2016 CPO Study: Capitalizing on the Value of CPO

1. 2016 CPO Study: Capitalizing on the Value of CPO Full Report December 2016

2. Table of Contents Source: 2016 CPO Study provided by Autotrader

3. CAPITALIZING ON THE VALUE OF CPO

4. THERE ARE SHOPPING FOR A VEHICLE * CONSUMERS RIGHT NOW *Based on incidence of those who intend to purchase in the next 6 months

5. Most shoppers are in the mindset for a Used vehicle 3.0 Million 5.8 Million 13% are in the market for CPO 13.9 Million

6. CPO Sales Continue to Grow Total Off Lease Unit Volumes (Millions) CPO Total Sales (Millions) Projections based on: Industry average lease term maturity Avg growth rate last 3 yrs + regression CPO as % of Franchised Used while assuming used car sales at franchised dealers Source: IHS PolkInsight; NADA, Autodata/Motor Intelligence

7. What if we told you the market for CPO could actually be much BIGGER? BIGGER?

8. The CPO market could be twice as big 5.2 Million This means an additional 2.2 Million CPO shoppers

9. A clear understanding of vehicle types increases CPO interest

10. MESSAGE & EDUCATE THE RIGHT INVENTORY The 4 cornerstones tomaximize the market potential ACCELERATE CPO OFFER DELIVER ON EXPERIENCE

11. THE RIGHT INVENTORY MESSAGE & EDUCATE Is key to attracting CPO shoppers. Sales tactics should start with make, model, year, and style CPO also sells faster and is valued $3000 more than the same non-certified used vehicle CPO shoppers are looking for the essentials – but they’re willing to pay more for quality condition and technology. CPO can also help draw in millennials; focus on warranty and tech The 4 cornerstones tomaximize the market potential ACCELERATE CPO OFFER DELIVER ON EXPERIENCE CPO Leasing can convert Used shoppers to CPO, especially for millennials Benefits packages are another way to enhance CPO, with increasing purchase interest as packages are layered in Experience matters. Not only can highly rated dealers attract more interest in CPO, but CPO purchase has also shown to create loyalty for both OEMs and dealers. An electronic F&I experience could further enhance this

12. THE RIGHT INVENTORY is key to attracting CPO shoppers When prospects arrive on the lot, the sales approach should start with make, model, year, and style THE RIGHT INVENTORY Most important criteria for vehicle purchase MAKE/MODEL Make/model Model year Style preferred (sedan, etc.) New/Used/CPO Warranty coverage Most important criteria for vehicle purchase DEALER Dealers overestimate (2x) the importance of warranty coverage to shoppers, and underestimate (1/2x) the importance of vehicle type (e.g., new, used, CPO)

13. CPO inventory sells faster and generates more revenue THE RIGHT INVENTORY Shoppers value CPO on average $3000 OR MORE over the same non-certified used vehicle DAYS After vehicle frontline ready, how many days it took to sell DEALER Dealers underestimate the value of CPO to shoppers, thinking consumers value a CPO vehicle on average $1260 more compared to a used, non-certified vehicle DAYS

14. CPO SHOPPERS ARE LOOKING FOR THE ESSENTIALS… Certified/backed by OEM/dealership Passed a detailed inspection Extended warranty Vehicle history report Scheduled maintenance from dealer MESSAGE & EDUCATE Items looking for in a CPO vehicle • …But they’re willing to pay more for • GREATCONDITION & TECHNOLOGY Mechanically perfect Better condition than used Latest tech features Items that shoppers would be willing to pay more for in a CPO vehicle DEALER Dealers correctly identify the essentials and their interest among CPO shoppers

15. CPO IS A WAY TO TAP INTO THE MILLENNIAL MARKET MESSAGE & EDUCATE • Millennial CPO Shoppers are willing to pay more for • warranty & technology than Non-Millennials Items that shoppers would be willing to pay more for in a CPO vehicle • Millennials place a higher value on CPO than Non-Millennials Non- Millennial Millennial Willingness to Pay More Added CPO Value or more or more 18-24 25-34 35-50 51-64 Willingness to Pay More Added CPO Value

16. LEASING attracts Used shoppers and spurs conversion to CPO – especially among Millennials ACCELERATE CPO OFFER THROUGH LEASING 1 in 3 CPO shoppers are considering a lease (1.7 Million) Half of Used shoppers are considering a lease (6.0 Million) MILLENIAL USED SHOPPERS Likelihood to Lease a CPO Non-Millennial Used Shoppers

17. Picking up your vehicle for service • Free wash/detail with scheduled service • Loaner vehicle during servicing • Towing coverage ACCELERATE CPO OFFER WITH BENEFITS PACKAGES • Free GPS tracking • Vehicle alarm notification • Engine/ignition failsafe/lockdown • Free oil/fluid changes • 1 year cosmetic damage coverage • Covered services available at any franchise across US Maintenance Concierge Security

18. As CPO vehicle benefits packages increase, so does purchase interest ACCELERATE CPO OFFER WITH BENEFITS PACKAGES CPO No Additional Packages Likelihood to Purchase (Lift) Maintenance Concierge Security All Packages Concierge, Security and Maintenance

19. Likelihood to Purchase (Lift) But it’s not all about packages – highly rated dealers can command a premium on EXPERIENCE DELIVER ON EXPERIENCE 3 STAR DEALER 4 STAR DEALER 5 STAR DEALER

20. CPO INCREASES SATISFACTION andCREATES LOYALTY for OEMs DELIVER ON EXPERIENCE PURCHASE SATISFACTION BRAND LOYALTY

21. CPO also creates twice as much loyalty for Dealers DELIVER ON EXPERIENCE Have used or intend to use service department at same dealer Will make their next purchase from the same dealership

22. Those buyers who went through an electronic F&I experience were MORE SATISFIED DELIVER ON EXPERIENCE ELECTRONIC EXPERIENCE TRADITIONAL EXPERIENCE Purchase Experience Satisfaction(5-completely satisfied) Likelihood to Recommend(5-very likely) Source: MakeMyDeal 2015 Finance & Insurance Study (Phase 2)

23. THE RIGHT INVENTORY MESSAGE & EDUCATE Is key to attracting CPO shoppers. Sales tactics should start with make, model, year, and style CPO also sells faster and is valued $3000 more than the same non-certified used vehicle CPO shoppers are looking for the essentials – but they’re willing to pay more for quality condition and technology. CPO can also help draw in millennials; focus on warranty and tech The 4 cornerstones tomaximize the market potential ACCELERATE CPO OFFER DELIVER ON EXPERIENCE CPO Leasing can convert Used shoppers to CPO, especially for millennials Benefits packages are another way to enhance CPO, with increasing purchase interest as packages are layered in Experience matters. Not only can highly rated dealers attract more interest in CPO, but CPO purchase has also shown to create loyalty for both OEMs and dealers. An electronic F&I experience could further enhance this

24. Extended Results MESSAGE & EDUCATE

25. CPO Perceptions MESSAGE & EDUCATE

26. CPO Perceptions – CPO Owners MESSAGE & EDUCATE

27. Helpfulness of Resources in Learning about CPO/Used Vehicles (Very Helpful) – CPO Owners MESSAGE & EDUCATE

28. Activities Done Online – CPO Owners MESSAGE & EDUCATE

29. Activities Done at the Dealership – CPO Owners MESSAGE & EDUCATE

30. Top Questions for Dealers – CPO Owners MESSAGE & EDUCATE

31. ACCELERATE CPO OFFER THROUGH LEASING Extended Results

32. Features that Drive Interest in CPO Leasing (Much More Interested) – CPO Owners ACCELLERATE CPO OFFER

33. Extended Results DELIVER ON EXPERIENCE

34. Vehicle Inspected by Independent Mechanic DELIVER ON EXPERIENCE

35. Luxury owners and Chevy owners want assurance that the CPO vehicle they purchase is inspected by an independent mechanic Vehicle Inspected by Independent Mechanic – CPO Owners DELIVER ON EXPERIENCE

36. Would Consider Same OEM in the Future – CPO Owners DELIVER ON EXPERIENCE

37. Mindset When Shopping for Next Vehicle – Owners DELIVER ON EXPERIENCE

38. Mindset When Shopping for Next Vehicle – CPO Owners DELIVER ON EXPERIENCE

39. Experience vs Expectations (Better than Expected) DELIVER ON EXPERIENCE

40. Vehicle Sentiment (Strongly Agree) DELIVER ON EXPERIENCE

41. Brand Perceptions – CPO Owners DELIVER ON EXPERIENCE