Why are CPO vehicle sales going up, up, up?

By Dan Monheit, originally shared by Carsales.com.au 8.4.21

If you’ve been paying attention, you’ll have noticed the small but growing proportion of used cars onsite listed as ‘Certified Pre-Owned’, or CPOs for short. The Australian market is only now waking up to the power of certification, with just 3.7% of dealer cars advertised online here carrying the badge. Compare that to more mature markets like the US, where around 15% of online stock is ‘CPO’, and it’s clear that there’s plenty of room for growth.

Indeed, CPO vehicles were a boon for US dealers in 2020 as the COVID-19 pandemic curtailed supply of new cars and consumer spending.

A CPO accreditation indicates that a vehicle has met a series of predefined criteria. For example, Volkswagen Group Australia’s recently launched program requires the vehicle to be less than five years old, have travelled less than 120,000kms and undergone a 114-point technician inspection check. The vehicles, sold at a slight premium over their non-CPO equivalents, come with a minimum 1-year factory warranty and 12 months roadside assist, as well as the technician’s report.

Of course, there are logical, pragmatic reasons why CPO vehicles sell fast and for higher prices than average. Customers clearly value the idea that their vehicle has undergone rigorous checks, had its mileage certified, looks ‘as new’ and comes with an extended warranty. But according to Behavioural Science, there’s also an important psychological factor at play.

Introducing the Authority Bias, a term that describes our tendency to attribute greater knowledge to, and be more greatly influenced by, perceived authority figures. The Authority Bias is why we see dentists in toothpaste commercials, celebrities selling eyeliner and expert advice columns (like this one!) in most publications. It also explains the prominence of other certifications like the Heart Foundation tick and ‘Non-GMO’ accreditations.

The Authority Bias influences us for a number of reasons. For one, we live in a world where the average adult is required to make thousands of decisions each day. When given the opportunity to defer a little of our brain work to a recognised expert in the field it can be hard to resist, especially for something as tricky, infrequent and important as assessing the value of a second-hand vehicle.

Beyond just being easier, relying on authority can reduce perceived risk, clearing the path to a sale. If a product has an accreditation, it means that someone else has gone to great lengths to publicly declare it’s safe, fit for purpose and as described. Importantly, that ‘someone else’ knows what they’re doing, and has plenty to lose if they end up being wrong. This is certainly the case with CPOs, where the OEM providing it is not only well versed in their own vehicles, but also has a reputation to protect at all costs.

Harnessing Authority Biases provides dealers and OEMs with the ability to give buyers some extra peace of mind when making a choice. The data already shows how effective a CPO accreditation can be, but showcasing expert reviews, high profile mentions, and prestigious brand awards are all powerful ways of putting the authority bias to work.

Learn more about CPO programs on carsales:

https://www.carsales.com.au/new-cars/certified-programs/

Further reading:

Overseas success highlights local CPO opportunity

Australian car buyers want a good deal … Now

Tesla dominates Australian EV sales

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