5 Ways to Keep the Business of CPO Customers

Ryan Williams

You Got their CPO Business, Now Keep Them: Here’s 5 Ways!

You want to retain every buyer to whom you sell a certified pre-owned (CPO) vehicle to this year – and not just for the months remaining on their factory warranty. If you can keep them returning to your service department for the first year, or longer, you are much more likely to retain them as a customer for life.

CPO sales will be a boon for dealers this year – bring those buyers back to your service department for routine maintenance, and the habit that’ll develop will convert to long-term retention and increased service sales.

“Certified pre-owned vehicles are some of the most highly coveted used cars on the market,” rightly notes an Edmunds.com advice blog. “They’ve been thoroughly inspected, are only a few years old, have low miles and are equipped with a more comprehensive warranty coverage.”

With CPO vehicle sales an increasing opportunity for new car dealers, operators should plan to retain that new business beyond the immediate sale. There needs to be true intent by your dealership to accomplish this.

Beyond the Bottom Line

General managers who get their used car managers thinking and planning more about their dealership than their bottom line will want to not only improve turn and price to market quickly, but also keep those buyers in the dealership family, as service customers and eventually re-purchasers of new or used vehicles down the line.

Given many OEMs are now mandating their dealers inventory off-lease vehicles, every franchised dealer these days is a CPO dealer. The differentiator will be whether your dealership manages the opportunity well or not. CPO shoppers may wrongly assume the pre-owned vehicles they are considering are covered by original factory warranties.

Sales associates must be clear about CPO warranty coverage limitations.  They would be wise also to recommend the buyer evaluate one of the service contracts the dealership offers, a way to extend their need for investment protection.

Another opportunity to encourage CPO buyers to use the dealership’s service facilities over the aftermarket is by providing incentives for them to do so.

One of the best offers is to provide them a free or discount priced preventive maintenance program. Called PPMs for prepaid maintenance, they include standard vehicle maintenance services – oil changes, tire rotations, alignments, or other discounted products. The best programs brand the dealership. The plan is useable only at the issuing dealership. Some OEMs have PPMs, and while they’re redeemable at any of that OEM’s franchises, it does not ensure that the CPO buyer continues to come back to your store.

We know these consumers are more financially sensitive than many buyers. They like that CPO vehicle prices reflect the depreciation that hits new car values once they’re sold and titled. They recognize the confidence in the OEM-branded certified warranty or window statement indicating the remainder of the original factory warranty. Investment protection tools like PPMs appeal to these prudent consumers.

“Another opportunity to encourage CPO buyers to use the dealership’s service facilities over the aftermarket is by providing incentives for them to do so.”

Increasing Consumer Desire

I see five critical factors indicating increased consumer desire for the value your dealership can package in a PPM:

  1. Risk-avoidance buyers who want peace of mind about future vehicle maintenance needs.  They have grown up watching OEMs give PPM away with the purchase of new cars and come to expect it, just like the base warranty.
  2. Cash flow-strapped consumers whom Bankrate.com notes cannot meet even a $500 emergency expenditure.
  3. Increasingly busy lifestyles with little tolerance for inconveniences like vehicle maintenance — pre-paid plans help smooth the bumps.  Don’t push your customers to start a relationship with an aftermarket service provider, rather, allow them to continue to build on the one you have just started, by selling them the car with maintenance included.
  4. Budget shopping is at an all-time high. Retailers report that 85% of consumers look for coupons before visiting. Discounted maintenance services in PPMs convey the same value statement to today’s car buyers.
  5. Many OEMs are eliminating or trimming factory-maintenance programs, so buyers must once again shoulder this burden. However, this opens a new opportunity for dealerships, especially those who offer a dealership-branded PPM, redeemable only at that dealership’s service department.  Dealers that DON’T take advantage of this approach/plan will quickly discover that their customers will likely not return to your shop for service.

Consumers learn about PPM products during the sales and finance processes or in service. It is common for F&I managers to present these plans as a menu item for purchase. Many dealers though include their expense in the vehicle cost, and then extend it as a complementary service for buyers.

In the past, used car buyers weren’t given this opportunity, but dealers have caught on that with the right incentives in place, used car buyers will continue to service their vehicles at that dealership for months or years to come.

Plans should also be presented by the service advisor. About 75 percent of plan usage will originate there. Plans can be sold to conquest customers or newly acquired CPO buyers who perhaps declined to purchase the plan initially but is now persuaded of its value to them.

Our analysis of Fidelis PPM prepaid maintenance programs shows it helps dealers achieve two- and three-year retention rates of 65 percent and grow their service volume by 70 percent.

These PPMs, when gifted to CPO buyers, get them in the immediate habit of using that dealership for oil changes and routine services.

As I noted in “CBT News” last year, a dealership not offering customers prepaid maintenance is shortchanging the dealership and customer, if for nothing else than how they simplify consumers’ lives:

Routine: Plans reduced missed opportunities. A plan keeps upkeep on schedule and a vehicle operating as designed.

Plan: Using prepaid maintenance services helps ensure critical services are not missed by motorists.

Budget: Bankrate.com reported that most consumers could not cash flow a $500 emergency expenditure.

Finally, when evaluating plans like this, dealers should consider:

  • Does your retention program drive customers to your shop?
  • Is the customer experience positive enough, so they come back again?
  • Are there accountability tools baked into the retention plan to measure the lift in customer-pay dollars for each visit so program return on investment can be proved?

“With CPO vehicle sales an increasing opportunity for new car dealers, operators should plan to retain that new business beyond the immediate sale.”