As we approach the halfway mark of the 1st quarter for this fiscal year, vehicle affordability continues to be a hot button issue. Which means now is a good time for dealers to start showing off their certified pre-owned cars to customers. On today’s show, Jim talks to Brian Moody, executive editor for AutoTrader and Cox Automotive, about the best CPO cars for 2019, and how to meet consumer demand.
Jim Fitzpatrick: Welcome back, Brian.
Brian Moody: Hey, thanks for having us.
Jim Fitzpatrick: Sure. Talk to us a little bit about vehicle affordability issues facing dealers and consumers today.
Brian Moody: We feel like there might be coming a point where price fatigue is gonna start to play into consumer’s decisions to buy or not buy. One of the reasons for that is, we have a couple of indicators. For example, the Kelley Blue Book transaction price, which is the price that cars actually sell for, not necessarily the value or any of those things, is well above 35, $36,000. That’s getting to be pretty expensive so, for the average person, it means don’t buy a new car or maybe knock off some features. Either way the fatigue, I think, is probably coming in the next year or so.
Jim Fitzpatrick: Sure, I mean, the prices start getting up that high, you take a lot of people out of the marketplace, don’t you?
Brian Moody: Right, that’s exactly right. I think the good news here is that there are alternatives that not only can address the consumers needs, but can also help dealerships and local businesses stay in business and keep the flow going.
Jim Fitzpatrick: Sure. It also comes at a time when everybody, not everyone, but a new generation called Millennials are reevaluating the importance of even owning a vehicle, right?
Brian Moody: Right, that’s true, and some of those alternatives directly address that, others just have to do with branding. There’s some evidence to suggest that younger buyers, such as Millennials, would rather have, let’s say, a three or four-year-old luxury brand versus a brand new economy car. I can see why that would be, because they’re nicer and cars’ reliability has been improving dramatically over the past 10 years.
Jim Fitzpatrick: Right, you can get a lot out of a vehicle now. You keep a car for 10 years, is really no big deal at all.
Brian Moody: Sure.
Jim Fitzpatrick: Discuss with us, if you would, certified pre-owned vehicle and what impact that will have in 2019 and beyond.
Brian Moody: We believe that certified pre-owned vehicles, and it’s my personal opinion as well. That it’s kind of the perfect intersection of what can be good for consumers and what can be good for the small businesses or the dealerships in your community that sell these cars. There’s a couple of reasons for that. For one, many of those cars go through a rigorous inspection process set out by the manufacturer. The dealership may be doing the work, but it’s the manufacturer, the builder of the car, that says these criteria need to be met. That’s a pretty high bar to start with. In addition, there is a manufacturer backed warranty, plus many of these cars look and feel, after a little bit of reconditioning or after the inspection process, they look and feel just like a brand new car. So, the average person’s neighbor is not going to know they didn’t get a new Escalade, for example, they got a three-year-old at a much better price.
Jim Fitzpatrick: God forbid the neighbor thinks anything different, right?
Brian Moody: Well, I mean, it’s funny that you say that-
Jim Fitzpatrick: We all live in that world.
Brian Moody: Yeah, but I think in luxury world … it might not matter to me personally, but that doesn’t matter that much. It matters what’s happening and why we have Cadillac and Mercedes Benz. I think people, in addition to wanting the car that has the latest look, they also want the latest technology and certified preowned helps you get there, too.
Jim Fitzpatrick: That’s for sure, there’s no question, so it might be a strong alternative to the first issue that we talked about and that’s affordability, for more people to be looking at certified pre-owned as an alternative, right?
Brian Moody: Yeah, that’s exactly right. When you look at certified pre-owned cars, it’s really difficult to come up with a lot of negatives. Now, is it possible that you could find a 10, 11, 12-year old used car from your neighbor down the street for less? Yes, you could. I think for people that are really, really budget conscious and that’s their only option, then, by all means, look at reliability reports and go that route. However, for people that want something that’s like new, but they don’t want to take the risk … here’s the big thing with CPO. If you buy a used luxury car that’s just outside of the warranty period, I think a lot of people don’t feel comfortable being on the hook for, say, a new water pump in a Jaguar, or even a battery in a BMW. The CPO warranties really help address that and, even if you don’t use it, it gives peace of mind and I think that’s the big selling point here. But, it’s also backed up with a real and tangible warranty.
Jim Fitzpatrick: Yep, it’s definitely a great alternative for a lot of consumers out there that are in the market. Can you tell me a little bit about some of the highlights from Autotrader’s 2019 non-luxury list for best CPOs?
Brian Moody: What we did was, we came up with a list of 10 cars, 10 luxury and 10 non-luxury. We said, hey, what cars are out there right now within a certain year range, that have the look and feel of a new car but you can get them as pretty strong CPO candidates. Those cars are, for example, the Chevy Tahoe. We know that the Tahoe is about to be updated, but in the meantime, the one that’s on sale now that looks like a two or three-year-old Tahoe is an excellent truck. It’s totally worth checking out. We also like the Honda Civic, the Hyundai Sonata is a really good one. These are all great cars that have good warranties to begin with, but when you add CPO … Listen, one more thing about some of these cars on our list is, we set out a cap to say we’re only going to consider cars that give you, at least, a 100,000 mile powertrain warranty. If you don’t get that, the cars aren’t on our list, so these are some pretty strong candidates.
Brian Moody: Of course, Toyota pickup trucks, both the Tacoma and the Tundra. Look very similar to a new one, very strong warranty program. Another one that just seems like can’t sell quick enough is the Jeep Wrangler. The Jeep Wrangler is an excellent alternative because it’s looked the same for many years and even the redesign looks very similar, and that’s on purpose. So, those are some of the cars that we think make excellent CPO vehicles from a non-luxury standpoint.
Jim Fitzpatrick: Okay, let’s switch gears and go to luxury. What’s on the list there?
Brian Moody: Earlier I mentioned the Cadillac Escalade?
Jim Fitzpatrick: Mm-hmm (affirmative).
Brian Moody: That wasn’t an accident, that’s on our list. That’s a really great truck. We also like the Chrysler Pacifica. The Chrysler Pacifica, now this is only a very narrow range because the Pacifica if you recall, was an SUV or a Crossover type thing many years ago. What we’re talking about is the 2017 to 2018 Pacifica, specifically the Limited. It is a luxury minivan, and I think when people see that they’ll appreciate its luxury qualities.
The warranty is pretty good. We also like the Jaguar F-Type and the Jaguar I-PACE, believe it or not. Those are cars, talk about price fatigue, luxury brands of cars can get to be expensive when you add desirable features. But look at a CPO Jaguar and see if you don’t think it fulfills almost every need of a new car. If you can afford a new car, great, that’s terrific for you. But, if not, then these are worthwhile alternatives. I’ll tell you my personal favorite, it’s a luxury car but from a non-luxury automaker, so I’m not sure how we would categorize this, but the Kia Cadenza is an excellent sedan with a very long warranty.
Jim Fitzpatrick: Really?
Brian Moody: Not many people know about it. You’re gonna get a good deal and it looks very similar to the brand new model, so that’s on the list as well.
Jim Fitzpatrick: Very interesting. Kia made the luxury list?
Brian Moody: Yeah, if you look at Kia, it’s interesting. They have the K900 and they have the Cadenza and now they’re going to have the Telluride, which is an SUV coming out. In the upper time levels of some of those cars, or even in the base trim levels for the Cadenza and the K900, I think they’re luxury cars. Is Kia a luxury brand? Maybe not, but I think they do give you a little something extra and I think it’s the perfect place to be. Combine that with CPO, combine that with I want a good deal, I’m a value-minded consumer but I still want something nice, those cars are definitely in the hunt for that kind of thing.
Jim Fitzpatrick: Sure. Consumers though, do you feel as though they still have a problem paying 60, 70, $80,000 for either the Kia or the Hyundai Genesis, in that it’s a Hyundai?
Brian Moody: In America, I think that that’s changing, but it is true and that’s why I think CPO makes a lot of sense. When you look in some of these cars home countries, you look in Europe, in Japan, and Korea, the people there know that a Kia or a Hyundai or a Toyota, or whatever you want to talk about, they’ll gladly pay 50, $60,000 for the nicest one. I think it just depends on what your sensibility is and what do you think you’re really getting by getting the luxury branded car, versus a non-luxury branded car if you get all the same features. I think we’re at a point where technology allows lots of cool stuff for cars that aren’t necessarily luxury.
Jim Fitzpatrick: Yeah, that’s a good point. That’s a very good point. We know that CPO programs are good for consumers. Why, in your opinion, do you think that they’re important for dealers as well?
Brian Moody: There’s a couple of reasons. I think, for one, if you’re a luxury automaker, this is an excellent opportunity in two ways. To get consumers onto your lot, that wouldn’t normally have stopped by there. I wouldn’t call it a negative, but it’s just a truth, that one of the things about luxury brands is that people associate those with high price. Whether that’s true or not, it doesn’t really matter. It matters what’s the perception. So a CPO Mercedes Benz, let’s say, or a CPO Jaguar provides an opportunity for a lower price point customer to get on your lot and now you have the opportunity to give them amazing service. If you get that amazing service from a Volvo dealer and you bought that CPO, the thought is, the hope is, eventually you’re gonna move up into a new Volvo. Even if you don’t, you still gave them amazing service so they’re gonna keep buying CPO Volvos or Benzs, or whatever it is, and that’s good for everybody.
Jim Fitzpatrick: Yeah. Boy, that’s exactly right. To bring them into the family like that and keep them into the family, the consumers that is. At the same time, you’ve got those vehicles coming back that are now, really, under factory warranty. So if you sell a CPO car, there’s gonna be a multitude of things that you’re gonna get paid for by the factory versus having to go to the customer for that, right?
Brian Moody: Yeah, that’s right, and I think the average person would be really surprised. This is speaking of consumers again, to know that you might be able to get a nicely equipped, modern Jaguar for in the $40,000 range when those cars become certified pre-owned. It depends on the miles and all those things, but I would say this is how the opportunity is there is, I don’t think it’s any longer fair. With the addition of CPO, I don’t think people should be saying, “I can’t afford Mercedes Benz.” I think they can afford a Mercedes Benz, and it’s up to the dealerships to prove that to them. Maybe you put those cars out front, maybe you put the price on it. Whatever it is, they’re at a price point that, “What do you want? Do you want a couple of year old Jaguar or do you want a loaded Ultima?” It’s up to you which one, because now the prices in some cases are similar.
Jim Fitzpatrick: Brian Moody wants everyone in a luxury car. He said it right here, everyone can afford it. That’s great. Brian Moody, Executive Editor for Autotrader and Cox Automotive, thank you so much for all your time today. This was very enlightening. I know our viewers are gonna get a lot out of it. Go online and check out the complete list of the 10 best CPO cars and the 10 best luxury CPO cars as well. It’s pretty interesting and I’m sure, for the people that are watching right now in the autoland out there, they’ve got these cars sitting on their lot. If you don’t have these cars sitting on your lot, go get some.
Brian Moody: Yeah, get some, for sure.
Jim Fitzpatrick: It’s great eye candy, and now that the list is out, I’m sure you’re gonna be getting some interest on behalf of the consumers. Again, Brian, thank you so much for joining us on CBT news. We very much appreciate it.
Brian Moody: Yeah, and thank you for having me.
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