Affordability issues are driving some buyers out of the new car market. Many people choose used cars.
Meanwhile, automakers are looking for ways to compete with the many online retailers that are gaining market share in the used car market and trying to lure some of those customers back to new cars.
New car sales tend to be highly profitable for car manufacturers, but reselling trade-ins as used cars can be very profitable for dealers. Used car prices are relatively high, but new online retailers such as Carvana and carmax The market is becoming more competitive for dealers and other existing used car sellers.
“The internet, technology, and mobile phone apps have changed every aspect of retail,” said Ivan Fainseth, partner, chief investment officer, and research director at Tigress Financial Partners. “The automotive industry is probably one of the sectors of retail that has been slowest to embrace online and digital shopping.”
general motors is a key example of an automaker’s attempt to address this changing market. The automaker has revamped its certified pre-owned vehicle program, which now operates under the name CarBravo. It’s essentially an online portal where Chevrolet, Buick, and GMC dealers can list their certified pre-owned vehicles and offer them to customers across the United States.
According to the company, about 1,615 of GM’s 3,700 dealers have enrolled in the program. The only GM brand not involved is Cadillac, which maintains its own program.
A “certified” or “used” car is a used car that has been thoroughly inspected and maintained. Usually comes with a warranty from the manufacturer.
Many automakers have certified pre-owned programs for their vehicles. But as part of its shake-up, GM is using CarBravo to certify vehicles made by other automakers. John Fitzpatrick, senior manager of the Car Bravo program, said many of these cars arrive at dealers as trade-ins, which often sell them at wholesale auctions.
“Wholesale doesn’t make as much money as selling to new customers,” he said.
GM said it plans to sell about 250,000 units in 2026 under its CarBravo program. Fitzpatrick said he doesn’t expect even half of that to be new car sales.
But through CarBravo, customers can access GM’s dealer network for service, which Fitzpatrick said is a key differentiator between the company’s program and the growing online retailer. CarBravo vehicles come with a variety of warranties depending on the year and mileage of your vehicle.
GM said the program has increased traffic to local dealers where purchases are typically completed. This creates an opportunity to convert used car buyers into new car buyers. So far, automakers have announced that about 38% of shoppers who were initially looking for a used car end up buying a new car.
Customers looking to purchase a full-size truck can compare used Chevrolet Silverados and pre-owned vehicles on the website. ford For example, F-150 or Ram 1500. A buyer might decide on a used truck from one of these brands, but a conversation with the dealer could take them in a different direction.
“Customers answer the phone, but in the back of their mind, they may have always been a traditional, newer car customer,” Fitzpatrick said.
“I think they’re showing the customer that they’re willing to pay $500 (per month) for this used F-150, but they’re willing to pay $510 or $515 for this new Chevrolet,” he said. “And now, all of a sudden, a customer says they might want to do that because a new car is better than a used truck.”
According to Cox Automotive, the average transaction price for a new car is about $50,000, while the average price for a three-year old used car was about $30,000 as of September.
But industry analysts say customers are making purchasing decisions based more on monthly payment costs than on a car’s list price.
Feinseth says new cars often come with longer-term financing options than used cars, which can mean lower monthly payments.
“A car that’s one or two years old might only have three or four years left on the loan,” he says. “If it’s a new car, you can get a five- or six-year loan.”
The percentage of new auto loans lasting 84 months hit a new record in the third quarter, accounting for more than one in four loans, Edmunds said.
Meanwhile, prices for some affordable used cars are rising, and about three-quarters of consumers are showing some interest in certified cars, according to Cox Automotive.
But the key, he says, is building relationships with customers. About 50% of the buyers GM acquires through the program appear to be new to the brand, with no such record in the automaker’s customer database. Approximately 70% had never visited the dealer where they would ultimately purchase.
“The real goal is to attract customers into stores and give them the option to build relationships with dealers,” he said. “Dealers really help customers find what fits their budget.”
This is also a boon for dealers. Customers who purchase a used car with a warranty frequently visit the dealership for service visits. This often accounts for about half of a dealer’s profit. GM can also sell subscriptions for connected vehicle services, such as OnStar, which provides safety, security and navigation services.
“A key part of General Motors’ business going forward is selling software and subscription services like OnStar and ultimately vehicles with Super Cruise,” Feinseth said.
GM isn’t the only automaker trying to attract buyers with a certified used car program.
detroit rival ford motor We also certify vehicles made by other manufacturers through the Ford Blue Advantage program. The company plans to achieve total sales of 450,000 units in 2026, exceeding GM’s target of 250,000 units. He did not say how many of those buyers ended up buying new cars.
Toyota told CNBC in an email that about 40% of used car buyers end up buying a new car.
Honda did not disclose details of the program. But Lance Wolfer, American Honda’s vice president of auto sales, said conversions are “probably happening every day at dealerships across the country.”
“But even more than that, it’s the first interaction with the consumer that matters,” Wolfer said. “And there are people in every market who prefer to buy used cars, and they appreciate the confidence that[the certified pre-owned designation]gives them.”
Welfer said those customers return to have their cars serviced at a rate about 18 percent higher than customers who buy non-certified used cars. Additionally, there is a possibility that they will purchase a new car at a rate that is approximately 7 to 8% higher in the future.
“The initial relationship is what creates lifelong customer loyalty,” he added. “That’s our focus. We’ve been doing this for many years and have seen a lot of benefits from certified businesses.”
