Car shoppers used to be limited to just two types of vehicles – new and used. The former was brand-spanking new, straight from the manufacturer – along with a warranty and that coveted new car smell. Of course, it also came with that new car price tag, and with the knowledge the vehicle could quickly depreciate. The ‘used’ category was a lot cheaper, but there was no telling where the used car had been; there was no offered warranty, and the only added features were (often) a sagging headliner or cigarette burns on the seats.
In the late ’90s, however, a third option opened up for car buyers that straddled the new car/used car fence: the certified pre-owned (CPO) car, automotive-speak for ‘reconditioned used cars’. Manufacturer certified pre-owned car programs were pioneered by luxury nameplates like Lexus and Mercedes-Benz as marketing tools to sell their off-lease vehicles. As leasing programs continued to grow, creating a glut of two-and-three-year-old vehicles on the market throughout most of the following decade(s), more manufacturers jumped on the certified pre-owned bandwagon, pouring money into marketing programs and buyer incentives to attract consumers to this other purchase option.
What does certified pre-owned mean?
Though the auto industry environment has shifted over the years, the basics of manufacturer-certified certified pre-owned programs have remained largely the same. Carmakers take their late-model used vehicles (usually less than five years old), put them through a fairly rigorous inspection process, attach an extended warranty and other perks, and sell them at a premium – relative to the price point of a non-certified used car – to the used car buying public. In the best-case scenario, the manufacturer ekes out a decent profit margin on the resale and the consumer gets a like-new car with a limited warranty for some extra peace of mind.
Today, the certified pre-owned car is officially a third category of vehicle – and certified pre-owned vehicles are here to stay. Some auto manufacturers are even expanding their certified pre-owned car programs to cover a wider span of years. For example, Honda and Acura recently extended their CPO programs to cover cars up to 10 years old with no mileage limit. The perks are lesser than the typical certified pre-owned age car, but you still get a small security blanket.
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Advantages of Buying a Certified Pre-Owned Car
On the face of it, the CPO option sounds like a win/win situation for buyer and seller. And buying a certified pre-owned certainly has its advantages. Every educated buyer knows that, while there are some exceptions to the rule, most new cars lose a great deal of their value over the first few years of ownership. But with a certified pre-owned car the first owner of the vehicle takes most of the depreciation hit. And looking at certified pre-owned options expands your car-buying horizons. Because the car has lowered in value, you can afford more luxury for less money.
“The CPO provides a new category of entry-level vehicle, especially for the luxury auto makers,” explains Adesa Corporation’s Tom Kontos. Car buyers with budgets that would limit them to a BMW 3 Series in the new car world can consider a two-year old 5 Series or a four-year old 7 Series in the certified pre-owned realm.
Of course, that would be true with traditional used cars as well. The biggest selling point for consumers who actually purchased a CPO car was the manufacturer’s warranty, followed closely by the manufacturer’s inspection process, according to CNW Marketing/Research. Both vary a great deal according to manufacturer programs. Each manufacturer places its own age and mileage limits on the cars they will certify. But the savvy certified pre-owned shopper should note that luxury car manufacturers are known to be choosier in deciding which cars make the certification cut.
“The high-end certified used cars tend to be really, really good. The luxury manufacturers have very strict rules about what gets certified,” noted Art Spinella of CNW Marketing Research in Brandon, Oregon. “Companies like Toyota and Chevy and other more mainstream manufacturers also have rules for certification, but they’re not as stringent so it’s a little more of a gamble.”
After a vehicle is selected for potential certification, there’s the inspection process. Carmakers are big on touting how many points they check off before a car is certified, but is a 142-point checklist somehow better than a 141-point checklist? Probably not. They all tend to cover the same major areas, with some variation in the details or what signifies a check point.
Warranties also can come in many forms, from the remainder of the new-car limited warranty to a specific additional one or two year certified pre-owned limited warranty. Total coverage can range anywhere from 30 days to several years, depending on the manufacturer. Certain carmakers have an exchange or return policy consumers can fall back on for even more peace of mind.
Today’s certified pre-owned come with other new-car-like benefits as well, such as interiors and exteriors detailed to look like new, free initial oil changes and 24-hour roadside assistance. While most additional certified pre-owned perks are intended to make them appear as attractive as new cars, some pluses are CPO-specific.
Many manufacturers offer free vehicle history reports from companies like CarFax to further placate worried shoppers and build consumer confidence in certified pre-owned purchases. Generally speaking, used-car loan rates tend be higher than those offered to finance new cars. But some manufacturers also make special low financing rates available for their certified-car inventory. And others even offer a lease option.
Is there a difference between pre-owned and used cars?
There isn’t necessarily a difference in the vehicle; the difference between a certified pre-owned car and a used car is in the warranty and inspection process. Only used cars that pass a manufacturer’s specific criteria pass into a certified pre-owned category. The requirements vary from automaker to automaker.
Are certified pre-owned cars worth it?
If you value peace of mind, then yes. Having an extended warranty is one of the main benefits to certified pre-owned cars. Buyers who like to tinker with their vehicles or modify them may not see a benefit over a regular used car.
Can you lease a certified pre-owned car?
This will depend on the car company you’re considering buying from. Luxury brands like BMW and Mercedes-Benz often allow shoppers to lease a certified pre-owned car, as does Honda. But it’s not always possible, and whether it’s desirable or not will depend on your unique situation.
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