Auto Dealer Chief In Used Car ���Pull Out���

The CPO emphasis is about maximizing profitability for retail ers, said Adam Chamberlain, Mercedes-Benz USA vice president of sales.

"Having a strong healthy used- car business becomes a real pillar of overall dealer profitability," Chamberlain said. "It drives profit in the shop, it drives profit from the sale of the vehicle, it brings in [new] customers to the brand."

For Mercedes, the renewed focus on used-vehicle sales is both strategic and opportunistic. Franchised dealerships face increased competition in the used-car business from independent retailers, such as Carvana and CarMax.

"The quality of independents' used-car offerings has increased over the last five years. ... They are capturing the imagination of certain consumer groups," Chamberlain said.

"That keeps us on our toes. We want Mercedes-Benz franchised dealers to be the destination of choice for a used Mercedes-Benz purchase in the U.S."

The wave of vehicles coming off lease is also driving luxury automakers' interest in growing the CPO channel. New-vehicle sales in the U.S. surged in the aftermath of the Great Recession.

"If 50 percent of your business is leasing it, you know you've got cars coming back as well," Chamberlain said.

CPO programs are a profitable way to get off-lease vehicles back into the market while supporting vehicles' residual values.

"The more participation you have on buying and selling your used vehicles, the more upward support you get on" residual values, J.D. Power's Stowe said. And higher residual values "help to sell new vehicles, especially when leasing is a critical part of what you do."

It all helps explain why automakers are pushing their retailers to expand their used business with marketing support, sales incentives and in-store training.

Mercedes uses a combination of "push and pull" levers to drive used-car sales. The brand is priming the demand pump for used Benzes with TV and digital advertising campaigns and customer-focused carrots, such as low-rate financing and prepaid maintenance plans.

And "we incentivize [dealers] to buy cars from us off-lease, and we incentivize them to sell an increased number of used cars each year," Chamberlain said. "If a dealer hits their target, they'll earn some money from us."


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