Supply of Certified Pre-Owned Vehicles Still Outpacing Demand

Luxury Brands Continue to Dominate Certified Pre-Owned Market

WESTLAKE VILLAGE, Calif.: 10 May 2005 — While certified pre-owned (CPO) vehicles are gaining share of the used-vehicle market, many of the sales and marketing efforts may not be communicating the value of certification to consumers, according to the J.D. Power and Associates 2005 Used Vehicle Sales and Certification StudySM released today.

The study, in its fourth year, finds that 38 percent of late-model used vehicle buyers are purchasing a certified vehicle, compared to 35 percent in 2004. However, the majority of CPO buyers surveyed indicated the primary reason they purchased a certified vehicle was not due to their awareness of the CPO program. Rather, it was due to the availability of their vehicle of choice, which just happened to be certified. This indifference toward certification contributes to a lack of understanding as to what constitutes a certified program. Sixty-four percent of CPO-vehicle buyers said they first became aware of the certification program that they eventually purchased while at the dealership.

"The sales and marketing efforts of CPO vehicles and programs are still generally falling flat, which indicates that sales are being driven by supply rather than demand," said Todd Wilson, director at J.D. Power and Associates. "There is some good news for the CPO industry. There is a small increase in the number of consumers actively shopping for a certified vehicle. And while those used-vehicle buyers who value certification are still in the minority, the average dollar amount they place on certification is up 6 percent from 2004. However, the study continues to shed light on the industry’s inability to communicate the value of this intangible item — from Madison Avenue to the dealership lot."

Luxury brands have had more success in breaking through to their target audience and creating demand for their certification programs. Luxury buyers are more likely to actively seek information on the Internet to learn about CPO programs. In fact, luxury CPO buyers are twice as likely as non-luxury buyers to purchase a certified vehicle primarily because they saw the value in certification (47% versus 24%). Still, CPO demand among luxury buyers has remained relatively stable over recent years.

Overall satisfaction with the used-vehicle sales process increased slightly to 794 index points (on a 1,000-point scale) up from 790 in 2004. Although non-luxury brands, on average, post more significant improvements in sales satisfaction, luxury brands continue to provide a much more satisfactory sales experience for their used-vehicle buyers.

The study finds that a positive sales experience influences the likelihood that used-vehicle buyers will recommend their make or model, purchase another certified vehicle, and return to the dealership where they purchased the vehicle for future service. In fact, nearly 90 percent of used-vehicle buyers reporting an outstanding sales experience intend to return to the dealership of purchase for future service.

"Imparting the value of certification to a used-vehicle buyer is one of the most challenging things a dealership’s salesperson faces," said Wilson. "Consistent training in this area is necessary. As the automotive industry learns to better coordinate their new- and used-vehicle strategies to appeal to the motivations of both new- and used-vehicle buyers, more consumers should begin to see the value in used-vehicle certification."

The 2005 Used Vehicle Sales and Certification Study is based on responses from more than 15,000 used-vehicle owners who purchased a 2000-2005 model-year used vehicle.

About J.D. Power and Associates Headquartered in Westlake Village, Calif., J.D. Power and Associates is an ISO 9001-registered global marketing information services firm operating in key business sectors including market research, forecasting, consulting, training and customer satisfaction. The firm’s quality and satisfaction measurements are based on responses from millions of consumers annually. J.D. Power and Associates is a business unit of The McGraw-Hill Companies.

About The McGraw-Hill Companies Founded in 1888, The McGraw-Hill Companies is a global information services provider meeting worldwide needs in the financial services, education and business information markets through leading brands such as Standard & Poor’s, BusinessWeek and McGraw-Hill Education. The Corporation has more than 280 offices in 37 countries. Sales in 2004 were $5.3 billion. Additional information is available at http://www.mcgraw-hill.com.