To shore up sales in a slowing new-vehicle market, retailers in Canada are turning to certified pre-owned (CPO) programs, and not just from automakers: Some dealers have created their own strategies to boost margins and volume.
“We certainly know that the industry in Canada, the total vehicle sales in Canada are starting to dip down,” said Joel Gregory, national manager of CPO for Nissan Canada.
“It only stands to reason that we as a company would want to expand. Every company wants to do that. We see the certified pre-owned program as an opportunity to bring in all new customers that we haven’t seen before into our showrooms.”
George Augustaitis, director of automotive industry and economic analysis at CarGurus, said the dealers can expect a “consistent amount.”
“It’s going to provide pricing stability and really competitive pricing for consumers who are looking to purchase their new vehicle and not lease their new vehicle,” he said.
CPO programs — automakers inspect and certify used vehicles that are then typically sold with an extended warranty or other perks — appear poised for growth in Canada in the coming years. Automakers and dealers have steered more cost-conscious buyers into leases as vehicle prices rise, meaning a bubble of used vehicles in relatively good shape is set to return to the market.
In recent months, several brands have made drastic changes to their CPO programs in hopes of increasing awareness of their programs and selling more certified used vehicles. Those vehicles often have higher margins than noncertified ones.
NISSAN DEALERS BUY IN
Nissan Canada overhauled its CPO program, tweaking how it offers warranties and reaching out to dealers to get them on board. Gregory said more than 80 per cent of Nissan dealers in the country were engaged in the CPO program, up from 61 per cent in 2018. Nissan Canada’s CPO sales through August were up 70 per cent from a year earlier to 10,604 units, according to the company.
Before CPO programs, used-vehicle sales were one of the few areas of a dealer’s business that the automaker had little involvement in, Gregory said. It is up to Nissan, he said, to make the business case for CPO programs to its dealers.
“That’s their world,” Gregory said of dealers and used vehicles. “What we want to do is bridge that gap, to say we as a company are now mature enough to understand how you view your business, and now we want to partner with you.”
Nissan sees its CPO program as “an introduction” to the brand, Gregory said, bringing new customers into its showrooms with the idea that they could be interested in buying a new vehicle from the company in the future.
Kia Canada relaunched its CPO program in March by increasing digital-marketing funds for the program and offering special finance rates for CPO vehicles. The brand also added an exchange policy that allows customers to return a vehicle within 15 days or 1,000 kilometres, as well as a program aimed at recent college graduates.
The result: A 20-percent increase in CPO sales, Kia Canada COO Elias El-Achhab said in August.
Kia aims to sell 5,000 to 6,000 certified used vehicles in Canada in 2019, El-Achhab said, up from 3,000 to 4,000 in a typical year.
NEEDS TO BE BETTER
Not all dealers are rushing to join Kia’s CPO program, in part due to cost.
Dealers have to pay for a CPO vehicle’s rigorous inspection, and depending upon supply and demand in a given market, a dealer might decide not to add costs to a vehicle’s price.
Kim Coneita, general sales manager of O’Regan’s Kia Halifax, said the dealership has yet to sign on to Kia’s program. O’Regan’s offers its own certification program, with a 45-point inspection and similar types of incentives typically offered in an automaker’s CPO program, such as warranties and exchange programs, she said.
The dealership doesn’t see enough of a financial advantage to partake in Kia’s program yet, said Coneita.
“We shouldn’t be stronger than the manufacturer, but we are in this scenario,” she said.
“I personally think Kia is not where it needs to be on the CPO program. It will get there. They’ve done quite a good job of branding themselves in Canada that now we’re gaining traction and we’re selling lots of new cars, so now there are more used Kias out there.
“Once they get there, we will definitely follow suit and get with the program. It’s just got to be a little better than what it is.”
El-Achhab said growing Kia Canada’s CPO program will help keep residual values high on Kia vehicles returning to market.
“We’re seeing the values of our used cars increase over the last few years, and we think CPO will help take us to the next level,” El-Achhab said. “In the long term, having better residuals will help us to offer better leases.”