Lack of supply is crunching certified pre-owned car sales

Used retail vehicle sales took a 9% dip in Sept. compared to Aug., according to Cox Automotive. Their analysis, drawn from vAuto Live Market View data, shows that 1.4 million used vehicles moved through franchised and independent dealerships last month.

• Used vehicle sales were still up 5% year-over-year.

• Days’ supply rose to 47 at the end of Sept., up from 45 days in Aug.

Digging deeper: While the seasonal slowdown in used car sales wasn’t surprising, certified pre-owned (CPO) sales fell even harder. 

• Year-over-year, CPO sales dropped 20.8%, leaving 48,000 fewer units sold. Compared to Aug., Sept.'s CPO volume slid by 22.4%, with just 182,551 units sold, down from 235,150. CPO sales have also trailed last year’s numbers by 4.2% so far.

• A few things are driving this drop — fewer selling days, tighter supply, and some rough weather that took the wind out of sales toward the end of the month.

Bigger problems at hand: Dealers are navigating an ongoing shortage of late-model used vehicles that could stretch through 2024 and 2025. It’s the fallout from COVID-era production slowdowns and the chip shortage, which slashed new-car sales and leasing three years ago. With fewer cars coming off-lease, dealerships are struggling to keep high-quality used inventory on the lot.

To tackle the problem, automakers are expanding their certified pre-owned programs.

• Toyota, the top player in U.S. CPO sales, has tweaked its program to certify older vehicles. Its new Silver Certified tier now covers cars up to 10 years old with mileage between 60,000 and 125,000. 

• 1,000 Toyota dealers have already signed on to these expanded tiers, giving them more flexibility to stock a wider range of inventory.

• American Honda has also expanded its certified pre-owned programs for both Honda and Acura, now allowing vehicles up to 10 years old to qualify for certification.

Worth noting: The challenges don’t stop with off-lease supply. Vehicles with open recalls can’t be certified, further shrinking the pool of eligible inventory.

Looking ahead: Even with these hurdles, Cox Automotive’s year-end forecast for CPO sales is holding steady at 2.6 million units. Hitting that target will take a strong push from dealers to certify more inventory before the year wraps. And as new car incentives heat up (especially leasing), dealers will have to get resourceful to make CPO vehicles stand out to buyers.

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