DETROIT -

An ample supply of popularly equipped off-lease vehicles, consumer concerns about the economy and upgraded certified used-vehicle programs from major players, have set the stage for another record-setting year of CPO sales, said industry analysts and managers of factory CPO programs.

Cox Automotive predicts that industry-wide CPO sales will hit 2.75 million units by year-end, representing a 1.9% increase over CPO sales for all of 2018, said Zo Rahim, the company’s manager of economics and industry insights.

Supporting those sales are an expected 4.1 million units coming off lease this year. The number of off-lease units in 2020 is expected to be about the same or “slightly down, but still at very high levels,” Rahim predicts.

Citing data from Motor Intelligence, Cox Automotive reports that over 1.6 million CPO units were retailed from January through July 2019, up 2% compared to the year-ago period.

Cox Automotive believes that the growth rate for CPO sales justifies its year-end projections, Rahim said. “There would have to be a significant material impact to the used-vehicle market for us to not grow versus 2018,” he added.

The economy matters

Ivan Drury, senior manager of insights at Edmunds, agrees that CPO sales this year are tracking to outpace last year’s total. He cites “turbulence” on the new-vehicle side as one reason.

Higher new-vehicle prices, a volatile stock market and talk of a trade war and recession, are causing some new-car intenders to become more cost-cautious, making CPO vehicles an attractive alternative, Drury said.

Additionally, CPO vehicles, given their younger age, are likely equipped with customer pleasing technology such as blind-spot monitors, Bluetooth, navigation and backup cameras, he noted. And because SUVs and crossovers have been popular with new-vehicle buyers for the past few years, there are more of them coming back off lease and available for certification.

“If we talked about this say, three to five years ago, that pool of cars in inventory, the technology that they would be lacking compared to a new car — the difference would be night and day,” he said.

“You wouldn’t get the obvious, like a backup camera which makes your life so much easier. But three to five years ago, a CPO car is not going to have that, unless it’s a luxury car.

“The way technology proliferates downward, now is a better time than any for a near-new 3-year-old vehicle.”

Toyota, Honda enhance warranties

Helping buoy those sales is Toyota Certified. The brand’s CPO unit sales in August rose 33.2% to 36,430; year-to-date sales were up 9.8% to 256,593.

The brand saw its sales slightly dip in early 2019 compared to the same period in 2018 and at other times over the two years prior.

That’s when it was time make some changes, said Ron Cooney, the Toyota Certified Used Vehicles (TCUV) sales operations manager.

So, on May 1, a Toyota vehicle’s seven-year or 100,000-mile CPO limited powertrain warranty that started from the time the vehicle was purchased as new, was expanded to start from the day the vehicle was purchased by the CPO buyer.

For example, under the previous program, a 3-year-old Toyota CPO vehicle with 40,000 miles on its odometer, would have its powertrain covered for four years or 60,000 miles.

Under the new program, a CPO vehicle with the same mileage gets its powertrain warranty of seven years or 60,000 miles.

“It’s huge for us,” he said. “It’s actually a better deal for the customer because a lot of our (TCUV) sales are of 3-year-old, lease returns, with 35,000 to 40,000 for the average mileage.”

The company also changed the reimbursement it pays CPO customers if their vehicle is at a Toyota dealership for warranty covered repairs, Cooney said.

Under the previous plan, customers’ whose vehicles were still under the brand’s 12-month or 12,000 comprehensive warranty were reimbursed $50 per day for car rental. But if the repair was covered under the seven-year or 100,000-mile limited powertrain warranty, the reimbursement was $35 per day.

That has changed, and now any customer whose vehicle needs a repair covered under a Toyota Certified warranty is reimbursed up $50 per day.

“Not everybody rents a car anymore,” he said. “There are ride-shares like Uber and Lyft. We want to make sure that up to $50 a day — whether it’s in 10 different $5 Uber rides —  we want to make sure it’s convenient for everybody.

“Things have gotten a lot more expensive; we needed to look at a lot of different things.”

New customer amenities

CPO warranties for Honda brand and its upscale sibling, Acura, have also undergone major revisions. Starting Aug. 1, Honda rebranded its program, HondaTrue Certified, and began offering a second CPO warranty tier called HondaTrue Certified +, said Dan Rodriguez, the company’s manager of auto remarketing and certified pre-owned.

New to both programs are customer amenities such as two complimentary oil changes, roadside assistance, emergency fuel delivery and lockout assistance.

Honda CPO vehicles that are current model year, less than 12 months old and have fewer than 12,000 miles on their odometers, are covered by a Certified Plus warranty of 24 months or 50,000 miles, extending its coverage to up to five years or 86,000 miles from the time it was sold as new, Rodriguez said.

Prior to rebranding and unchanged for HondaTrue Certified, is that vehicles are covered by a 12-month or 12,000-mile non-power warranty on top of any portion of the vehicle’s three-year or 36,000-mile factory warranty. If a vehicle’s factory non-powertrain warranty has expired, the vehicle coverage is 12 months or 12,000 miles.

Acura’s Precision Certified has extended its non-powertrain warranty, which begins after its four-year or 50,000-mile, new-car warranty expires, from 12 months or 12,000 miles to 24 months or 50,000 miles, bringing the warranty period to six years or 100,000 miles from the time the Acura vehicle was sold as new. Also new is that the Acura vehicle’s first scheduled maintenance is complimentary and includes services such oil change and filter and tire rotation.

Just over a year ago, Honda began including its 182-point inspection check lists, complete with vehicle identifications numbers, with its CPO vehicles listed for sale at Honda dealerships on its Honda Certified Pre-Owned website. Similar inspection check lists are posted with vehicles listed for sale at Acura dealerships on the Acura Certified Pre-Owned website.

Rodriguez said the program enhancements and the check list resonate with millennials who want transparency and peace of mind.

“We’re pretty proud of what a car has to go through to be a certified car, whether its Honda or Acura,” he said. “Not every car can be a certified car, and this is what it has to go through to be a HondaTrue or Precision Certified car. That led to the naming convention. It ties to our core values of trust and transparency.”

Honda’s CPO sales in August increased 12% to 28,297, and it year-to-date sales increased 8.3% to 196,724. Acura’s CPO unit sales in August were up 12.1% to 4,657 and up 9.8%  to 32,774 year-to-date.

More FCA dealer participation

Here’s another reason CPO sales are soaring, according to Eric Swanson, head of certified pre-owned vehicles at Fiat Chrysler Automobiles:

More dealers than ever before are participating in FCA’s CPO program, and they are selling more cars per dealer, he said.

FCA’s CPO unit sales increased 30.6% to 27,121 in August and was up 8.9% to 197,567 through the first eight months of the year.

Swanson predicts that FCA’s CPO sales at year-end will exceed 2018’s annual total by at least 8%, and industry-wide sales will grow by a healthy 2% to 3% for calendar 2019.