CPO assumptions put to the test

In the past few years Certified Pre-Owned vehicles have become increasingly popular in Australia. However, the CPO sector is still very much in its infancy.

In the past few years Certified Pre-Owned (CPO) vehicles have become increasingly popular in Australia. However, the CPO sector is still very much in its infancy in Australia when compared to markets like the United States, where sales of manufacturer CPO vehicles reached a new high in 2016 on the back of six consecutive years of growth. CPO vehicles now account for almost 25% of dealer sales in the United States.

Using the wealth of data available from customer surveys, leads and feedback, carsales tested some widely held assumptions to better understand the CPO segment, and the opportunity it presents for dealers and OEMs, with full findings published in a new whitepaper titled The rise of CPO

Sales-winning differentiation

carsales’ research uncovered that CPO leads closed at a higher rate than comparable non-certified leads, with the number of people reporting that that they had purchased the car being 16.4% higher for leads on certified cars.

Additionally, for consumers submitting leads on CPO vehicles, warranty was the most important factor in their purchase decision, with price and location far less important than it was for non-CPO purchasers - supporting the assumption that consumers do indeed like the certainty that CPO programs provide.

carsales’ Executive Director – Dealer, Michael Holmes, who has long championed the benefits of CPO programs, was not surprised by the results.

“What we have heard from dealers for a long time is that CPO vehicles attract better quality leads and help increase conversion, while maintaining higher margins than non-CPO vehicles,” said Mr Holmes.

“Online platforms such as carsales spoil consumers for choice with so many great purchase options, but with CPO status and everything that this encompasses, a CPO vehicle possesses that critical point of difference that reduces perceived purchase risk and wins a sale.

Many consumers view a CPO vehicle as the option that helps save thousands of dollars compared to buying a new car, which justifies the price premium over a non-CPO used vehicle,” added Holmes.

Brand loyalty and repeat purchasing

CPO programs are also smart way for OEMs to engage used car buyers who they would otherwise not have a customer relationship with, and present an opportunity to capture valuable lifecycle data that would otherwise be lost in private-to-private and independent dealer transactions.

carsales Sales & Strategy Director - OEM & Media, Ag Giramondo, believes that in this age of harder-to-win customer loyalty, CPO programs are an ideal avenue to attract and retain buyers through a better experience and potential access to higher spec vehicles.

“The beauty of CPO programs from an OEM perspective is that they help deliver a new-car like buying experience. With CPO, no longer is the used-car purchase considered a second-class experience or a less rewarding purchase.

In many cases, CPO programs also give buyers access to higher spec cars with more features and better performance, for less outlay. This is important as it can help deliver a better ownership experience, higher perception of the brand and ultimately facilitates repeat purchasing that entrenches the buyer within the brand family,” said Giramondo.

There’s further work to be done

In the past, not all CPO programs have gone according to plan. Some large OEMs who previously ran CPO programs in Australia have cancelled them due to associated costs, lack of take up from dealers and perceived lack of customer interest.

Furthermore, The Rise of CPO whitepaper uncovered that 53% of consumers did not know what a CPO vehicle was, despite being in the market and on the journey to vehicle ownership.  In addition, only 3.7% of dealer cars advertised online are marked as CPO in Australia, to comparable sites in the United States where CPO vehicles account for 15% or more of stock on site.

“It’s critically important that CPO programs are mutually beneficial for franchised dealers and OEMs, and that buyers are aware of the program’s benefits beyond just an extended warranty. Without this awareness and education, it’s more difficult for these initiatives to gain traction so collaborative marketing efforts – both on sites such as carsales and at the point of sale – are really required,” stated Mr Giramondo.

From a dealer engagement perspective, there are a number of initiatives that can help.

“Commercial agreements and clear certification processes that help deliver a good quantity and consistent supply of CPO vehicles, will help dealers further embrace these programs. Then tools such as the AutoGate inventory and lead management system make it easier for the dealer to quickly mark a vehicle as CPO and deliver greater visibility in front of more active buyers on carsales. Combined with sales training, this is the integrated and holistic approach that can pay dividends for all parties,” added Mr Holmes.

For full analysis of the CPO opportunity and how promotion of CPO programs within the relevant context of carsales is proven to drive a significant increase in awareness, download a copy of carsales’ The Rise of CPO whitepaper here.