The SiriusBuzz Used Car and CPO (Certified Pre-Owned) Scorecard is a weekly series dedicated to tracking the used car and CPO markets. This series will track current incentives offered, marketing efforts, and of course the penetration that the used car and CPO market is seeing. We will explore various penetration levels, and as time passes, could refine the data to a point where reasonable assumptions can be used.
There are many factors at play in the used car channel. In point of fact, the CPO channel is a subset of the used car channel. The advantage of the CPO channel is that Sirius XM has deals in place with the various manufacturers that deliver a promotional subscription in much the same way that a new car buyer gets exposed to Sirius XM Radio. In essence the consumer drives off of the lot with a trial subscription to Sirius XM Radio. The difficult part is that a car often does not become a CPO car until a deal with a consumer is struck. Making a car a CPO car has expenses that dealers must pay. These expenses make that car more expensive. In many cases a dealer will reach a deal on a car, and only then offer up the CPO option. If the consumer wants the benefits of a CPO, such as a longer warranty, they pay an up-charge and the dealer does the required work to turn it into a CPO. Because of this tracking the CPO has challenges that readers must bear in mind. In simple terms, the CPO program is bigger than what is reported.
The goal of this scorecard is to develop a tracking mechanism for readers before Sirius XM begins reporting the numbers. To date, the company has never offered much insight on the used car market other than to say that it is growing. This weekly report will allow you the reader to see how fast it is growing. The importance here is to understand the size and therefore the potential of the used car market as it relates to satellite radio.
The new car channel sees about 60% penetration, and 45% of those exposed to the service elect to become self paying subscribers. The used car market will see a much lower conversion rate. This is because as yet, Sirius XM has not marketed heavily to these potential subscribers. In part this is because the company wants to be effective when they launch a campaign. They want to see a measurable ROI (return on investment) of their advertising dollars. The best way to get a reasonable ROI is to give it the best chance for success. that means waiting until the pool is large enough to deliver value to Sirius XM.
Another challenge in tracking this segment is that we have no idea how long the same used car sits on a dealer lot. For example, it is quite possible that the same cars will be counted in the data for several weeks. To try to assume a sale is nearly futile and would require assumptions that could be way off of the mark. Eventually, we will likely be able to develop more reasonable assumptions by comparing the data to other known quantities over time. This all has to start somewhere, so why not get it started now? Trying to convert this data into potential subscriber numbers is not prudent at this point. Understanding the scope, growth factors, and potential is.
In determining what sites to use for this data, I was quite purposeful and selective. CarMax is independent, and therefore a good gauge of the inventory of a large scale used car service that crosses various markets, yet centralizes their data. Vehix is a national service that has relationships with hundreds, if not thousands of dealers. Dealers often use many services, so we want to eliminate the possibility of the same car being counted more than once. To eliminate this, I chose Vehix due to their robust network, advertising, and general acceptance by the used car consumer.
With all of that being said, here is this weeks data:
VEHIX.COM USED CAR DATA
- Used Car Inventory at Vehix = 382,107
- Satellite Radio Equipped = 65,545
- Satellite Penetration Rate = 17.15%
- Peak penetration was 17.15% on May 24, 2010
VEHIX.COM CERTIFIED PRE-OWNED SUBSET
Certified Pre-owned cars from most manufactures come with a promotional subscription to satellite radio. This is facilitated by various deals between Sirius XM and the OEM.
- CPO Inventory at Vehix = 34,274
- Satellite Radio Equipped = 7,331
- Satellite Penetration Rate = 21.39%
- Peak Penetration was 21.68% on May 23, 2010
CARMAX USED CAR DATA
Carmax is a national used car dealership that carries an extensive inventory. Sirius XM has promotional deals with CarMax that facilitate satellite radio installations and consumer promotions.
- Used Inventory at CarMax = 28,429
- Satellite Radio Equipped = 9,743
- Satellite Penetration Rate = 34.27%
- Peak Penetration was 34.34% on May 22, 2010
So what we have is a differing story in the used car market. In a past article the data at Vehix stood substantially closer to that experienced at Carmax. I have not yet been able to determine the change in data. Vehix does rely heavily on each individual dealer to supply the features in a car. Sometimes a car can be satellite equipped, but there is little information on the radio to point that out to a dealer or perhaps even a consumer. Even with the gap between the two services, we still carry value in the ability to track. I would tend to, despite the smaller sample, put more faith in the CarMax number because of "centralized" input by Carmax staff. My contention would be that given the length of time between when OEMs began installing satellite radio in new cars that between 25% and 33% of the "desirable" (2000 and newer) are satellite radio equipped. This means that Sirius XM is entering a key area where marketing to this segment can be cost effective.
SiriusBuzz tracks the used car and CPO dtata daily and will publish a new scorecard each Tuesday.
Position - Long Sirius XM Radio