Automakers are braced for a plateau this year in U.S. vehicle sales. Analysts predict this calendar year to be the first since 2014 in which total vehicle sales in America drop below 17 million units.
One of the driving factors is the high price tag associated with buying or leasing a new vehicle. Kelley Blue Book reports that the estimated average transaction price for a light vehicle in the United States was $37,149 in January 2019, an increase of $1,481 (4.2%) from January 2018. That's steep, and a far cry from the under $10,000 new car prices that were available for compacts and subcompacts less than 10 years ago.
The shift away from passenger cars also is ongoing, and these buyers are either moving up to small utility segments or looking at used vehicles instead. While Cox Automotive expects new-car sales to slow in 2019, the good news for the industry is transaction prices remain strong without help from huge incentives.
While consumers love the features a new car offers, budget-minded car shoppers are looking for more choices. Certified pre-owned (CPO) vehicles are becoming an attractive option, evidenced by the record 2.7 million CPO vehicle sales in 2018, according to Cox Automotive economists.
“CPO” certainly has a nicer ring to it than “used.” Consumers really need to put aside the stereotype of the shady used car dealer hawking less-than-desirable vehicles with questionable pasts. Those guys are becoming few and far between as legitimate dealerships expand their used vehicle selection.
CPO vehicles offer all the benefits of a new vehicle, but at a much more affordable price point. They also give dealerships another way to protect their bottom line with economic uncertainty ahead.
“As more and more shoppers become familiar with CPO, many automakers will begin to change their certification process and warranty terms,” Brian Moody, executive editor of Autotrader, tells DriveTime. “In some cases, this will mean longer [a] warranty that benefits consumers -- but in other cases, I predict it will reduce the years or total miles of coverage, especially in luxury vehicles.”
Lexus and Porsche continue to have a very strong CPO program in the luxury space while Honda, Toyota and Jeep are good in the non-luxury space, he says.
“For dealers, this is much more than ‘better than nothing,’” Moody says. “At many dealerships, used cars can result in more profit per car versus a new model. Automaker-backed CPO programs give consumers the assurance they’re looking for when buying a used car and give dealerships the opportunity to impress a new customer and earn their repeat business. [This is] a customer that might not have previously considered that brand -- especially true when it comes to luxury brands.”
For consumers on the hunt, Autotrader has put together handy guides, including Autotrader’s Top 10 Luxury CPO Vehicles for 2019 and Autotrader’s Top 10 Non-Luxury CPO Vehicles for 2019.
The bottom line is, many folks cannot afford the new vehicle they want, but the more affordable CPO option with a good warranty could fit the bill nicely.