The Pros and Cons of Certified Pre-Owned Programs

• Chris Smith

• July 18, 2016

If given a choice, and they could afford it, most people would prefer to buy a new car over a used one. There are those who make the argument that a used car is a better value because new cars depreciate faster in the early years than the latter but those are in the minority.

Used cars still carry the stigma of “someone else’s problem” even though the quality of cars and trucks has increased dramatically over the past decade.

Then there is the problem of tight credit that has been endemic since 2008. Fewer people will qualify for financing on the more expensive new vehicle essentially forcing them into the less costly used car market.

So how do dealers overcome the stigma attached to used vehicles to get consumers to buy them? They change the name from used to pre-owned and create an elite class of used cars called Certified Pre-owned (CPO) that are nearly new.

What Makes a Certified Pre-Owned Program Special?

The biggest fear a consumer has when buying a used car is something major is going to crap out four blocks from the dealership. To counter that fear and give the buyer a sense of confidence almost every major manufacturer has adopted a CPO program that offers certain assurances.

• For starters there will be limitations on a car’s age and or mileage to be considered for the CPO designation. These limitations will vary brand to brand and generally range from 5 years old or 60,000 miles to Porsche’s 8 years and 100,000 miles.
• Each car will undergo an in-depth inspection of 100 to 160 points on the car or truck. When an item is found that needs attention it is repaired.
• Typically the CPO vehicle will come with a third party car history report like CarFax or AutoCheck so the buyer will know the history of repairs and registrations.
• Many programs will offer roadside assistance as an added service.
• And the big kicker, the game changer, is a warranty. Now you can buy a used car and have similar protection as when buying new. This is where consumers want to do careful comparisons because the length of warranty, when it becomes effective, deductible (if any) and terms can vary greatly brand to brand.

Quick Pros and Cons of Certified Pre-Owned Programs

There is no question that CPO programs differentiate themselves from the “standard” used car lot. Consumers are offered a level of comfort and certainty that didn’t exist before. But like anything, the CPO program has to fit the needs of the buyer to have real value.

Pros include:

• • Typically the vehicles with the CPO designation are the “cream of the crop” of a dealer’s inventory. Lease returns are ideal candidates for these programs because they won’t be more than 3 years old, have limited mileage and many will have a documented service record as part of the lease. Other cars that are taken in on trade receive extensive inspection ensuring the buyer that it won’t crap out 4 blocks from the lot.
  • The warranty provides the warm and fuzzy feeling for the buyer knowing that his or her investment has coverage normally reserved for new car buyers.
  • Many times CPO buyers are offered very favorable financing that they wouldn’t otherwise receive if they were purchasing a new vehicle.

Cons include:

• CPO vehicles will cost more than similar vehicles not designated as Certified. Certification costs the dealer money. There is the cost of a technician to inspect, the cost of the warranty and many manufacturers require payment from dealers to participate in the program. Additional cost can run a couple of hundred dollars for an entry level vehicle to a couple of thousand for luxury or high end cars and trucks.
• CPO or not, it’s still a used vehicle and things can go wrong and some of those things can be big ticket items. Hopefully they go wrong while under warranty but if not you are just like any other used car buyer.

A Sampling of Certified Pre-Owned Plans

To get a feel for the variety of CPO programs we are offering a quick synopsis of plans offered by a few of the bestselling brands in America:

Toyota (non-hybrid)

• Be 6 model years or newer and have fewer than 85,000 miles
• Warranty is 12 months or 12,000 miles from certified purchase date
• Power train is 7 years or 100,000 from original in-service date
• Car history report
• Warranty deductible $50

Ford

• • Be 6 model years or newer and have fewer than 80,000 miles
  • Warranty is 12 months or 12,000 miles from certified purchase date
  • Power train is 7 years or 100,000 from original in-service date
  • Car history report
  • Roadside assistance for length of warranty
  • Warranty deductible $100

Honda

• Be 6 model years or newer and have fewer than 80,000 miles
• 48 months or 48,000 miles from original in service date or 12 months/12,000 miles if original warranty has expired at time of CPO purchase
• Powertrain covered for 7 years or 100,000 miles from original in service date
• Vehicle history report
• Warranty deductible $0.00

Audi (not a top seller but an example of differences)

• Be 5 model years or newer and have fewer than 60,000 miles
• 72 months or 100,000 miles from original in service date. Can be transferred from CPO owner to private party.
• Roadside assistance
• Includes trip interruption and trip planning service.
• Warranty deductible $85

Is the certification worth it? That’s really up to you to decide. It does give you the confidence of a warranty but with many brands that’s only good for a year. If you are interested in a model that has high resale value and a history of low maintenance costs, a CPO designation may not mean much.

But if you are one of those people who believe used cars are just a calamity waiting to happen, then CPOs may give you at least a partial sense of well being.