CDK's purchase of Auto/Mate may create a major disruption in the dealer management system (DMS) industry. Here is our take. DOWNLOAD
There is a huge ‘certification’ gap in our industry that represents a potential loss of billions of dollars by used car dealers.
Consider: over 35 million used cars were sold last year, but fewer than 2 million of them were certified by OEM-sponsored programs. This is a stunning fact given that consumers are willing to pay, on average, a 12-27% premium on a certified vehicle.
Let’s add the numbers up: the average cost of a used vehicle at a franchised dealership is $11,026 and at an independent dealer it is $9,562. So, dealers are potentially missing out on an average of $1,323 – $2,977 and $1,147 – $2,582 per uncertified vehicle respectively. Let’s take the average of the above numbers, $2,007, and begin to comprehend the scope: if just one million more vehicles were sold as certified by dealers, we are looking at additional revenue of $2 billion!
Add to that the fact that certified vehicles turn 20 days faster than their uncertified counterparts – meaning more sales volume … and the dollars lost by dealers for lack of certification really add up.
And it does not stop there. The fact is that the majority of used car buyers (65%) WANT to buy certified vehicles! And, they cite peace of mind as a top priority when buying and believe the quality is higher if the vehicle is certified.
So, you have a population of shoppers who want certified vehicles and are willing to pay more for them — and a population of dealers that are able to only certify about 6% (and far fewer if you are an independent dealer) of their inventory, on average.
Oh, and one more thing: the used vehicle market has never been hotter…
This is a problem in search of a solution.
The industry needs expanded products and services to widen-out the CPO phenomenon that began 20-years ago. By limiting the certification of vehicles to manufacturer sponsored programs, the number of vehicles eligible for certification will necessarily be limited. Consider that the average age of vehicles on the road has never been higher than it is today. As vehicles age, they increasingly fall out of the OEM-sponsored certification guidelines. And as a recent Automotive Remarketing article noted, “Arguably the most visible and pressing hurdle [that CPO faces] is finding enough cars to certify.”
Programs like SureSale are being launched to meet this market need. In the case of SureSale, eligibility requirements have been expanded to 15 years and 150,000 miles, all with a third-party independent inspection and extended service plans.
Consumers want it, and dealers profit from it. That means that closing the multi-billion dollar certification gap is a win-win solution and should be on the agenda for 2012.
To learn more about SureSale Certified go to http://www.suresalecertified.com
To stay current on the CPO industry go to http://www.jeffreyschwartz.com
* CNW: “franchise dealers are estimated to fetch $11,026 per used vehicle, on average, with independents expected to average $9,562” http://www.autoremarketing.com/content/trends/cnw-used-inventory-still-record-lows-big-3-used-supply-improves?page=2#ixzz1fzXhPUrq