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DEARBORN, Mich. (May 16, 2006) In today's extremely competitive marketplace, it's increasingly important for dealers to maximize profits throughout all departments, according to auto executives. In this climate, pre-owned and certified have become increasingly vital parts of a dealer's business, and as such, automakers now have dedicated divisions and invested in resources to help salespeople move these units. When consumers purchase a certified vehicle, they are much more likely to buy new next time around from the same automaker, Mike Dennis, manager of sales planning and distribution for Ford, said. Moreover, he said successful pre-owned and certified sales can drive dealer profits, along with improving residual values of vehicles coming off-lease. "These are very savvy customers who may not be brand loyal," Dennis said. "It makes sense for us to introduce these new buyers to Ford, Lincoln, Mercury and Ford Credit. It also makes sense for the dealer to offer CPO to a buyer who may be ready to walk out of a dealership." Dennis also mentioned that Ford recently put the final touches on a vehicle locator for its dealers to help them find inventory and meet market demand. "Ford and Lincoln Mercury CPO dealers are able to view other inventories in their metros," he said, explaining the locator. "They simply go to our CPO administrative Web site and search by year, model, color, equipment, etc. If a dealer finds a car or truck that they need, they can contact the inventorying dealer to make an offer. Dealers can also restrict displayed vehicles by age. As always, dealers can opt-out of displaying their vehicles." Over at Chrysler Group, auto executives pointed out that pre-owned and certified sales go hand-in-hand with new sales. "The dealers I'm talking to are advising me that the market has never been more competitive, and thus they're pursuing the optimization of all profit opportunities that can be driven by each of their departmental operations," explained Bud Place, senior manager of used vehicle sales and marketing for DaimlerChrysler. "Dealers equate new and used more like bread and butter, not bread or butter," he continued. "In other words, they compliment each other, not compete against each other. What the used vehicle brings on a dealer's lot greatly influences what a dealer allows on trade-ins, thus having a significant impact on the new car transaction. Nowhere is this new and used relationship more transparent or more evident than with CPOV. For example, here at Chrysler Group, our top-volume CPOV dealers have the highest new-to-used selling ratios and the greatest increase in new vehicle sales." He went on to explain that certified sales can have a "significant" impact on an automaker's bottom line, which is why manufacturers invest in training and helping dealers sell these units. "How many certified units a dealer is turning each month and how much profit he is realizing on those units directly impacts how often that he returns to our auction and other remarketing purchase venues, and how many vehicles he purchases from us, along with how much they pay for those they do purchase," stated Place. "Due to the bidding dynamics, our remarketing industry is built upon in this country, a single CPOV dealer, who had a great CPOV month, can have millions of dollars of impact on his manufacturer's profit in just one single day by standing in the auction lane bidding aggressively and often," he added. "Then there is the positive and potent impact CPOV has on new vehicle sales, and there are service contract revenues, incremental service and parts business and captive financing. A lot of revenue streams via CPOV directly impacts the automaker." Strong certified and used vehicle sales can have a chain reaction, Place noted. If such sales are strong, then residual value is enhanced, and the automaker can then offer more aggressive leasing strategies, he explained. "These sales also broaden the breadth of our brands by bringing new folks to our Chrysler, Jeep or Dodge family who likely will have a family member buy a new vehicle at some point. Plus, these sales can lead to referrals via friends, neighbors, etc.," he commented. As for General Motors, Paul Pejza, manager of GM Certified Used vehicles, said his automaker's certified program has supported dealers' used vehicle operations for quite a while. "We're actively engaged with our dealers to make them profitable and competitive in the marketplace," Pejza explained. "GM field representatives are out in the field, contacting our dealers on a daily basis, advising them on market trends, new systems and profit opportunities. We are focused squarely on making them better used vehicle dealers. "Our strongest GM Certified dealers do a great job selling used vehicles, which also makes them better new vehicle dealers and builds a stronger operation," he continued. "They're smart businesspeople, and their focus is addressing the consumers' needs and building a relationship with them to generate future sales." GM has always seen used sales as an important component of a successful operation, Pejza said. "GM senior management believes strongly in manufacturer certification," he said. "While used vehicle certification has grown over the last decade or so, used cars have always been a cornerstone for GM dealer operations -- resulting from strong working relationships between dealers, the manufacturer and the finance company working together. "GM Certified Used Vehicles helps drive stronger residual values and manage off-lease returns," he added. "GM Certified provides profit opportunities through faster vehicle turns and through-put, which is good for the dealer and good for GM. Dealers also have other ways to enhance profits by selling additional services in the used-vehicle value chain, such as OnStar, XM Radio and GM Service and Parts. GM Certified is all about building relationships with consumers, and we've seen an impact on repeat business and customer loyalty at the dealership level." Toyota's Norm Olson, manager of retail sales operations and certified used vehicles, also said certified and used sales can really help to bolster residual values. "These sales impact dealer profitability and customer satisfaction," he explained. "It's a win-win for everyone." Olson said Toyota's dealers rely heavily on trade-ins for their certified inventory, so by successfully selling certified units, it also helps the new-car side, as dealers can offer more for trade-ins. "From what we've heard from dealers, the demand for used vehicles is very strong," Olson said. "With fuel prices being high (as of early May), it drives people toward Toyota, as we're known for fuel efficiency. We get a lot of entry-level buyers through certified. Approximately 46 percent that purchase a CPO unit have never owned a Toyota before. >From our surveys, 76 percent of consumers who bought a certified vehicle in April indicated their next purchase will be a Toyota. They're pretty happy campers. That's the way we keep building sales into the future." |
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