see how these quite a few changes to some of the programs … the captive finance companies are adding incentives for consumers to buy certified pre-owned. 

“And what that does is, it helps the dealers by giving the dealers a value proposition to the consumer,” Banks said. “So, ultimately what the captive finance companies want is for the dealers to buy more of their vehicles upstream.” 

The presentation showed how prices in direct-to-dealer wholesale sales — which J.D. Power describes as “usually facilitated by online tools that occur in advance or outside of a physical auction sale” — have been more stable than prices in physical auction sales during the pandemic.

The price index (where March 1 = 100) for direct-to-dealer wholesale prices has been in the 94 range for the last three weeks. The wholesale auction index, meanwhile, dropped from 101.8 the week of March 15 to 84.8 by the week of April 19, before rising in each of the last two weeks.

“And if we go back and think about how the upstream prices are holding much strong than the physical auctions, this makes a lot of sense,” Banks said of captives wanting dealers to use upstream channels. “So, we’re seeing the captive finance companies use tools to help keep used-car prices firm for those late-model used (units) and also providing good value proposition for the dealers.

“Now granted, this is really untapped in our opinion, where you can increase the program’s desirability and you can market these vehicles to create a real pull-based strategy for used vehicles, instead of just discounting,” he said. “So, this is a great tool for the captives to use that you can see is starting to be more utilized than it was pre-COVID.”

Incentives from CPO programs

On Monday, Auto Remarketing reached out to a wide range of automaker CPO programs and asked them to share any incentives/deals they were offering on certified vehicles or any other CPO-related programs they were running with dealers.

Below is a roundup, based on what those CPO managers shared:

Of the incentives that include CPO, Porsche Financial Services has a “90 Days to First Payment” program for CPO retail contracts dated April 4-June 30, where allowed by state regulation, the automaker said. This is not allowed in Pennsylvania or Maine, per state regulations.

Additionally, there is 1.95% APR financing for up to 60 months is available on select CPO contracts from April 16-June 1. This deal is “compatible” with the above deal. But only Level 1 (Tier 1 credit) qualifying customers can access it.

At America Honda Motor Co., the Honda certified program is offering Dream Deal APR Sales Event through June 1. That deal is on the Accord, Civic and CR-V models. The company said regional offer and details are available online. Acura is conducting is Certified Pre-Owned APR Sales Event through June 1, offering 0.99% APR for up to 36 months on the RDX and TLX models. 

“We are monitoring the market closely and actively providing support to help our dealers navigate through these challenging times. We are offering APR support for both our Honda and Acura brands. Honda is featuring APR support on our core models of Accord, Civic and CR-V and Acura featuring RDX and TLX,”  Dan Rodriguez, manager of auto remarketing and certified pre-owned for American Honda, said via email.

Volkswagen is offering 0% financing for up to 60 months on certified through the end of next month.

Michael Ashton, who is VW’s senior manager of national CPO/used operations, said this incentive began in mid-April and led to a significant uptick in CPO “within days.”

“I don’t think I ever remember seeing that aggressive of a rate for 60 months from any OEM,” Ashton said via email. “We are proud of the 0% at Volkswagen because it is helping our customers and driving traffic into our dealerships during these challenging times.”

Cadillac is offering 2.9% financing for 60 months and is also allowing payments to be deferred for 90 days for customers.

Nissan is offering 1.99% special APR financing for 60 months or $450 captive cash on CPO purchases on its core models of Versa, Versa Note, Sentra, Altima, Rogue and Rogue Sport. Any CPO vehicle financed via Nissan Motor Acceptance Corp. will receive a year of complimentary maintenance.

Nissan is also offering an option to have payments delayed 90 days on all certified purchases financing with a NMAC special APR.

Over at Fiat Chrysler Automobiles, head of CPOV Eric Swanson said the program has put a big emphasis on video conference calls and digital retailing, and finished with a 13% share in April, its best ever.

Jaguar Land Rover is offering as low as 0.9% financing on select certified pre-owned that are financed via Jaguar or Land Rover Financial Group. Specific breakdowns for those deals, which last through June 1, are available from the Jaguar and Land Rover websites.

Mazda is offering approved customers 1.9% financing for 60 months on all CPO model as well as a payment deferment for 90 days after the contract date.

Toyota is providing 2.9% financing through the end of June on certified Camry, Corolla, RAV4 and Tacoma.

Ron Cooney, who is TCUV sales operations manager at Toyota Motor North America, said via email that even though the incentives technically have an end date next month, he plans to renew special financing deals each month on several vehicles for the rest of the year.

Toyota also began offering a 90-day deferment on the first CPO payment on purchases in April. That deal continues this month.

“On the sales side, we have seen great week over week and month over month growth since this all started. This weekend’s business was a 150% improvement over the first weekend in April,” Cooney said. “A couple of our regions saw weekend TCUV sales increases over the same weekend last year. That’s amazing! Each day’s national sales exceeded the daily target for the last several days. So, things are really trending in the right direction.

“Online search and lead data is showing great signs of improvement too. Some KPIs show consumer engagement and interaction nearing pre epidemic levels,” he said.

Chance for OEMs to get more dealers involved

In an Auto Remarketing story from Jim Leman and in a subsequent Auto Remarketing Podcast episode — both of which were published in April — Lotpop founder Jasen Rice said CPO could emerge as the “winner” from COVID-19. But for that to happen, he champions automakers backing up certified programs with incentives like the ones described above.

He also advocates potentially waiving CPO fees for dealers and driving more attention to the segment.

With large quantities of late-model off-rental and off-lease cars hitting the market, Rice said in the podcast, “The OEMs are going to take a beating on these cars as much as the fleet companies, rental companies (and) dealerships (are) … And then those years — the 2020s, ‘19s, ‘18s — when those take a beating, it’s going to trickle down to the rest of the cars out there.”

He encourages automakers to put incentives on CPO vehicles “at a great level, like they do on new” and push some attention towards the segment.

Rice said that “consumers are going to be very hesitant to buy a new car and spend a lot of dollars, so if they can get a nice used CPO under warranty that whole time, it’s stabilizes the market a little bit, instead of it dropping … 15-20%, it might drop 10% or less. 

“And then, it depends on the retail push that comes in, hopefully, but then it also reserves residual values for the new cars for dealers to then be able to maybe lease new cars. Because if these late models just fall to the bottom and lose thousands of dollars, the residual values aren’t going to be very great, either.”

And that leads to “a trickle-down effect,” he said.

“So, if they do back (CPO) up, I think it becomes the winner, because more people are going to probably tend to buy used over new, especially a warranty-backed (car with) good incentives,” Rice said. “Dealers will back it if they waive the fees and start gobbling up these cars and get a better demand on them.”

Dealers have bought in to CPO, for the most part. Some, of course, have not gravitated to CPO, because of fees and a perceived lack of gross profit potential. 

“This is the chance for OEMs to get the other dealers, the doubters, back in line, to be excited about CPO,” Rice said. “I think it’d be a win-win for everybody.”

So far, it appears they are stepping up.