Buyers Guide - Certified Pre-owned Cars

Are you thinking about buying a new car, but discouraged by the thought of losing money to depreciation right off the bat? At the same time, are you uncomfortable with the idea of purchasing a used car with an unknown history and little-to-no promise of support after whatever is left of the manufacturer warranty expires?

If this rings true, a certified pre-owned (CPO) car may be for you. But what is CPO, and what should you know before you start shopping? Read on to find out.

What is a certified pre-owned car?
Fundamentally, a certified pre-owned vehicle is no different from any other used car of similar age and mileage. While CPO programs vary (more on that later), most of the cars for sale under this banner are being offered by the same dealerships where the vehicles were sold. Most are “off-lease” examples (meaning they were previously leased and have been returned to the dealer at the end of their terms). They’re generally one-to-three-years old and usually have 36,000 miles or fewer on their odometers (the typical new vehicle lease term). There are some exceptions to this, which we’ll get to later.

What does this mean for the buyer? For starters, CPO vehicles have already undergone their most significant depreciation hits. A car loses a huge chunk of its initial value the second it is recorded by the dealership as a retail sale. This is the point at which it is considered “used” for any future transaction purposes. For this reason, a CPO vehicle that is only one year old may be significantly less costly than a brand-new vehicle with the same features.

So it’s used. Can I trust it?
This is where CPO vehicles differ most significantly from their generic used brethren. While a used car that is only a couple years old may still be under some portion of its factory warranty, it is often nearing its end. In addition, some long-term factory warranties are not completely transferrable to subsequent owners.

CPO cars not only retain whatever is remaining of their factory warranties, but they also typically include an additional warranty term that guarantees the car against defects for an extended period of time. For example, Audi’s new-vehicle limited warranty covers the car for four years or 50,000 miles. Audi’s CPO warranty extends that an additional two years and 50,000 miles, effectively making Audi’s limited factory warranty on a CPO car good for 6 years/100,000 miles from the point of the initial purchase.

That last bit is important. Continuing with this example, Audi’s extended warranty doesn’t care when the car was bought from a CPO program. It only cares when the vehicle was originally purchased. For that reason you should be sure to research the CPO program you are considering. See the “Not all CPO programs are created equal” section for more information).

Because of these guarantees, turned-in vehicles are generally put through a fairly rigorous inspection before they are “certified” by the dealership for sale under a CPO program. This is a good thing for consumers, because it means CPO vehicles should generally be in better outward and mechanical condition than cars which are not certified.

What’s the catch?
So, a used car with a factory-backed warranty sounds like a great deal, right? It can be. But keep in mind that dealerships aren’t in the business of giving away service coverage. CPO vehicles do carry a premium over their simply “used” cousins.

So, you’re going to pay more. Is it worth it? That’s up to you. In some cases, a CPO vehicle may cost nearly as much as a brand-new equivalent if the manufacturer is offering heavy incentives for whatever reason (such as the end of a model year). Before buying CPO, you may want to look into this. Don’t worry: your dealer will be equally happy to sell you a brand-new car.

Not all CPO programs are created equal
The guidelines and examples above are not universal, and for that reason you should research the specific CPO program you’re considering before making a purchase. Certified pre-owned programs frequently include variations in coverage and cost.

Buyers should also exercise caution when comparing CPO vehicles. For a car to truly qualify as CPO, it should be certified to manufacturer standards and covered by an original equipment manufacturer- (OEM-) backed warranty. Audi’s CPO program (which we mentioned earlier) is an example of a CPO program that is fully supported by the manufacturer. Dealers participating in the Audi CPO program must adhere to inspection guidelines laid out by the manufacturer and customers who are shopping for new cars can expect a consistent level of quality from Audi’s CPO vehicles regardless of the dealership or region in which they are shopping.

In addition, because Audi’s CPO vehicles are covered by an extension of the factory limited warranty, buyers don’t have to concern themselves with the possibility of dealing with an aftermarket “extended warranty” provider should a defect show itself during the coverage period. For this reason, you should take care when considering vehicles advertised as “certified” that are offered at the dealership level rather than the factory level.

These are usually found at generic used-car dealerships, rather than dealers that hold manufacturer-affiliated franchises. Often these vehicles are sold with aftermarket warranties that can be far less comprehensive than those offered by manufacturers, and frequently the owners is required to foot the initial bill for repairs before applying for reimbursement through the warranty provider.

MG’s bottom line
Certified pre-owned cars have a lot to offer, and with a record number of buyers opting to lease rather than finance new vehicle purchases, these programs are more commonplace than ever. As with any major purchase, the buyer should learn all he or she can about buying a CPO vehicle before pulling the trigger.

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