Automotive News - September 27, 2021 - 29

SPECIAL SECTION: USED CARS
September 27, 2021 * 29
In hot market, dealers forgo certification
CPO sales rebound amid new-vehicle shortage
David Muller
dmuller@crain.com
D
emand for used vehicles has been
high this year, and flooding this
month from Hurricane Ida just sent
more customers clamoring for cars
at Planet Honda in Union, N.J.
Planet Honda isn't alone facing that growing
demand. In times like these, General
Manager Bill Feinstein said he and other
dealership leaders he knows are choosing to
sometimes not certify used vehicles that
would otherwise qualify
for automakers' certified
Feinstein: Do I
wait for parts?
pre-owned programs.
Dealerships, particularly
in parts of the Northeast
hit hard by Ida's flooding,
simply need to get cars
and trucks ready for sale
to meet demand.
" There [are] some
[dealers] saying, 'Hey,
you know what, it's going
to take an extra three
hours in my shop to make
it a CPO, and I don't have
enough cars on the lot,' "
he said. " I think you can
make those decisions. "
While the need has inBartosch:
It's a
" tricky time. "
tensified in recent weeks
for Feinstein and others
because of the storm, it's
been a persistent theme
for retailers across the country this year as
new-vehicle inventory dwindled, putting more
pressure on them to bolster their used stocks
and quickly get those vehicles ready to sell. Yet,
nationwide, CPO sales have risen anyway,
swiftly rebounding after dipping in 2020.
Last year, driven by the drop in demand at
the onset of the coronavirus pandemic, sales
of certified vehicles fell 7.2 percent to
2,611,634, according to figures from the
A look at sales
Certified pre-owned vehicle sales are
strong through August of this year.
Here are select data points from the
Automotive News Research & Data
Center.
CPO sales through August 2021:
1,935,384 vehicles
CPO sales through August 2020:
1,734,154 vehicles
Change year over year: Up 12%
TOP 5 VOLUME
BRANDS
Toyota
Honda
Chevrolet
Ford
Nissan
CPO SALES CHANGE
277,719 +22%
183,141 +13%
152,283 +14%
134,074 +6.3%
125,868 +3.3%
Automotive News Research & Data Center. It
was the first drop since 2009 and the lowest
annual volume since 2015. This year, CPO
sales are up 12 percent through August compared
with the first eight months of 2020.
Certification rate dips slightly
According to J.D. Power data, the rate of
certification this year is only a few percentage
points lower than before the pandemic and
the subsequent microchip shortage.
For mainstream brands, roughly 72 percent
of same-brand used vehicles on dealership
lots are eligible to be certified. Of eligible inventory,
dealerships certified 38 percent of
the vehicles in the second quarter this year,
said Ben Bartosch, manager of CPO solutions
at J.D. Power. That certification rate has hovered
between 36 percent and 39 percent for
the last five quarters.
The rate was 41 percent for the first quarter
of 2019 and stayed above 40 percent until the
fourth quarter that year. While dealerships
are certifying at a lower rate, CPO sales are
rising because the volume of certifiable inventory
has grown, Bartosch said.
" When you look at things
from a percentage standpoint,
it shows that [dealers have] always
had that inventory to certify,
[but] they just weren't certifying
it at really high rates, "
Bartosch said. " And now's the
tricky time with that because
consumers may see these
newer vehicles coming into
the used market and they
think, 'Well, the vehicle's
brand new. It maybe doesn't
need to be certified.' "
Still, many car buyers see
value in certification, as evidenced
in vehicle turn rates,
he said. Mainstream-brand
CPO vehicles turn in 35 days
vs. 55 days for non-certified,
according to J.D. Power. For
premium vehicles, it's 41 days
for CPO vs. 66 days for
non-certified.
In this tight market, the decicertify
sion
for
dealers
to
sometimes
comes down to whether the vehicle
can be brought up to snuff in a timely
manner.
Feinstein said he has foregone certification
when needed parts were on back order and
unlikely to arrive for days or even weeks.
" Do I hold the car up for a week to certify it
until the back-ordered part releases, if I'm
lucky? Or do I just go ahead and not certify
the car? " he said.
Top CPO brands
The industry's leading automakers for CPO
sales were off to a solid year through August.
Toyota Motor North America's certified sales
jumped 21 percent to 343,470 vehicles in the
first eight months of 2021. General Motors'
CPO sales increased 11 percent to 248,301.
American Honda was up 15 percent to
222,598. Stellantis rose 4.5 percent to 208,435.
Ford Motor Co. also increased 5.1 percent, to
151,193.
For Toyota, certified vehicles
have turned at a faster rate this
year than before the pandemic,
said Ron Cooney, Toyota's CPO
sales operations manager.
Toyota's certified inventory is
"
" That's definitely
going to shift
those buyers
who are kind of
on the edge into
the CPO market. "
Kayla Reynolds,
manager of economic
and industry insights,
Cox Automotive, on the
new-vehicle shortage
and high prices
turning at a rate of 15.5 times a
year, for about a 20-day supply,
Cooney said. A typical turn rate
before the pandemic and chip
shortage, when sales were robust,
was a 60-day supply.
" At any given moment today,
my ground stock inventory is
actually down slightly from last
year, the end of last year, but my
turn rate is up really, really
high, " he said.
This has led to a " huge spike "
in sales of both certified and
non-certified used Toyotas,
Cooney said. Toyota has had
several record months for CPO
sales this year.
Kayla Reynolds, manager of
economic and industry insights at Cox Automotive,
said Cox data shows the new-vehicle
shortage - and particularly the resulting
high price tags for those cars and trucks - is
boosting CPO sales performance.
In July, the average new-vehicle transaction
price was $42,736, up 8 percent from July
2020, according to Cox's Kelley Blue Book.
" That's definitely going to shift those buyers
who are kind of on the edge into the CPO
market, " Reynolds said. " So we do think that
as long as new-vehicle prices, and also
new-vehicle inventory, continues to be impacted,
there will still be some demand for
the CPO market. " n
" We dropped our sale-ready time from 12
days to a 4.6-day group average. "
- David Simches, Group Used Car Director, Crown Auto Group
The 22-store Crown Automotive Group is one of 2,400 Rapid
Recon users across North America selling more cars with
less inventory to improve profitability, efficiency, and
customer engagement by using the industry's
#1 automotive reconditioning software.
CALL: 650-999-0497 / DEMO: www.rapidrecon.com
"
http://www.rapidrecon.com
Automotive News - September 27, 2021

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