- Certified pre-owned cars are typically the more roadworthy used cars on a dealer lot
- Certification adds cost, but it provides an assortment of new-car-like benefits
- Greatest value is in its manufacturer-backed warranty
Does it make sense to spend four to eight percent more for a certified pre-owned (CPO) vehicle over a non-certified used car? Well, maybe.
You've seen the ads and heard the hype, but you may be a little fuzzy about how the added cost of certification translates into real value.
Unfortunately, there isn't a single piece of sage wisdom that applies to every situation. The value varies from individual to individual, manufacturer to manufacturer and car to car.
You are going to have to invest some time and expend some mental elbow grease on research to determine if CPO is the best way to go for you. However, there are a few things you should know and some steps you can take that will help you tiptoe through the decision-making minefield.
How is the certification issued?
There are two types of certification: one is generated on the dealer level, and the other is underwritten by the used car's original manufacturer.
Some dealers talk about certifying their used cars by using inspection checklists, and then by sometimes providing short-term 30-to-90-day limited warranties. Such certification provides some reassurance that, for example, if a wheel falls off a dealer-certified vehicle two blocks from the dealership, the dealer will fix it for free. These programs aren't supported by the manufacturer, and they require the owner to return to the dealer of purchase to have the warranty honored. The good news is that dealer certifications usually don't add much, if anything, to the price of the used vehicle.
With a manufacturer CPO, the manufacturer establishes, monitors and backs the program on a national level, providing continuity among its franchised dealerships.This carries through the certification process, the addition of benefits and the response to warranty claims. Moreover, the warranty will be honored by any authorized dealer of the issuing manufacturer.
Make sure you know which type of certification you are getting.
Who is the target CPO buyer?
There are two types of buyers who might consider CPO: those shopping for a new vehicle and those shopping for a used vehicle.
Yes, that's just about everyone.
By opting for a CPO, new-car shoppers can often buy more car than they can afford new, yet receive many of the same perks. Used-car buyers, by paying a bit more for CPO, can wind up with added warranty protections and other benefits usually reserved for new-car owners.
For one type of buyer, CPO provides a car upgrade, and for the other, some peace of mind. In either case, it's a tradeoff. It's up to the individual to decide if the CPO premium is worth it.
How do CPO deals differ by manufacturer?
Virtually every volume carmaker has a CPO program of some sort, but the details vary wildly from manufacturer to manufacturer. You can see the list of manufacturers offering CPO and compare the details of their programs here.
Every manufacturer's CPO program has maximum age and mileage requirements and a limited warranty. Many also provide special finance rates, a vehicle history report from Carfax or AutoCheck and 24-hour roadside assistance. Some also offer a degree of reimbursement for out-of-town repairs and trip interruption expenses. A few have provisions for loaner cars during warranty repairs and some sort of return/exchange terms, which creates grace period of sorts when the CPO car is purchased.
There may be other perks as well, such as a free trial satellite radio subscription or concierge service.
Every CPO car is inspected using a checklist of items ranging in number from Mazda's 100 to Audi's 300. No doubt some manufacturers parse the list, breaking out the number of components inspected to make the inspection appear more meticulous; but none of that is terribly important to the buyer. When an inspection reveals a major issue, the repair is made or the car is weeded from the CPO program.
Always ask to see the car's completed checklist. If you have questions about exactly what was inspected, don't be shy about asking. Also, verify that the vehicle identification number (VIN) on the inspection form matches the VIN that can be found on the dashboard where it meets the windshield on the driver's side of the car.
More important than the number of items inspected are the details of the CPO limited warranty. Usually the areas of coverage are similar to that of the original new-car limited warranty, but not always. Most manufacturers list the CPO warranty details on their websites.
In determining the actual value of the premium you pay for CPO, it's essential that you understand the terms of the warranty: what is covered and for how long or how many additional miles. The assorted CPO programs are all over the map in this regard. Some CPO warranties are based on when the car was purchased new, while others are based on the sale date of the CPO car.
Why not just buy an extended-warranty that costs less than CPO?
You may be able to buy an extended warranty on a used car-particularly later models-that costs less than the premium certification adds to the used-car price. Cost, though, isn't the only difference between the two approaches.
A CPO warranty acts just like the warranty that came with the car when new. The dealer's service department performs the warranty work and bills the manufacturer, and you drive the car home. Some CPO warranties require a small deductible, just like most medical insurance, but that is the limit of your out-of-pocket expense for warranty work. Extended warranties that dealers sell usually require the car owner to front the money for the repair and then collect it from the warranty company. This can take weeks or months.
Additionally, extended-warranty companies are notorious for going belly up. You can spend several hundred dollars for an extended warranty only to discover the company is out of business when it comes time to file a claim. CPO warranties are backed by the manufacturer.
Are you prepared to do the work?
All CPO really means is that you are going to pay a little more for a used car. The manufacturer asserts is above average and backs up that assertion with a warranty. That in no way lets you off the hook.
You still need to select the vehicle that best suits your wallet and your needs. Most dealers break out their CPO inventory on their Web sites. You can compare the price of the CPO vehicle with the average price that model brings in your area. This provides a general idea of the extra cost CPO adds.
You will still need to carefully inspect and test drive the car before signing on the dotted line.
What it means to you: Determining if the added value of CPO justifies its extra cost is in the eye of the buyer; after all, you'll still be getting a used car blessed with some new-car trappings.