Buying any car, new or used, is a risk. Machines are not perfect, things break/malfunction and sometimes need repair. That is why I try to steer people into "Certified Pre-Owned" vehicles whenever possible. But what is a CPO car and when is it a good deal?
If you purchase a new car you have the protection of the manufacturer's warranty for a few years, if and when hiccups occur. While pre-owned vehicles can certainly save you money over new, they don't always offer the same level of warranty coverage. But how is a certified pre-owned car different from just a "used" car? Let's break it down.
Certified by whom?
The word "certified" gets tossed around a lot on dealership lots. The idea behind it is to offer a little more peace of mind for those buying a pre-owned vehicle. But not all "certifications" are equal. There are basically two types of certification: Manufacturer certified and dealer certified. Most of the CPO vehicles you will encounter will come from manufacturer-backed programs. Each carmaker has its own standards on what qualifies as "certified."
Since the luxury car market is one of the most popular areas for CPO cars, I have included a chart from KBB.com to compare the various manufacturer programs-
It is important to note the the warranty length and when each warranty begins. Some, like Audi, begin at the original date of delivery from the primary owner, while others such as BMW are in effect once the new car warranty expires. Also, notice that both BMW and Audi have a deductible for CPO warranty repairs whereas Mercedes and Lexus do not.
Aside from manufacturer certified programs, often dealerships will have their own certification process. Popular used car franchises like CarMax and Auto Lenders advertise that they too put their pre-owned vehicles through rigorous multi-point inspections and even offer extended warranties similar to factory backed programs.
Most of the time, however, these extended warranties will add an additional cost to the price of the vehicle. These programs, especially those from CarMax, can be worthwhile if you desire something that you could not afford to buy new and has a reputation for expensive repairs. For more information on how to
exploit take advantage of a CarMax warranty see posts from Doug DeMuro.
The primary difference between a manufacturer CPO warranty and a dealer-backed plan is that a factory warranty must be honored by any dealership of that brand. While a dealership specific warranty will sometimes only be honored at that dealer. This is an important distinction if you are traveling some distance for a purchase. So be sure to get in writing were you can take your vehicle for warranty repairs. Also be aware that there are many dealerships charging a premium for "certified" cars that are offering little in the way of quality control or warranty protection.
So a CPO car has to pass inspection, does that mean it is accident free?
You would hope so, but there have been a few instances where cars with documented accident damage have slipped through the cracks. However, this is rare in the case of manufacturer certified cars. Although there are many documented cases where dealer "certified" cars have been found to have damage on their history reports. Remember, just because a collision is not revealed on the CarFax, doesn't mean it didn't happen; this is why an independent inspection is always recommended for any pre-owned car purchase.
What is covered?
This really depends on the brand on what they will cover and at what point their warranty terminates. For example, Lexus has a 3yr/ 100k mile bumper-to-bumper warranty that begins at the time of CPO purchase whereas Hyundai/Kia have a 5 year bumper-to-bumper CPO warranty that begins at the time of original purchase, however Hyundai/Kia has a longer powertrain coverage from the original purchase. In the case of dealership specific "certified" programs, the dealer determines the types of coverage and terms. The one nice thing about dealer-backed CPO plans is sometimes you can choose the types of coverage you need. You may not want to pay several thousand for comprehensive coverage but rather just buy a plan for secondary components.
Will I pay more for a CPO car and is it worth it?
More often than not certified vehicles command a premium over a similar non-certified car in the same condition (year, miles, trim etc…). Again, it depends, if you are considering a car with a solid reliability history that is only a few years old with few miles it may not be worth paying the premium for the certification. However, some of your higher priced luxury cars can be fairly notorious for expensive repairs so I suggest you do your research on your chosen model to see what some of the trouble spots are. If they are minor like radio, AC or non-essential electronics it may be worth rolling the dice by purchasing a less expensive non-CPO car.
However, if a particular car has a history of problems with major components like the engine or transmission or other complicated parts a full-fledged CPO warranty is recommended.
(image credit MBUSA.com)
If you have a question, a tip, or something you would like to to share about car-buying, drop me a line at AutomatchConsulting@gmail.com and be sure to include your Kinja handle.