Certified pre-owned vehicles have grown in popularity over the years. More than 2.6 million were sold in 2017.
Most automakers offer CPO programs to help remarket their off-lease vehicles. Some dealers also certify vehicles on their own, The units are inspected, reconditioned as needed, warranted and sold at a higher price than regular used vehicles.
A top CPO seller is Ricart Automotive, a dealership group based in Columbus, OH. I spoke about that part of the business with Rick Ricart, a third-generation auto retailer and the organization’s vice president-sales and marketing. Here’s an edited version of the interview.
Q: CPO is such a common term in the industry, but do most auto buyers know it in the same way as a dealer?
Ricart: No. The non-premium OEMs have never educated the public to the level necessary to make CPO a “brand.” Some luxury brands have done a much better job of educating, marketing and building value before the customer arrives.
All other programs are based on switching a customer in the showroom. CPOs won’t sell themselves, it takes commitment, processes, and consistent message delivery.
Q: You’ve been the No. 1-selling CPO dealer in the U.S. How did you accomplish this feat?
Ricart: Our team will scold me if I don’t clarify the rankings: No.1 CPO for the past 4 years, No.1 franchised used-car dealer for 2 years running.
We started six years ago, it took 2-3 years of sustainable growth to get to our current levels. We call it “Certified Velocity” and we took a hybrid business model of quality, velocity and treating our Used Car Factory (a pre-owned vehicle outlet) as a stand-alone franchise.
Quality means we certify everything. We create a culture of success through training and process. We treat the employees and the customers better than do some new-car franchises. We market, merchandise and deliver the correct messages consistently.
Q: Why don’t more dealers actively display and advertise CPO?
Ricart: We tried manufacturer-specific CPO programs multiple times before we found what works for us. The OEM programs are all alike, and every dealer is not. Some dealers certify the vehicles, place them either in the used-car inventory or “between” new and used, price them above market value due to certification fees and over-reconditioning charges, and wait for the customer to arrive. That’s a recipe for failure.
Q: How do you market CPO digitally?
Ricart: Digital video is incredibly efficient and easy to do. Facebook and YouTube are the two big dogs, and where we like to run. You can focus on auto intenders and geo-target a specific radius and push people right to your website.
Most of what we shoot is with an iPhone. It makes it authentic and fun.
Q: Is traditional TV part of your advertising arsenal?
Ricart: Traditional TV is still alive and well. Live broadcast TV (such as sports events) is the best direction I can give. I like a combination of short-form (5-10 seconds) for quick message “jabs” mixed with full 30-second branding. TV is the best medium to create trust. That’s why brands like Amazon, Google and Apple buy broadcast TV.
Q: Are CPO units harder to finance for the buyers?
Ricart: Exactly the opposite. Most lenders offer late-model used-vehicles rates and terms similar to new cars. And with the additional CPO add-on you get more advance, due to higher book value. Many manufacturers will offer subvented programs as well.
Q: Is there a specific way to successfully buy CPO inventory?
Ricart: Always push for trades. Create relationships and buy vehicles that have not been previously offered in your market. Auctions are relevant. Just do research ahead of time and avoid units that have already been offered in the past 90 days. Private purchases are a must. Off-lease is next best. As difficult as the manufacturers make doing business today, there are times when I view the new-car department as trade-bait for the used-car department.
Most dealers don’t hold their used-car departments in higher regard than their new-car franchises.
Q: Do customers view CPO as a third “brand” in addition to new and used inventory?
Ricart: Non-premium customers don’t view CPO as a brand until they get a face-to-face explanation of the features and benefits. Even then, it doesn’t change the fact that the vehicle is still used. It just comes at a lower risk.
Q: Can you make a better gross on a CPO versus a used unit?
Ricart: Yes. And you should. If a dealer experiences a negative impact on gross they have not done a good job of training and implementing a sales process to properly offer a CPO as an option to a new car.
Q: What about reconditioning or accessorizing costs? Are these an issue or an advantage?
Ricart: This is where the dealer has to think long-term and understand that recon costs will go up. To manage the balance of recon time, costs (avoid over-reconditioning), and inventory control (aging) is critical for the success of each individual unit.
If done correctly, assuming the marketing and sales process build authentic value in the brand, the additional costs become an investment in future business. This happens because the word-of-mouth, repeat and referral business grows along with the brand, and eventually marketing dollars are reduced and organic growth begins.
Q: Do any manufacturers assist dealers with CPO sales through national advertising?
Ricart: Absolutely not, and they do not intend to.
Q: As profit margins narrow, can CPO be a magic bullet for dealers?
Ricart: I would have every available option at my disposal. Why handcuff yourself to one segment? That’s like saying “I’m only selling small cars.” Know your CPO options, create solid processes and offer every customer every option every time.
Q: Is any special sales training needed for CPO?
Ricart: I think I’ve made this clear: CPOs won’t sell themselves. Communicating the features and benefits is the majority of what we “sell.”
Q: Are most car buyers willing to consider a CPO unit when you present it?
Ricart: Every buyer is different. Their needs are different. Used-car customers subconsciously calculate risk versus value. They want to find the best used car that fulfills their needs and offers the best value at the lowest risk, while knowing every used car is a risk. CPOs reduce that risk.
Adam Armbruster is a senior partner in the business-growth firm Eckstein, Summers, Armbruster & Company located in Red Bank, NJ. He can be reached at 941-928-7192.