Benefits of a CPO Lease

According to the NADA Used Car Guide, more than 3 million vehicles will reach the end of their leases in 2016. This represents a 35 percent jump in off-lease volume. With such a huge increase in reliable, late-model, pre-owned vehicles, the industry has already seen used vehicle prices drop to become more competitive. Now, dealers are more concerned with maintaining front-end profitability while still being competitive.

So, how can dealers accomplish their profitability goals while maintaining a competitive edge? The answer lies in certified pre-owned programs. Today’s consumers are much more concerned with getting more value for their money. That’s part of the reason why pre-owned vehicles have been top sellers in recent years. Dealers can further utilize this trend to sell higher-priced pre-owned vehicles with a CPO program.

According to proprietary research from EFG Companies, 32 percent of consumers would look to purchase a vehicle in the 61 – 150k mile range, of which, 62 percent would actively seek for that vehicle to be covered by a CPO program.

And, of course, consumers understand that CPO vehicles come with a higher price tag than non-CPO vehicles because of their expectations. Clearly CPO programs fit a niche that consumers want, and for which they are willing to pay a higher premium.

Off-lease vehicles fit the CPO niche perfectly because the dealership often has greater knowledge and control of vehicle maintenance, making it easier and more cost-effective to perform the required inspections for CPO qualification.

However, the buck doesn’t have to stop with simply selling CPO vehicles. Have you considered the value of leasing CPO vehicles? You heard me right. Consider the value of taking those off-lease vehicles, certifying them, and putting them into another lease.

We all know the consumer benefits of leasing, but what about the dealer benefits? A recent Cox Automotive Analysis of Experian data demonstrates:

• Consumer loyalty is higher for CPO, than non-certified pre-owned vehicles.
• Consumer loyalty is higher for leasing than purchasing.

Put the two together and you’ve got a winning combination.

Just like with new vehicles, leasing CPO vehicles provides dealers with:

• shorter sales cycles;
• a constant communication strategy to keep consumers engaged;
• higher service drive retention; and,
• greater customer loyalty with ongoing purchases/leases.

In addition, because CPO programs are backed by limited vehicle protection plans, they make it easier for F&I managers to overcome objections on upselling F&I products for a vehicle the consumer doesn’t own. And, lenders are more likely to fund a lease on a CPO vehicle than on a traditional pre-owned vehicle.

So which makes more sense to you? Having the ability to increase both front and back-end profit with a certified pre-owned program, while increasing the finance options available to your customers? Or, sticking with the traditional three-pronged approach to vehicle sales with selling or leasing new vehicles, and selling pre-owned vehicles, requiring heavier price discounts to remain competitive in today’s market?

With almost 40 years of experience helping dealers drive profitability, EFG Companies knows how to position dealers with market-differentiating programs that increase bottom-line profitability, customer loyalty, and service drive retention. Contact us today to learn more.