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CNW Marketing Research in Bandon, Oregon, reports that 816,604 certified pre-owned (CPO) cars were sold in 2001. That number is expected to reach 2 million by 2005.
Why the CPO push? Well, leased cars are returned two to three years later in prime condition because the lessee must pay for damage and any previously-not-agreed-upon miles. But for dealers, these cars sell for a lower profit margin. So, within the last six years, auto leaders such as BMW and Toyota’s Lexus have helped revolutionize the used-car market by creating a 100+ point inspection, repair, and warranty process.
“Certified pre-owned vehicles are designed to protect the auto brand,” explains Bryan Dorfler, senior director, retail programs for the marketing information firm J.D. Power and Associates in Westlake Village, California. “The consumer benefits by getting a nicer used car that may have been out of his or her price range.
CPO’s must undergo a rigorous inspection process of checking and fixing everything from engines and electrical systems to dents, dings, and windshield wipers. Additional warranty coverage, averaging from 60,000 to 100,000 miles, is also provided.
“You can get a slightly used 2- to 3- year-old car that the manufacturer has restored to ‘like-new’ status for 60% off the original purchase price,” explains Clarke Wood, vice president of marketing for AutoTrader.com, an Internet car-shopper classifieds site. Bill Bates, the marketing manager for pre-owned cars at BMW of North America in Woodcliff Lake, New Jersey, concurs. “Leased cars come back in such good condition and then the dealer has the responsibility to make that car indistinguishable from a new car.” At BMW, 80% of its leased vehicles become CPOs. CPO prices on the BMW 540i can run as low as $36,995 down from the original $51,200 sticker price.
At Lexus, CPO car shoppers are courted as “move-up buyers” says Marv Ingram, national/CPO fleet manager, Lexus Sales Division. “We expect certified pre-owned buyers to come back and purchase a new Lexus when they’re ready, but this way we bring them into the franchise earlier.” In fact, 56% of Lexus shoppers are expected to become “move-up” buyers. Its RX 300 model hovers at the CPO price of $29,000 — sliced from the retail price of $39,000.
Ford Motor Company’s Jaguar automatically eliminates cars with frame damage from its CPO pool. In addition, cars must have less than $60,000 miles. Check out the Jag S Type 4.0 for $36,300 vs. $49,355 for the MSRP.
Honda’s Acura line sells its NSX model for a CPO price of about $61,500 — down from its $84,000 price tag. The Acura 3.5 RL has a CPO price that runs as low as $26,990 — down from the $44,000 retail price.
The Mercedes-Benz E320 may be snagged for about $29,995 as a CPO. The new model costs $46,950.
New to the CPO circle is Ford’s Lincoln/Mercury. Auto seekers can pay $25,000 for a CPO Lincoln Town Car Signature Series, rather than the $42,000 sticker price.
What to Look for in a CPO
Warranties/Mileage: “The warranty is most important because you won’t have to worry about maintenance,” explains
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