The CPO Playbook

By: Jeff Hatch

January 24, 2018

Make the Right Call for Your Certified Pre-Owned Program By Getting Your Entire Team on the Same Page

How do you build a top-tier certified pre-owned marketing program in your independent operation?

You build it from the ground up.

That means you start with the basics – a good partner to help you with your program and train everyone on their role in the process.

When Peyton Manning was quarterback of the Denver Broncos, he would yell “Omaha” as he waited for the snap.

Manning’s voice made the entire stadium tense up in anticipation of what was coming. Most important, his teammates snapped to a state of mental preparedness. When the snap came, they could react without thinking. 

The offense has the advantage over the defense – the offense knows what’s about to happen.

Every player knows his responsibilities and if any of them fail to carry out their assignment the play won’t work. Because they have a plan, the team moves in unison, beginning at the sound of the quarterback’s voice.

That can happen in your store. You can make is so everyone knows what to do when you call the play. 

When your staff knows which part of the playbook is being used and what everybody’s assignments are, the store becomes a team.

Manning was able to get buy-in from his teammates because they all knew the situation. Some plays are designed to get one tough yard and some are after a big gain. 

When everyone knows the situation and the goal of the play, they can carry out their duties with a more dedicated commitment.

So why are you calling the play for a CPO program?

Even if you know the answer to that question it might not be obvious to your employees.

The answer, really, is easy – to keep up with the competition.

The popularity of certified pre-owned is not showing any signs of slowing down. In fact, CPO sales set records for six consecutive years, and when the final numbers are tallied for 2017, they’re expected to break the record again.

Certified pre-owned vehicles are becoming more desirable even though fewer than half of all customers know what CPO entails. 

According to Autotrader’s 2014 CPO research study, 60 percent of car buyers said they’d like to look at a CPO unit while making a used car selection, but only 48 percent actually knew what it means for a vehicle to be certified. 

Those customers most likely don’t know the difference between warranties that come with a vehicle and extended service contracts that are purchased.

That leads to several conclusions about how to maximize the value of a CPO program.

Customers have heard of CPO and feel it is a better option. They also know it’s usually backed by a warranty for some period. 

The statistics tell us that to get the full value of a CPO program dealers should not rely on what customers think they know about certified pre-owned. A full presentation and explanation allows salespeople to create a need for the program.

For example, at Auction Direct USA, one of the nation’s most successful CPO dealerships, salespeople walk customers past an education wall that teaches them about Auction Direct, NIADA and their partnership in the NIADA Certified Pre-Owned program. 

Sales is about giving enough information to allow customers to arrive at the conclusion you want them to. That definition requires your salespeople to have knowledge of what the dealership’s program includes.

With that knowledge your salespeople can provide customers information that allows them to consider the value of the CPO program when weighing your dealership’s vehicles against the competition’s. 

The economy continues to grow, allowing more people to be able to buy a vehicle. That alone is going to create a spike in business.

To capture more than their share of that market, independent dealers must be ready to compete for every deal. 

Analysts agree a majority of used vehicle buyers are interested in at least learning about CPO.

That means if you do not have a CPO program, you are left fighting for the scraps among the minority of customers who don’t know about or are not interested in CPO. And it allows new car franchises and sophisticated independents to dine on the more lucrative segment of customers who are searching for certified pre-owned vehicles. 

You need to let your team know why the CPO play was called. The people who represent your programs to the public need to know it will allow the store to stay competitive and will make marketing to the entire spectrum of the used car business viable. 

Once the people who will make your program a success know why you are setting up a CPO program, the next question to answer is, “Why that one?”

So how do you choose which program to bring into your dealership family?

Factory programs are fantastic – but they’re not an option for independent dealers. OEMs only certify their branded vehicles exclusively through franchise stores.

Even if independents could get in on the factory CPO programs, they have their issues.

Just a few years ago, for example, the margin for CPO vehicles was as much as $2,500 more than for other inventory. Today, according to research by iseecars.com, it’s more in the $750-$1,200 range.

That’s still a good return, but when you add in the average price of reconditioning a used vehicle to factory CPO specifications – including expensive items such as factory floor mats and four matching tires – most of that profit for OEM programs goes to expenses that don’t increase the customer’s satisfaction with the vehicle.

Indeed, factory programs are so stringent with their qualifications that they only certify their brand at a factory store. Which is why some new vehicle franchises have begun to use independent programs to certify their non-factory inventory. 

Without a factory program what are you left with?

There are three main ways to certify a vehicle. OEM programs are one. Independents can also self-certify through a service contract company. 

Or they can find an independent organization willing to certify the dealer’s CPO process.

The best-known national certified pre-owned program for independent dealers in the NIADA Certified Pre-Owned program, sponsored by NIADA – an organization with more than 70 years of history whose mission includes promoting ethics in the used car industry. 

When NIADA wanted to bring its reputation and expertise to the CPO world it looked for a partner with the ability to certify pre-owned vehicles as well as experience and financial wherewithal to back those vehicles with a strong warranty. 

The exhaustive search for a program administrator led to The Amynta Group and its wholly owned subsidiary, Warrantech. 

“The best thing about that is it’s the same administrator General Motors and Mazda use for their extended service contracts and CPO, giving independent dealers’ customers the same service a new vehicle franchise would give,” said Warrantech’s Natalie Suarez, director of NIADA Certified. 

As a result of NIADA’s partnership with The Amynta Group, Suarez said, “we are able to provide a high-level, complete marketing program for independent dealers.” 

NIADA’s program, Suarez said, “is designed to give customers the kind of service in the event of a breakdown that’s usually reserved for new car dealerships, elevating the independent dealer in the customer’s eyes.

“And the more repeat and referral business dealers can generate, the less they spend on conquesting new customers.”

One of the first car salespeople in America was a man named Eddie Rickenbacker, who was best known as America’s most decorated flying ace, earning the Medal of Honor in World War I. He also raced in the Indianapolis 500, helped design a vehicle that bore his name and founded Eastern Airlines. 

Rickenbacker always said he learned while selling cars that you had to find your advantage and move continually towards that advantage, a philosophy that allowed him to survive countless dogfights over France. 

“The one thing I know for a fact is every lot has the same vehicles and the prices are pretty much the same, so if you want to differentiate yourself from the pack, you better provide something no one else does,” longtime auto dealer and advertising pioneer Bob Catterson once said. “If you can’t do something special the only other choice is price, and price prohibits sales, not makes them.”

Calling the NIADA CPO play for your store creates that competitive advantage over other independent dealers – and it allows you to compete with new car franchises for their used vehicle customers.

NIADA adds to that advantage with CPO partners that include some of the biggest names in the industry, such as Carfax, eBay Motors and SiriusXM Radio, adding credibility with customers and making your inventory more visible on search engines. 

Not to mention The Amynta Group, which has earned an A rating on A.M. Best’s rating system as one of the most stable companies in America and an A+ rating with the Better Business Bureau. 

Once all the people in the store know their part in running the play, it is important for everyone to flawlessly execute his or her assignment.

As legendary coach Vince Lombardi once said, “You can’t coach a player who hasn’t been trained.” Before they can execute the plan, your staff must be trained. 

Whoever is responsible for certifying vehicles must understand how important it is to properly communicate the condition of each vehicle to management.

If it costs too much to bring the car up to CPO standards, management needs to know. And the certifying technician needs to know that not certifying a vehicle also has a cost to the dealership. 

The technicians who inspect the vehicles need to be shown the deeper importance of their work to the sales process.

In the CPO process, credibility is extremely important. Customers must believe in the concept of the inspection process. If customers do not believe there has been an actual technician touching the car, they will doubt the value of the warranty and that will negate any certification advantage. 

Sales must use the NIADA certification checklist in the sales process. 

The sales department should leave a copy of the checklist in the glove compartment of the certified vehicle. The salesperson will pull the checklist out during the walkaround or demo ride and go over how the inspection affects the customer’s ownership experience. 

The tech’s role is to check every box individually to give validity to the checklist. He or she can help sales even more by adding extra details, such as writing the actual numbers for tire tread and brake pad width.  

When the behind-the-scenes people who help sell vehicles realize how much the little things they do help the profitability of the store, their work ethic is increased.

Salespeople have the job of being enthusiastic about the program.

W. Clement Stone once said, “A positive attitude increases the likelihood of a good outcome.” That means being committed to the belief that what the store is providing the customer has value helps accomplish the task – in this case, the task is maximizing profit and sales volume.

How did Peyton Manning always perform at a high level and get his teams to perform with him when he called his plays?

The team started from the ground up, making sure everyone knew the play, their role in the play and the goal the play was meant to accomplish.

If everyone does their job, from the inspection process to sales and finance, having a great CPO option allows independent dealers not only to keep up with the local competition but to be competitive with dealers across the country via the Internet.

When you have the advantage, you become a difficult team to compete against. 

ABOUT THE AUTHOR: William Carr is a longtime auto industry veteran in sales, management and training and a regional training manager for Warrantech Automotive, Inc. administrator of the NIADA Certified Pre-Owned program. For more information on the NIADA CPO program, visit www.niadacertified.com/dealers

This article originally appeared in the January 2018 edition of Used Car Dealer magazine and can be found online at: http://bit.ly/2DyhBHN 

Filed Under: Carr, contract, CPO, dealer, dealership, extended, independent, NIADA, service, team, William

Advantage: Independent

By: Jeff Hatch

July 09, 2016

With NIADA CPO and the Internet Creating a Level Playing Field, Independent Dealers’ Low Overhead Gives Them an Edge in the Used Car Market

Last year was one of the best retail sales years in car business history. And looking forward, sales in 2016 and beyond should benefit from the wave of full employment, low interest rates and low fuel prices to continue knocking down strong years. So where does the independent operator fit into this sales boom? How do owners in this segment of the market maximize their dealership value? 

As new car franchises hit record numbers, the trend creates opportunities for independent sales organizations. But the question is: How can you capitalize on those opportunities when they are presented?

The Internet allows independent dealers, no matter how small, to compete on an even playing field with mega-franchises. 

It is important to know that new car franchises look for one-to-one new-to-used sales. They’re currently running at about .02-to-one used-to-new, according to NADA data. 

With used car prices at an all-time high, according to Edmunds.com, and new car dealers renewing their efforts to conquest used car customers, independent operators needs to be prepared for the future — not only to gain market share, but to keep what they have.  

On the Internet, the small operation is the same size as the largest dealer. If an independent operator takes advantage of his opportunities while diminishing his competition’s added value, the independent dealership can compete very well with new vehicle showrooms. 

When looking at how to best capture a percentage of sales generated from the big-box retailers, it is always wise to examine the advantages and disadvantages of your position versus local new car dealerships. 

The biggest and most obvious difference is the facility. New car franchises are required by their OEMs to meet certain specifications in order to remain a franchisee. 

Those cathedrals to car sales look great and attract customers, but in the final analysis add nothing to the value of the vehicle purchased. In addition to that zero value, the future and present state of the auto industry relies heavily on Internet sales, which makes these structures almost obsolete. 

The costs of building and maintaining the facilities at most franchise lots are astronomical. And because the new car business is so competitive, the franchise stores’ profits from their new vehicle departments are minimal. That means the costs must be paid for through used car sales, the service department and increasingly higher profits in service contracts. 

The overhead advantage works in favor of the independent used car dealer.

This is the best news for independent dealers. A small lot can be just as spectacular as the largest franchise on the web. 

If the independent dealer can get his message out to customers, he has a chance to take one or two new vehicle customers and some used customers from a larger dealership. 

One very important statistic to keep in mind is that a new car purchaser will consider a used vehicle instead 59 percent of the time – if the used vehicle is certified. 

That creates an opportunity for a used car dealer to capture new car business. 

It means if the new car market consists of 1,000 people per month in your area, 590 of them would look at a good certified pre-owned vehicle. Attracting 1 percent of those customers through the Internet translates to six vehicle sales a month. 

The great change that the Internet has brought is a larger marketplace and a greater opportunity for used vehicle operations to cash in.

Unfortunately for new car franchises, the Internet really serves to drive profits down in the new vehicle world because of the competitive advantage it gives the customer. 

A new vehicle at one lot is no different than the one down the street. Customers can locate and negotiate its purchase at multiple lots, pitting one franchise dealer against the other and putting the customer in a power position. 

Not so with used vehicles. They are all different because of miles and vehicle condition, which makes location a much more important factor in the shopping experience. 

That is why eBay retailers like NIADA president Frank Fuzy of Century Motors of South Florida can get customers from all over the country. The shopping those customers do is powered by the way a vehicle looks and the way it is described on the Internet. 

If a vehicle is clean and in front-row-ready condition — featured with an appealing background, shown from all angles inside and out, badged with vehicle certification, and presented with a limited warranty and an explanation of the meaning of CPO — an independent with the smallest lot will be able to compete for a customer’s attention against the largest retailers.

Many small operations don’t put the effort into the photos they post on the Internet. They need to realize it is the equivalent of the showroom of the ’60s and ’70s and should be thought of as a display case. 

Large dealer groups put a huge emphasis on their web display in their marketing efforts, making sure that the vehicles and the ambience of the background appeals to visiting customers. 

Typically, social media is where customers first see a CPO program’s commitment to quality. If customers don’t feel the program meets a high standard, they will not feel safe doing business with that dealership.

Participating in CPO programs offered by organizations like NIADA announces your commitment to integrity and allows your website to display certified units, which shows your commitment to the customer and the industry. 

But simply being a member of such a program is not enough. You need to broadcast what that membership means so customers become informed enough to tell the difference between an NIADA member and other car lots. 

Another thing to keep in mind is new vehicle dealerships really have little advantage in inventory. They might carry more units than a smaller store, but independents should be able to be more responsive to the customer’s needs. 

Everybody pays the same price for automobiles. Whether it’s purchased at the auction, traded in for a new vehicle or bought wholesale, a car is worth what it’s worth. 

The real advantage for a dealer is the ability to have vehicles certified by a national source. Usually, that means a factory certification program administered by a manufacturer that has invested millions of dollars into creating a certified market. In doing so, it has created a niche in the customer base for people who have a prejudice toward buying a vehicle that is certified and will not look at anything else. 

Certified vehicles now make up 65 percent of the used vehicles sold by franchise dealers. That means any car lot that does not have some certification program is only going to be a viable alternative to 35 percent of the used vehicle market. 

So how do you certify your vehicles? 

There are really three ways — through the factory, a dealer-branded program or a third-party program. 

Factory dealerships are strongly encouraged to certify every vehicle through their OEM’s programs. While those are very good certifications, there is no proof customers put any more credibility in those programs than they assign to third-party or dealer-branded programs. 

Customers know they want certified even though they may not be fully aware of what that means. What customers are really looking for is tangible evidence that the certification is meaningful and that there is a credible program behind it. 

Factories have spent millions making customers aware of certification and the value of a certified vehicle. They have even tried to tie certifications to new vehicle franchises. 

But that can work to an independent dealer’s advantage.

Factory programs are very specific as to what is certifiable, making their certified vehicles cost more in reconditioning than the average trade-in. And OEM programs get into distinguishing between vehicles with or without matching tires or if they have factory-installed floor mats, when customers really just care about the vehicles being mechanically sound.

A customer might not be buying a certified vehicle because the program has a limited warranty attached, but a limited warranty offers proof, from the customer’s point of view, that the certified vehicle should command a higher price. 

Customers feel if the entity issuing the certification is also backing it with a limited warranty, that entity must believe in the certification process.

To be a credible certification program, there has to be reputable company paying the bills for customer repairs. A strong financial backer, along with coverage that protects customers from the fear of buying someone else’s problem, offers the peace of mind customers are looking for when they decide to purchase a certified vehicle.

Factory stores are forced or strongly encouraged to go with factory-backed certification programs. But recently, more and more progressive dealers like Huntington Honda in Long Island, N.Y., have elected to venture off with their own dealer-branded programs. 

Groups like this have seen how the high costs of factory programs have limited their profits without providing a significant benefit over other nationally recognized programs. 

The best known and most respected of the nationally recognized certification programs outside of the OEM brands is the NIADA Certified Pre-Owned Program. 

Frank Fuzy credits the NIADA CPO program for giving him the credibility that has helped him sell vehicles on eBay. 

Frank is the king of eBay sales – he sells more cars on eBay using the program than any other dealership. At the 2015 NIADA Convention and Expo, Fuzy said he hopes more stores don’t start using the NIADA CPO program because he competes nationally on the Internet and believes the program gives him an advantage he doesn’t want to give up. 

Teaming with NIADA removes the biggest advantage a new car franchise has. Statistics show that 65 percent of all people buy a car where they get it repaired. So when your customers are using your warranty, you can direct them to the service department where you want them to have their repairs completed. 

The NIADA CPO Program allows independents to bring customers into their service area, creating another profit center as the warranty pays for retail parts and labor. 

The greatest equalizer in the history of the car business is the Internet. When automobiles are presented on the Internet with NIADA CPO certification and a limited warranty, they stand out from the fog and clutter of vehicles advertised on the social media outlets. 

The dealer or independent operator who knows how to take advantage of the social media setting will be able to excel in the new environment we find ourselves in. 

For example, when Fuzy advertises on the Internet that he certifies his vehicles with the NIADA CPO program, he gains an advantage in several ways. 

First, his organization is saying it has an agreement with a national organization that was founded on ethical business practices. Plus the program is backed by Warrantech, a wholly owned subsidiary of AmTrust Financial, which is A+ rated and accredited by the Better Business Bureau. 

That gives Fuzy’s customers peace of mind and an affordable program that provides rental vehicle benefits, towing and trip interruption coverage equal to or better than most megastores.

Using a program like NIADA’s allows an independent broker to take advantage of the cost of maintaining the lot he has as opposed to a new car franchise’s Taj Mahal.

Simultaneously, it allows for more gross profit and faster turn of inventory while alleviating the risk that a customer assumes. 

Risk is what drives the used vehicle industry. The more risk a customer is willing to accept, the less the vehicle will cost. A 12-year-old vehicle with 100,000 miles is much less expensive to purchase than a new vehicle because of the risk in ownership. 

That risk is mostly due to repair costs, which can be offset with a CPO program like the one offered by NIADA. 

Many experts foresee a golden age in vehicle sales over the next 10 years, with predictions that average annual new vehicle sales will reach 17.5 million. Sales of that volume would make it the best sales period in the history of the auto industry. 

Independent used vehicle operations that take the time to position themselves at the top of the pyramid and are prepared to take a portion of new car franchises’ business will find this a very profitable period. 

By partnering with the right organizations and following through with what you promise, you can use the next 10 years to establish your dealership as a dominant force in the market.

ABOUT THE AUTHOR: William Carr is a regional training manager for Warrantech Automotive, Inc., and a longtime auto industry veteran in sales, management and training. For more information on the NIADA CPO program, visit www.niadacertified.com/dealers. 

This article originally appeared in the July 2016 edition of Used Car Dealer magazine and can be found online at: http://www.usedcardealermagazine.com/i/698409-jul-2016/30 

Filed Under: AmTrust, automotive, certified, CPO, dealers, independent, NIADA, pre-owned, Warrantech

NIADA Certified 2.0

By: Jeff Hatch

August 23, 2014

The following article appeared in the 2014 August issue of Independent Dealer and can be found in its entirety at: http://bit.ly/2mpQFBi 

Reintroducing the national CPO program that was built by dealers, for dealers
 
Certified Pre-Owned has become the industry buzzword lately. The CPO model, created by the franchise dealers and OEMs, has set a new standard for used car sales and redefined the way customers shop for cars. In 2013, sales of manufacturer-certified pre-owned vehicles totaled a record 2.1 million units. 
 
National, high-dollar marketing campaigns have educated the car-buying public about the benefits of buying a used car that has been certified, so much that it has now come to be an expected part of the process. Much like a missing CarFax, if a car has not been certified then the customer starts to wonder what the dealer is hiding. 
 
For the most part, independent dealers have been left out of the CPO game. Good dealers, of course, have always inspected their cars and done their best to represent the condition of the vehicle as accurately as possible and some will even stand behind their inventory by offering some type of limited warranty to ease the mind of a wary customer. Even so, customers can still be a little skittish of a dealer-endorsed certified car and many will end up paying more at a franchise dealer’s used car lot to get the label they are after. 
 
That all changes, however, with the re-introduction of the NIADA Certified Pre-Owned program. NIADA Certified has been around for a few years, but recently underwent some extended enhancements and tweaks that have made it an attractive option to customers and a powerful profit-center for dealers.
 
“The NIADA Certified program allows independents to play on an even field with the new car dealers,” said NIADA Senior Vice President Frank Fuzy. “It’s 50 percent easier to sell a car that’s been certified and has a warranty, and we know that today every sale counts!”
 
The NIADA Certified program is backed by Warrantech, an The Amynta Group. NIADA approached the company earlier this year to retool the program and develop something that made sense for independents. Warrantech, who has worked with several other national partners to build similar programs, compiled all the data they could from dealers, consumers and associations to create a program that they say was “built for dealers by dealers.”
 
“We basically asked ‘what do you want’ and then we listened to what everyone said,” National Business Development Manager Natalie Suarez said about the changes to the program. Since it kicked off in January the number of dealers using the program has quadrupled. Suarez says dealers understanding exactly what CPO is, and can be, is part of the reason. 
 
“Customers want peace of mind. They are looking for cars that are advertised and branded as something they can trust and have been thoroughly checked out. NIADA Certified gives them a guarantee,” Suarez said. 
 
Some of the biggest changes to the new program include:
 
Three very flexible CPO Limited Warranty programs which include Basic, Standard and Enhanced options
CPO coverages for vehicles up to 14 years in age and with up to 150,000 miles
100 percent credit of the CPO Limited Warranty investment if the customer upgrades to an NIADA VSC contract
No surcharges
Enhanced NIADA CPO marketing resources, including large window banners, lot flags, etc.
A more seamless, less time-consuming CPO contract form processing procedure
eBay Motors promotion and inventory listing support/endorsement
ASE certified technician vehicle inspection requirement enhancing validity to the customer
 
NIADA Certified is exclusive to NIADA members (FIADA members of course gain NIADA membership automatically). Dealers choose which vehicles they want to certify, as well as the terms (3 months/3,000 miles, 6 months/6,000 miles or 12 months/12,000 miles) of the warranties. Current model year plus 14 year units with zero to 150,000 miles are eligible. There is a cost to the dealer to certify, however, if the customer upgrades to a service contract the fee is waived. Even if they don’t, however, the value added with the certified status can cover the cost. 
 
“There is a small cost to it in the beginning, but it gives leverage to the dealer to ask for more money in the price because of the value it has being certified. Consumers will and do pay more for certified,” Suarez said. 
 
“If you ask them, about one in four customers will upgrade to the service warranty, so the program really pays for itself,” Fuzy said. His dealership has seen so much success by utilizing NIADA Certified that he jokingly says he doesn’t want other dealers to know about it. 
 
“Don’t do it,” Fuzy teases to the other dealers, “because your sales will increase and you’ll be competing with me.”
 
There is more detailed information about NIADA Certified at the official website that has been created for it at www.niadacertified.com. To find out more, you can also call the FIADA office at (800) 237-0448 or go to the website at www.fiada.com

Filed Under: certified, CPO, Dealer, FIADA, Independent, NIADA, pre-owned, Warrantech