Automotive News - September 21, 2020 - Best Practices Supplement - S16

16 | SEPTEMBER 21, 2020
K I N G S T O YO TA , C I N C I N N AT I

Retailer treats CPOs better than new
Efforts generate more
sales and profit boost
for fixed ops and F&I
Published in Automotive News Feb. 17, 2020
Larry P. Vellequette

lvellequette@crain.com

t Kings Toyota in the Queen City, a
princely portion of the profits come
from certified pre-owned vehicles.
It's the reason the Cincinnati dealership, which sells about 2,900 new Toyotas
per year, dedicates prime real estate in its
new-vehicle showroom to feature Toyota Certified Used Vehicles, and why it gives CPO
buyers the same free-oil-changes-for-life
treatment that it bestows on those who purchase new vehicles.
And the treatment has paid off where it
counts: in the numbers.
Of the 2,835 total used vehicles Kings Toyota
sold last year, 1,290 were Toyota Certified Used
Vehicles, which tend to not only generate stronger returns for the dealership's used-vehicle department but also profits for the fixed ops and
F&I departments.
Last May, Toyota upped its warranty on its
CPO vehicles to 12 months/12,000 miles from
the CPO purchase date, with an additional
7-year/100,000-mile limited powertrain warranty, also from the CPO purchase date.
"We promote [certified used vehicles] as being good as new, and in some cases better
than new, because of the warranty," says Dave
Caddell, senior used-car manager for Kings
Toyota. "We tell people that they're getting a
vehicle that's priced lower than a new car,
with a better warranty."
That promotion includes treating its CPO inventory as if was new, with prime display
space, point-of-sale materials and special
showroom signage that details the certification process. And underneath the marketing,
the dealership has taken additional steps to
ensure that its supply of CPO vehicles to market remains robust.
Caddell said Kings Toyota hired a reconditioning manager, whose job it is to ride herd
over the used vehicles moving through the certification process. The dealership uses vAuto's
Lifecycle management software to watch over
vehicles as they move through reconditioning.
As a result of these and other changes, Caddell said, the dealership "cut our reconditioning
time in half. We started out at a big number,

Dave Caddell of Kings Toyota says certified pre-owned profits outperform new-vehicle profits.
Kings Toyota treats its CPO inventory
as if it was new: free oil changes,
prime display space, special signage
and more.

something like 14 days for average reconditioning time. But with the changes we made to our
process, and monitoring, we were able to cut
the average down to seven days," including for
those vehicles which must go through an
off-campus body shop. The changes to the reconditioning process increased CPO profits last
year by $300 per vehicle, Caddell said.
Kings Toyota is part of Kenwood Dealer Group,
a family-owned group of 14 dealerships located
throughout the Cincinnati metro region.
Caddell said that Kings Toyota has always
"been a believer" in CPO sales, and has led its
four-state region - Ohio, Michigan, Kentucky
and Tennessee - in recent years in annual
CPO sales. He said that even four or five years
ago, the dealership's profits from CPO sales
were double the average of the rest of the region. But as used-vehicle margins came under
pressure from Internet sales, Kings Toyota's
CPO profits are now just above the region average. However, even in their lessened state,
they still outperform new-vehicle profits,

Caddell said.
Ron Cooney, Toyota Certified Used Vehicles
sales operations manager for Toyota Motor
North America, said most Toyota dealers nationally are seeing a lift in CPO sales. In 2019,
Toyota sales of CPO vehicles nationally rose
13 percent, while the number of vehicles the
automaker certified rose 15 percent over the
previous year.
"It's probably one of the best brand-retention tools that we have," Cooney said.
CPO sales also don't exactly follow new-vehicle trends, Cooney explained. "I'm still 55
percent cars and 45 percent [light trucks] nationally. I tell dealers all the time, 'Don't be
afraid of sedans. Don't be afraid of Corollas,' "
because CPO customers are sensitive to fuel
economy and affordability.
Dealerships such as Kings Toyota that make
what Cooney calls a "big deal" out of their
CPO inventory bolster confidence not only in
the CPO vehicles, but in their new-vehicle inventory as well, because customers can see
firsthand what their new vehicle is likely to
look like in a few years.
And the CPO product bolsters dealer profitability, Cooney says.
"Dealers are starting to witness and see that
it's not just about the front-end profit," he said,
"it's about the department profit." a

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