What Is a Certified Pre-Owned Vehicle and Should I Buy One?
“Certified pre-owned” is not a euphemism for “used.” The term certified pre-owned (CPO) is an official designation by the manufacturer to show that a used car passed the highest inspection standards and comes with a longer warranty. It also typically comes with a higher price in exchange for this peace of mind.
Here’s how a certified pre-owned vehicle is different from a used car, how to decide whether one could be worth the price and where to find CPO vehicles for sale.
What does certified pre-owned mean?
A certified pre-owned vehicle is a used car that is inspected, approved and warrantied, all by the original manufacturer, before it is offered for sale again. Most certified pre-owned vehicles are cars that have come off leases or have been traded in early. Not all used cars pass the qualifications and inspections to become certified pre-owned. Vehicles that meet these standards will have less wear and tear, fewer miles and the same (or similar) length of warranty as if you bought it new. Each manufacturer offers different CPO programs.
CPO cars vs. new cars
An important distinction to understand is that a CPO vehicle is not a new car, which could be great if you want to save money. Edmunds says new cars can depreciate 23.5% in the first year of ownership and 60% in the first five years. By getting a used vehicle, you could save thousands in deprecation. If you haven’t set a budget for a vehicle yet, find out how much car you can afford.
How much is a certified pre-owned car?
The benefits of a CPO car don’t come for free. Non-luxury CPO vehicles typically cost about $1,000 more than their used counterparts. The main appeal of certified pre-owned cars is that they are less risky. Therefore, they are worth more than a noncertified or a “regular” used vehicle.
To find out how much you should pay for a CPO vehicle, look up its fair market price on an industry guide like Kelley Blue Book, Edmunds or the National Association of Automobile Dealers guide, which should show three used car pricing options: dealership CPO, dealership used and private seller used.
The pros and cons of CPO cars
CPO cars come with a variety of advantages and disadvantages. Here are a few to consider when shopping for a certified pre-owned vehicle.
Certified pre-owned cars have to pass more rigorous inspections from factory-certified mechanics to earn the title of CPO. And a Ford mechanic can’t certify a Chevrolet. Only the original manufacturer can certify its own car.
Certified pre-owned warranty
CPO vehicles often come with extended warranties from the manufacturer. Many automakers tack on an additional 1-year, 12,000-mile basic, bumper-to-bumper warranty onto the remaining original warranty that came with the car.
Example: CPO Ford has an additional year and 12,000 miles added to the original 3-year, 36,000-mile basic warranty. So the maximum time and miles a certified pre-owned Ford could be under warranty is four years, 48,000 miles from the day the car was originally bought by the first owner.
Here’s a closer look at several major manufacturers and their CPO warranties.
|CPO Total Basic Warranty|
|Automaker||Maximum Time (years)||Maximum Distance (miles)|
Manufacturers may offer even longer warranties on the vehicle powertrains: the engine, transmission and drive axle. And if you’d like a longer basic warranty, you often have the option to buy an extended warranty beyond what’s included in the certified pre-owned warranty.
Because the vehicle is certified and comes with a warranty, auto lenders usually see CPO cars as less risky to finance. The car is less likely to break down any time soon, and if it does, the longer warranty will probably cover the cost of repairs. The lender doesn’t have to worry that you, the borrower, will need to choose between making the monthly car payment or paying the repair bill.
Lenders adjust APRs according to a variety of factors, but risk of default is one of the key aspects they use. Certified pre-owned vehicles can qualify for lower APRs than regular used cars, although the APR may still be higher than that for a new car. Here are the best auto loan rates in 2020.
As discussed earlier, the typical price increase for a CPO vehicle above a regular used vehicle is around $1,000, which isn’t chump change for most used car buyers. Dealers may not be pressured to lower their prices on CPOs due to limited options if your heart is set on getting a CPO car from a particular automaker.
Potentially limited options
Not all used vehicles can become CPO cars, so your options may be limited, depending on what a dealer has in stock at the time you visit. There are, after all, only so many CPO vehicles that come with the specific packages you want, in the color you want.
WHere to find a CPO:Again, branded or franchised dealerships are the only places you can buy a certified pre-owned vehicle.
Should you buy a CPO car?
CPO cars offer a peace of mind, which can be worth the expense for some buyers. Yet, there are ways you could potentially get a “regular” used car and still have peace of mind. If you get your used car of choice inspected by an independent mechanic, they could confirm that the car is in top shape, or tell you what repairs may be needed and how much they could cost. You could then use that information to negotiate the price and get an even better deal on a used car that is just as safe and reliable as a CPO vehicle. The inspection itself could cost around $100. Whichever you decide, you may find how to finance a used car useful.