Affordability concerns are pushing some buyers out of the new vehicle market. Many choose used cars instead.
In turn, automakers are looking for ways to compete with many online retailers that are grabbing market share in the used car market and trying to lure some of those customers back into a new vehicle.
New vehicle sales tend to be more profitable for automakers, but reselling used vehicles as used vehicles is very profitable for dealers. Used car prices are relatively high, but new online retailers such as Carvana And CarMax have made the market more competitive for dealers and other historic used car sellers.
“The internet, technology and apps on our phones have changed every aspect of retail, and the auto industry is probably one of the slowest retail sectors to embrace online and digital shopping,” said Ivan Feinseth, partner, chief investment officer and director of research at Tigress Financial Partners.
General engines is a key example of automakers’ attempts to respond to this evolving market. The automaker has revamped its certified pre-owned vehicle program, which now operates under the CarBravo name. It is essentially an online portal through which Chevrolet, Buick and GMC dealerships can list their certified pre-owned vehicles and make them available to customers anywhere in the United States.
About 1,615 of GM’s 3,700 dealers are enrolled in the program, according to the company. The only GM brand not involved is Cadillac, which maintains its own program.
“Certified” or “pre-owned” used vehicles are used cars that have undergone a thorough inspection and reconditioning. They usually come with manufacturer warranties and guarantees.
Many automakers have certified pre-owned programs for their own cars. But GM, as part of its overhaul, uses CarBravo to certify vehicles made by other automakers. Many of these cars arrive at dealerships as trade-ins, and often dealers sell them at wholesale auctions, said John Fitzpatrick, senior director of the CarBravo program.
“Wholesale doesn’t bring in as much revenue as selling to a new customer,” he said.
GM said it expects to make about 250,000 sales through its CarBravo program in 2026. Fitzpatrick said he doesn’t expect even half of those to be new car sales.
But through CarBravo, the customer has access to GM’s dealer network for service, which Fitzpatrick says is a key differentiator between its program and growing online sellers. CarBravo vehicles come with various warranties, depending on the age and mileage of the car.
GM said the program drives more traffic to local dealerships, where purchases are typically completed. This creates an opportunity to convert a used car buyer to a new car buyer. So far, the automaker said about 38% of buyers initially looking for used cars end up buying new ones.
A customer who wants to purchase a full-size truck can visit the website and compare used Chevrolet Silverados with used ones. Ford The F-150 and Ram 1500, for example. The buyer may choose a used truck from one of these brands, but a conversation with a dealer may push them in a different direction.
“The customer picks up the phone, but in the back of their mind, they may have always been a traditional, newer car customer,” Fitzpatrick said.
“You showed the customer that you’re going to pay $500 (per month) for this used F-150, but you could pay $510 or $515 for this new Chevrolet,” he said. “And now all of a sudden the customer says, yeah, maybe I can do that because I’d rather have that new vehicle than the used truck.”
While the average transaction price for a new vehicle is around $50,000, the average 3-year-old used car costs around $30,000 in September, according to Cox Automotive.
However, industry analysts say customers base their purchasing decisions more on the cost of the monthly payment than on the price of the car.
New cars often come with longer-term loan options than used cars, Feinseth said, which can result in lower monthly payments.
“For a car that’s one or two years old, you might only have a three- or four-year loan,” he said. “On a new car, you can get a loan for 5 or 6 years.”
The share of new auto loans with a term of 84 months reached a new record in the third quarter, at more than one in four loans, according to Edmunds.
At the same time, used car prices in some affordable segments have increased, according to Cox Automotive, and about three-quarters of consumers express some interest in certified cars.
But the key is to build the relationship with the customer, he said. About 50 percent of the buyers GM has won through the program appear to be newcomers to the brand, meaning there’s no record of them in any of the automaker’s customer databases. About 70% had never visited the dealership they ultimately purchased from.
“The goal is really to engage that customer in the store, to give them the opportunity to build a relationship with the dealership,” he said. “The dealership can really help the customer determine what’s right for their budget.”
It’s also a boon for dealers: Customers who buy used cars covered by warranty often return to the dealership for service visits, which often account for about half of a dealership’s profit. GM may also sell subscriptions to connected vehicle services, such as OnStar, which provides safety, security and navigation services.
“A lot of General Motors’ future business is selling software and subscription services like OnStar and eventually cars equipped with Super Cruise,” Feinseth said.
GM isn’t the only automaker trying to use its certified pre-owned program to attract buyers.
Detroit Rival Ford engine also certifies vehicles made by other manufacturers through its Ford Blue Advantage program. It is on track to achieve 450,000 total sales in 2026, more than GM’s goal of 250,000. He did not say how many of those buyers end up buying new vehicles.
Toyota told CNBC in an email that about 40% of its used car buyers end up buying new instead.
Honda did not provide details of its program. But Lance Woelfer, vice president of automotive sales at American Honda, said conversions are happening “probably every day at dealerships across the country.”
“But it’s also more about that first interaction with the consumer,” Woelfer said. “And there are people in any market who prefer to buy a used vehicle, but appreciate the confidence that a (certified pre-owned designation) can give them.”
Woelfer said these customers come back to have their vehicles serviced at a rate about 18 percent higher than someone who buys a non-certified used car. They also come back to buy a new car at about a 7 to 8 percent higher rate in the future, he said.
“It’s this first relationship which then allows us to build customer loyalty for life,” he added. “And that’s where our attention is focused. We’ve been doing this for a long time and we’ve seen a lot of benefits from the certified company.”
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