• by Karl Greenberg , November 6, 2014

While the numbers are still comparatively small, certified pre-owned (CPO) cars and trucks are about 18% of new car and truck volume and under 10% of total pre-owned volume, but it is growing fast, especially with waves of vehicles coming off lease now. This year, CPO volume is heading toward 2.3 million versus 1.8 million last year. 

And that’s good for automakers and dealers, per data from AutoTrader.com's annual CPO study, released on Thursday. The study suggests that certified pre-owned shoppers turn into happy owners, and then into buyers of new cars within the same brand family: 77% of CPO owners are likely to buy the same brand again, whether new or CPO, and 49% of owners are likely to buy new. Eighty-five percent of CPO owners are likely to buy from the same dealership. 

Also, awareness of CPO is at an all-time high among auto shoppers, with 75% of new car shoppers and 45% of used car shoppers familiar with CPO. Last year, per the firm, 63% of new-car shoppers knew about CPO. The firm says that this year 44% of new car shoppers and 30% of used car shoppers (versus 22% and 18% last year, respectively) are considering CPO for the first time.

Shoppers are also more inclined to consider CPO when they understand what CPO actually means: that the automaker sets strict vehicle-condition standards for gauging the viability of an off-lease car for CPO business. But three quarters of new-car shoppers and 66% of used car shoppers think CPO standards are set by the dealer. 

That makes a difference. The firm found that among new shoppers, 59% said that they would consider CPO, but when they found out more about the standards underlying the CPO designation that number went up to 84%. For used car shoppers, 50% consideration rose to 69%. Also, 84% of new-car shoppers are willing to pay more for a CPO vehicle, up 22 points since 2013. 

Millennials are likely to buy a new car in that brand as their next car: Fifty-four percent of Millennials versus 43% of those age 35 or over. 

Michelle Krebs, senior analyst at AutoTrader.com, tells Marketing Daily that CPO is a key strategy for bringing Millennials to a brand. "Here's a person who can't get into a new model, but can get the CPO option, and they are likely to move up to new after that." 

And she says that while on the surface the dealer gets the benefit of a CPO sale, "the study shows that there's tremendous benefit to manufacturer. These buyers tend to be loyal to that brand, so it's building new car sales for the future. It's a feeder system." 

What's the way to move consumers from CPO into new cars? The products themselves. "People buy CPO cars because they want that car first and then enjoy the foundation of service and warranty CPO offers. It's about the product. The deep-dive details of CPO aren't even that well known."

The study involved 450 interviews among shoppers, split evenly among new, used and CPO considerers who were planning to purchase a vehicle in the next six months.