2015 Will Be a Record for Certified Used Car Sales TrueCar Says
Interested in buying a certified pre-owned used car? It’s going to be more difficult in 2015, even with increasing supply, because of increased demand. Also, look for dealers to attempt to get top dollar for certified pre-owned used cars.
With the increase in demand, also comes the potential for increases in fraudulent behavior by unscrupulous used car dealers. Certified pre-owned used cars can only be sold by new car dealers of the same brand.
For example, only a Ford dealer could sell you a certified pre-owned Ford F-150. Any other certified pre-owned used cars don’t have the same vigorous warranties as those provided by manufacturers.
TrueCar, Inc., the negotiation-free car buying and selling mobile marketplace, estimates consumer purchases of certified pre-owned (CPO) vehicles, a growing source of revenue for automakers and dealers, will expand by 11 percent to reach an all-time high in 2015.
TrueCar currently forecasts sales of CPO cars and trucks will total approximately 2.6 million units in 2015, up from 2.3 million the previous year. At that level, CPO volume would exceed sales of either new pickup trucks or premium autos, which TrueCar estimates at 2.3 million and 2.1 million units, respectively.
CPO supply fell to a 15-year low of 9.3 million units in 2013. That’s because new car sales had reached a low point in 2009 after the recession. People weren’t buying or leasing new cars in sufficient quantities. However, TrueCar projects the supply of all used vehicles from one to five years old, including CPO units, will rebound to 10.4 million in 2015.
“Improved inventory means we can expect a stellar year for the used market – and particularly for certified pre-owned vehicles,” said Larry Dominique, TrueCar’s executive vice president and president of ALG, TrueCar’s residual value data unit. “Across the industry automakers have enhanced CPO programs to delight buyers with longer warranties, improve their own residual values, and successfully grow volumes of these high-margin products for their dealers.”
In contrast to traditional used vehicle sales, automakers receive revenue from overseeing inspection, refurbishment and providing warranties for CPO units, which are mainly vehicles coming off lease. TrueCar works with automakers to help sell CPO vehicles, offering technology and tools to improve such sales through TrueCar and its trusted affinity partner network.
TrueCar estimates the average transaction price for a CPO vehicle is $17,345 this year, and may generate record revenue of $45 billion. By comparison, an expected 17.1 million new vehicle sales should produce a record $556 billion of revenue this year, nearly three times the value of new single-family home sales in the U.S.
TrueCar expects total industry revenue, including new autos, CPO and other used vehicles, of approximately $1.2 trillion this year. Of course, because it’s a trillion-dollar industry the potential for deceitful behavior flourishes.
The positive outlook for CPO comes after 15 auto brands set records for such sales last year. Audi, Chrysler, Fiat, Hyundai, Infiniti, Kia, Land Rover, Lexus, Mazda, Maserati, Mercedes-Benz, Mini, Nissan, Porsche and Subaru all reported their highest-ever CPO sales totals in 2014.
According to Autotrader's 2014 Certified Pre-Owned study, familiarity with CPO is at an all-time high, with 75 percent of new car shoppers and 45 percent of used car shoppers saying they're familiar with CPO.
In addition, the number of new and used shoppers considering CPO for the first time has doubled in just one year. Even though 75% of buyers are familiar with certified pre-owned, allow me a moment to recap. Certified pre-owned programs are used cars sold by new car dealerships with extended warranties. They are sold at a premium over comparable used cars.
The terms of CPO programs vary from manufacturer to manufacturer, making cross shopping a challenge. To help, the car shopping experts at Autotrader have analyzed every brand's CPO program to determine not just how they compare, but which ones offer the best combination of amenities that CPO shoppers should look out for.
In ranked order, Autotrader experts say the best CPO programs are:
"Porsche's certified pre-owned program is easily the best in the industry," Autotrader Site Editor Brian Moody said. "Like many luxury-car certified pre-owned programs, it offers six years or 100,000 miles of bumper-to-bumper coverage for any vehicle that's still under factory warranty. But if a used car's factory warranty is expired, Porsche will also offer an additional two years or 50,000 miles of coverage -- something no other automaker does. They also offer a long list of perks that make a CPO vehicle very compelling."
Some things to consider before buying certified pre-owned. Just because a program calls itself certified pre-owned doesn’t mean it is backed by a manufacturer. For example, only Chevrolet can sell certified pre-owned Chevrolets. Volkswagen, just to make things confusing, does offer a World Auto program, which certifies used cars from other manufacturers.
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