As leases continue to grow in importance for commercial sales, it’s imperative that dealers have a strong strategy for selling off-lease vehicles without depressing residual values. More vehicles, particularly light-duty and heavy-duty, will be coming off lease in the next 18 months. This can be a valuable opportunity for savvy dealers. But, it’s important that we do it correctly in order to make it profitable.
We have seen a trend where commercial buyers are becoming increasingly interested in programs that take into account maintenance and service. Building a certified pre-owned (CPO) program has been proven to maintain residual values. A customer who can’t quite afford a new vehicle but is looking for the same ownership assurances (12-month warranty, service plan, etc.) gravitates to CPO programs, and they are willing to pay a premium for it.
When developing your dealership’s CPO program, it’s important to focus on those vehicles coming off lease that will be able to pass inspection with minimal service required. Otherwise, all of the profits from your premium price point will be consumed by the costs of bringing the vehicle up to CPO standards. You should determine as soon as you are able, before trade-in if possible, which vehicles will be targeted for your CPO program. Only the best should be considered for CPO.
Dealers can benefit from the increase in off-lease vehicles, but a solid CPO strategy should be a key component to ensuring profitability. If you have any advice regarding off-lease sales, please drop us note. We’d love to hear from you!