New car shortages lead to a rebound in certified used car sales

Demand for used cars has been high this year, and the floods caused by Hurricane Ida this month will only allow more customers to snap up cars on Honda Planet in Union, New Jersey.
Faced with increasing demand, Honda is not the only one. At times like this, general manager Bill Feinstein said that he and other dealer leaders he knows sometimes choose not to certify used cars, otherwise these cars will be eligible for the used car program certified by the car manufacturer. Dealers, especially in the northeastern region hit by the Ada flood, only need to prepare to sell cars and trucks to meet demand.
“There are [there] some [dealers] say,’Hey, you know, it takes three more hours for my store to become a CPO, and I don’t have enough cars,’” he said. “I think you can make these decisions.”
Although the demand for Feinstein and others has increased in recent weeks due to storms, as the inventory of new cars has decreased, this has been an eternal theme for retailers across the country this year, which has increased the number of second-hand Car inventory and quickly get the pressure of these cars. Vehicles ready for sale. However, throughout the country, crude palm oil sales have been rising anyway, and rebounded rapidly after a decline in 2020.
According to data from the Automotive News Research and Data Center, last year, due to the decline in demand at the beginning of the coronavirus pandemic, the sales of certified cars fell by 7.2% to 2,611,634 units. This is the first decline since 2009 and the lowest annual sales since 2015. This year, CPO sales through August increased by 12% compared to the first eight months of 2020.
JD Power data shows that this year’s certification rate is only a few percentage points lower than before the pandemic and subsequent chip shortages.
For mainstream brands, approximately 72% of used cars of the same brand in the dealer batch are eligible for certification. Ben Bartosch, CPO solutions manager at JD Power, said that in the eligible inventory, dealers certified 38% of vehicles in the second quarter of this year. In the past five quarters, the certification rate has been hovering between 36% and 39%.
The ratio in the first quarter of 2019 was 41% and remained above 40% until the fourth quarter of that year. Bartosch said that although dealer certification rates are low, CPO sales are rising due to the increase in certifiable inventory.
By August of this year, sales of certified used cars were strong. The following are selected data points from the Automotive News Research and Data Center.
CPO sales by August 2021: 1,935,384 CPO sales by August 2020: 1,734,154 year-on-year change: 12% increase
“When you look at things from a percentage point of view, it shows that [dealers] always have inventory to be certified, [but] they just didn’t certify it at a very high rate,” Bartosch said. “Now is the tricky time, because consumers may see these newer vehicles enter the second-hand market, and they will think,’Well, the vehicle is brand new. It may not require certification.’”
He said that despite this, many car buyers still see the value of certification, which is reflected in the vehicle’s turning rate. According to JD Power, the lead time for mainstream brand CPO vehicles is 35 days, compared to 55 days for non-certified vehicles. For premium vehicles, the CPO is 41 days, while non-certification is 66 days.
In this tight market, the dealer’s decision on whether to conduct certification is sometimes boiled down to whether the vehicle can be turned off in time.
Feinstein said that when the required parts are out of stock and unlikely to arrive in a few days or even weeks, he has given up certification.
“If I’m lucky, am I going to park the car for a week to certify it, until the backordered parts are released? Or am I just going on and not certifying the car?” he said.
By August, the industry’s leading CPO sales automakers performed solidly this year. In the first eight months of 2021, Toyota Motor North America’s certified sales increased 21% to 343,470 vehicles. GM’s CPO sales increased by 11% to 248,301 units. Honda’s sales in the US rose 15% to 222,598 units. Stellantis rose 4.5% to 208,435. Ford Motor Company also increased by 5.1% to 151,193 vehicles.
Toyota CPO sales operations manager Ron Cooney (Ron Cooney) said that for Toyota, this year’s certified vehicles will turn faster than before the pandemic.
Cooney said that Toyota’s certified inventory is turned around 15.5 times a year, and it can be supplied for approximately 20 days. Before the pandemic and chip shortages, when sales were strong, the typical turnover rate was 60 days of supply.
“At any given moment today, my ground inventory actually dropped slightly compared to last year and the end of last year, but my turnover rate is really very high,” he said.
“This will definitely transfer those marginal buyers to the CPO market.” Keira Reynolds, Economic and Industry Insight Manager, Cox Motors, on the shortage of new cars and high prices
Cooney said this has resulted in a “substantial spike” in sales of certified and uncertified second-hand Toyota vehicles. Toyota’s CPO sales this year set a record for several months.
Kayla Reynolds, manager of economics and industry insights at Cox Automotive, said that Cox data shows that the shortage of new cars—especially the resulting high price tags for cars and trucks—is boosting CPO sales.
According to Cox’s Kelly Blue Book, the average transaction price of a new car in July was US$42,736, an increase of 8% from July 2020.
“This will definitely move those marginal buyers to the CPO market,” Reynolds said. “So we do believe that as long as new car prices and new car inventories continue to be affected, there will still be some demand in the crude palm oil market.”
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Post time: Nov-10-2021