Certified Pre-Owned Programs Gain in Popularity

Washington DC July 7, 2006; The AIADA newsletter reported that Certified pre-owned (CPO) programs have become so popular among consumers that they accounted for 41 percent of all used-car sales in 2005, according to a recent study by J.D. Power & Associates.

CPO programs were created by auto manufacturers to resell vehicles coming off lease. The manufacturer cleans and inspects each car, places a warranty comparable to one found on a new vehicle, and sells it at a premium -- although still for much less than the cost of a new car.

According to BusinessWeek Online, the biggest advantage of a CPO program for a dealer and a manufacturer is that CPO vehicles can only be sold, not leased, so they do not drag down an inventory.

In addition to managing their vehicle inventories, manufacturers often view CPO programs as a way to increase their customer base.

"CPO is a great way for people to get into ownership if they're at a stage in their life when they can't buy a new car," said Bill Bates BMW USA's manager of CPO vehicle sales. "We think these customers are high potential, [and we want] to keep them in the brand because they're young and they're upwardly mobile." When consumers are shopping for a used vehicle, CPO programs also help allay fears of future mechanical problems.

"Retail buyers are willing to pay a premium," says Tom Webb, chief economist for Atlanta-based Manheim Auctions, "but, at the same time, you're getting a much better car. It's a higher quality vehicle, not just additional peace of mind."