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Many dealers understand the time and money spent to bring used vehicles up to Certified Pre-Owned (CPO) program standards is a worthwhile long-term investment. However, setting up an efficient process for finding, refurbishing, and certifying automobiles for a CPO program can be complicated.
This article discusses five strategies those dealers might consider for enhancing this process and driving more revenue.
Improving the CPO Program: 5 Strategies
1. Improve the Reconditioning Process
An effective reconditioning procedure is critical for optimizing CPO program profitability. To do this, dealers must monitor vehicle progress, create alerts for each step in the reconditioning process, and make staff accountable for deadlines.
A CPO program has many advantages, one of which is that the vehicles sell quickly and generate higher profits. However, dealers cannot sell cars that are still in the shop, and every day a vehicle is not for sale, dealers lose gross. In many cases, dealers are better off paying technicians overtime during service backlogs to turn CPO vehicles quickly. The opportunity costs of unsold cars can often outweigh staffing ones.
2. Practice Advising, Not Selling
Many buyers initially looking for a new car will ultimately conclude that a CPO vehicle is a more attractive choice. This decision is typically based on finances and not reflective of anything the sales team does (or does not do).
When a customer comes to this conclusion, the best sales reps change their role. Instead of making a sales pitch to the customer, dealers should advise them on making the best possible decision. Pushing a new car that a customer doesn’t want often results in that customer leaving and buying a CPO from your competitor.
3. Remember to Promote the Program
Dealers should view CPO program costs as an investment. Ideally, they have created an efficient process to buy reasonably-priced vehicles, move them through reconditioning quickly, and pay the necessary manufacturer fees.
The dealer now owns a solid CPO inventory, and to maximize ROI, they must execute an effective marketing plan. There is demand for the dealer’s vehicles somewhere. Still, dealers can only identify those potential buyers (and those buyers who know the car is available) if they communicate with those buyers effectively.
As such, dealers should design a marketing strategy leveraging all available communication channels (digital and physical) to reach as many potential buyers as possible.
4. Avoid Overusing Auctions
Dealers must minimize up-front purchase costs to optimize CPO gross margins, typically avoiding auctions. Granted, they may occasionally find a great deal at an auction, but that is more the exception than the rule. The dealership should employ an experienced used car manager who can recognize good deals and pass on bad ones.
The best source of CPO program vehicles is often vehicles the dealer has already sold. To find vehicles that meet the manufacturer’s requirements, dealers should conduct routine database searches using an equity mining tool, which helps to identify previous clients eligible to trade in their cars.
Lastly, dealers should also consider a vehicle exchange program in your service lane. Establishing a method for approaching and making offers to service clients will result in a consistent flow of vehicles for the CPO program.
5. Leverage Cross-Selling Opportunities
A CPO program creates revenue opportunities for other areas of the business, particularly the service lane and repurchasing.
Every CPO purchaser is a potential service customer. While dealers should fix and refurbish their used vehicles properly and ensure all are top-quality, older cars will still likely require more service than newer ones. Similarly, used cars typically last less time than new vehicles, meaning CPO purchasers are more likely to buy a second car sooner.
In both cases, CPO vehicles can be terrific sources of supplemental income, making ongoing communication with these buyers critical.
Maximizing CPO Program Profits Requires the Best Technology
Establishing any dealership as a reliable source for CPO vehicles is highly attractive to potential buyers. However, revisiting (and investing further in) your CPO program is vital to maximizing revenue.
Dealers can improve this process through the abovementioned strategies and investing in the right digital solutions to help you find the best used vehicles for a CPO inventory.
Contact us today and discover how Affinitiv’s Trade-In Valet can help you build an enhanced CPO program that creates a more valuable used car inventory.
All | September 19, 2023