What Is a Certified Pre-Owned Vehicle?
Call it an inconvenient truth if you must, but car dealers are in business to make money, first and foremost. Sure, plenty of dealerships put an emphasis on cultivating positive relationships with customers, and thus ensuring repeat business. But at the end of the day, these are businesses, and the only way a business keeps the doors open is by making money.
For decades, dealerships primarily relied on new and used car sales to generate profits. If there was a service department, that could generate some revenue, too. Then, back in 1941, a man named Zollie Frank began offering vehicle leases—long term rentals, essentially—and the long road to certified pre-owned sales broke ground.
You see, a typical vehicle lease today is anywhere from 24 to 36 months long. After those 2 or 3 years, the vehicle is returned to the dealership. Recognizing the good condition of most of these off-lease cars, Lexus formed the first Certified Pre-Owned vehicle program in 1993. The idea was simple: A car comes into the dealership in good condition and, assuming it meets a maximum age and mileage restriction, is put through an extensive, multi-point inspection before being sold on the used market… as a slightly more expensive, “certified” car.
What Are the Benefits of a CPO Vehicle?
Today, every automaker has a CPO program. In order for a car to qualify, most programs stipulate that it must be less than 5 or 6 years old, with mileage maximums ranging from 50,000 to 80,000 miles. On top of that, every manufacturer includes a vehicle history report in the certification. Tack on a multi-point inspection, and the benefits of a CPO vehicle start to become apparent.
For one, unless you got an incredible deal with tons of cash on the hood (or you live in a parallel world devoid of logic), buying a CPO car is going to be cheaper than buying one brand new. Sure, a primary driver of new-car sales is the appeal of a factory warranty. But, recognizing this, automakers have made warranties an important tenet of CPO's value. While some manufacturers offer up only limited powertrain warranties, many others will package that offer alongside a 1- or 2-year comprehensive warranty, too. Generally, these warranties take the form of either extensions to the original, new-car warranty, or are tacked on once the CPO sale has gone through.
The perks of a certified pre-owned vehicle don’t stop with the warranty, however. Nearly every automaker offers a complimentary loaner vehicle if your car needs to be taken to the shop for repairs, and if you break down mid-road-trip, you’ll be covered by 24-hour roadside assistance—a benefit included on every CPO plan. If the world-beating financing deals often used to move them off lots is drawing you toward a new car, you should still check out CPO options, as many offer special financing terms.
Okay, So What’s the Catch?
There is a distinction between manufacturer CPO programs and dealer CPO programs, and it’s an important one. Only franchise dealerships can sell manufacturer CPO cars. Automakers back the warranties and services associated with manufacturer CPO programs and, while a dealership may claim to offer a comparable deal, they simply can’t match the corporate clout and name-brand value of “Ford” or “Toyota.”
Whenever you’re considering purchasing a used car, investing in a pre-purchase inspection (PPI) is a good idea. Because Certified Pre-Owned cars get run through an inspection by the dealership, a full-blown PPI, where an independent mechanic takes the time to vet the vehicle of any potential faults, may be overkill. That being said, you should continue to perform your due diligence and give your potential CPO purchase a very thorough and careful “eye test.”
Take a slow walk around the car, look for anything out of place, any troublesome scratches or dents. Keep alert for any noticeable smells, and if you hear or feel anything unsettling, be sure to mention it to the salesman. Dealerships aren’t likely to replace or repair standard wear-and-tear items on a car—brake pads, scratched wheels, the occasional dent—but if it looks like they missed something in their inspection, definitely point it out.
Additionally, CPO contracts will have plenty of fine print. You should plan to read all of it. Every automaker’s plan is different, and it’s critical that you know when your CPO warranty begins, how many miles or years it will last, and what items and services are covered. Unfortunately, some brands are less reliable than others, so do some research to find what common problems may arise in the model you want.
Finally, you can search for a CPO car here. But, seeing as there's no such thing as a free lunch, it shouldn’t come as a surprise that used CPO vehicles generally cost more than their non-CPO counterparts. This premium may not seem worth it if you’re looking at a reliable, inexpensive used car, but if it’s a luxury model, it may offer more value. Luxury cars—particularly foreign ones—generally cost more to repair. If you’re shopping upmarket, CPO may be the perfect middle ground between the high prices of new vehicles and the risk of expensive repairs for used ones.