June 1, 2012
By Greg Wilson
Sales of used cars, particularly certified used vehicles, are soaring in Canada, and experts are predicting a strong market for the next decade.
Auto industry analyst Dennis Desrosiers, speaking at an industry conference in March sponsored by Auto Remarketing Canada, predicted sales of 30.63 million used cars between 2010 and 2019, a 28 percent increase from the prior decade.
Certified pre-owned (CPO) vehicles (used vehicles that have been given a thorough inspection by qualified technicians and come with an extended warranty from the manufacturer) are particularly popular right now. Most automakers in Canada who have CPO programs reported record sales of CPO vehicles in the first three months of this year.
In March alone, several automotive brands posted all-time records for certified pre-owned vehicle sales in Canada, including Honda, Toyota, Acura, Mercedes-Benz, and Volvo. Volkswagen, Kia, Subaru, and Audi also reported sales gains in March this year compared to March, 2011.
The increased interest in certified used cars is being driven by a number of factors. A study at the end of 2011 by AutoTrader.com and the Morpace organization indicated that the struggling economy has caused many new car buyers to consider certified pre-owned models. Sixty percent of new car buyers surveyed said they were willing to consider a CPO vehicle. And according to the same study, 68 percent of CPO car buyers cited the added peace of mind that a warranty provides as the main reason for choosing a certified used car over a non-certified vehicle.
Currently, 17 vehicle manufacturers have certified used vehicle programs in Canada, and their warranties generally range from one to two years, though GM is an exception with three months. In most cases, CPO vehicles are put through a rigorous inspection by qualified mechanics and come with a vehicle history report, and in some cases, an exchange policy if the buyer isn’t satisfied. Many manufacturers also offer lower financing and leasing rates on CPO vehicles.
What does a CPO warranty cover? In most cases, major mechanical and electrical items covered include the engine, transmission, steering, front and rear axles, differential, ABS brakes, electrical system, heating and air conditioning, and manufacturing defects. There is usually no deductible on covered repairs.
Items typically not covered include wear and tear items like tires, batteries, windshield wipers, clutch plate and linings, oil filters, brake pads, exhaust systems, timing belts, spark plugs, dust and pollen filters, ignition cable, distributor cap and rotor, points of ignition, struts, shocks, strut bearings, bulbs, fuses, worn seat covers, and convertible tops. Window glass and exterior body parts are also excluded.
CPO vehicles are typically more expensive than non-certified used cars. According to CNW Research, in the U.S., the premium on a certified vehicle was $2,274 at the end of March, up from $1,384 in January 2011.
That doesn’t appear to be discouraging buyers, though. AutoTrader.com research showed that 67 percent of vehicle shoppers were willing to pay more for a certified vehicle than a non-certified one. In the U.S. shoppers were willing to pay an average premium of $1,380, according to CNW Research.
One reason CPO vehicles are so popular right now is that automakers have been marketing their CPO vehicles more aggressively, creating greater consumer awareness about the benefits of a properly inspected used vehicle that comes with a warranty. Some automaker’s web sites, such as that of Mercedes-Benz Canada, allow purchasers to view photos and details of CPO vehicles available in their area and make an appointment for a test drive.
As a cheaper alternative to a new vehicle with the peace of mind that a warranty offers, certified pre-owned vehicles are a good fit for today’s budget conscious consumers, particularly if the economy takes a turn for the worse.
Click through to page two for a roundup of certified pre-owned programs.