Vehicle prices have surged at a record pace over the last decade, rising more than 50%, and pricing many potential buyers out of the market. To give them an alternative, Honda and its upscale sibling Acura are upgrading their certified pre-owned program, not only offering near-new models but adding more ways to finance them, including leasing – as well as the ability to shop for them online, the two brands announced Thursday.
New vehicle prices hit a record average of nearly $50,000 earlier this year, though they’ve settled back to just over $47,000 in recent months, according to Kelley Blue Book. Even then, that’s a big jump from 2013, when the average transaction price hovered around $31,000.
Industry research shows that a growing number of potential buyers have been priced out of the market, especially as general inflation has eaten into largely stagnant middle-class wages.
Rise of the CPO program
That’s driven more and more buyers into the used car market – where prices have also been running at or near record levels this year.
Most automakers have launched alternatives hoping to appeal to buyers who might normally shop new. Certified Pre-Owned programs focus on relatively new models – typically one to three years old, though some programs cover models up to six years old. Many of them are off-lease or dealer test vehicles with low mileage and that show little wear and have been well-maintained. Adding to their appeal, they undergo extensive inspections and repairs covering everything from tires to transmissions, and body dings or dents.
They’ve become “absolutely” popular with buyers who have been squeezed out of the new car market, said Dan Rodriguez, manager of auto remarketing for Honda and Acura.
Honda and Acura add new features
The Japanese automaker’s two brands have been among the most popular when it comes to Certified Pre-Owned, or CPO, programs. It hopes to further expand that appeal with new upgrades. That now will include the ability to lease, rather than buy certified models. As with new cars, trucks and crossovers, leasing typically translates into lower monthly payments and the certainty that you’ll not have to worry about eventually trade in or resell the vehicle.
“Higher new-vehicle prices make the ability to lease Honda certified used vehicles an even more critical gateway to vehicle ownership for young and first-time buyers,” said Rodriguez.
Currently, only 1% of Honda and Acura CPO buyers lease their vehicles, the executive told Headlight.News. He expects that to grow to 10% or more over the coming years.
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An additional benefit
The lease program not only will help Honda and Acura CPO customers, but deliver a longer-term benefit for the two brands.
Since leases run for a defined period of time, the automaker will know precisely when leased vehicles are set to return. And that will provide a steady stream of older models for Honda and Acura dealers, Rodriguez noted. Vehicles six years and older are particularly popular with budget buyers and retailers have been struggling to get a steady supply, he said.
The Honda and Acura TrueUsed programs offer upgrades to vehicles as old as 10, including features like a trial subscription to SiriusXM radio and roadside assistance.
The used car buying process has changed substantially over the past decade or two, starting with the launch of “superstore chains” and, more recently, the debut of services like Carvana – which Rodriguez said will be a prime target for the upgraded Honda and Acura programs.
Among other things, the two brands will become “even more transparent,” adding the ability to calculate purchase and leasing costs on the HondaCertified.com and AcuraCertified.com websites. Buyers then can handle most, if not all, the purchase process online.
Honda, in particular, saw a 16% increase in CPO sales this year and its program is now the second-largest of any brand in the U.S. It’s hoping the new upgrades will keep that momentum building at a time when millions of motorists are looking for alternative buying options.