Certified Used Car
A certified pre-owned car (CPO) or a certified used car is a second hand vehicle that has passed a safety inspection and comes with warranty. In comparison to traditional cars, these CPO cars usually cost more because they of their certification process and the bundled warranty. In many of the situations, these cars have been returned to “like-new” condition by the dealer and have a manufacturer-backed warranty.
These certified used-car programs go back into the early 90s with high-end automakers like Mercedes or Lexus. These CPO programs were “fueled” mostly by the high quantity of cars that came out of leases. Manufacturers thought that instead of turning these leased cars over to auctions or used-car lots, they should develop these CPO programs, targeting luxury new-car buyers that are on a strict and limited budget.
At the moment, about 40% of all used cars are sold through a CPO program. The main reason behind the success of certified pre-owned car programs is that now consumers can enter a segment of the market that in the past wasn’t affordable to them.
Customers are attracted mostly of the guarantee of a like-new car at a very close used car price tag. Most of these CPO programs include 100-point reconditioning/inspection, warranty coverage as well as some roadside assistance. In addition, a few automakers like Acura or General Motors have a return/exchange policy.
For many car buyers out there, they consider that it is worth paying the premium price as they get the peace of mind provided by owning a CPO car – and this is exactly what manufacturers and dealers want you to think. The reality is that automakers and dealers have come up with and backed these CPO programs because customers have asked for a more accessible method to purchase a used car and dealers have the liberty to charge more for a pre-owned car.
By taking a car and certifying it, the dealer has the ability to raise its asking price, compared to a non-certified car. The cost of this certification to the manufacturer / dealer is probably about 1/2 – 1/3 of what they are in fact charging clients. The vast majority of the dealers will certify and buy warranties on only the best used cars, and when they do, they usually spend from $300 to $1,000.
What you must know is that although dealers will tell you that an inspected car is repaired and returned to its manufacturer specifications or “upgraded”, the fact is that if they find something very wrong with it during this inspection, they will simply take it off the CPO program and sell it “as is” or even wholesaled at an auction house.
By increasing the resale transaction price tag of a used vehicle through a CPO program, the automaker reaps another benefit, consisting of higher residual values on like-model new cars. As a consequence, it increases the lease value of a like-model new car which means that the automaker will get a bigger profit – one of the most important reasons why car companies get involved in these CPO programs.
A certified used car can have either a factory or a dealer certification. Most of the used-car dealers and some new-car ones offer their own brands of certification. Our advice is to avoid dealer-certification programs as they are a bit of a gamble in comparison to getting a factory-certified car and in many cases, not worth the money. In addition, do not forget to get a copy of the inspection/repair list for the particular certified vehicle you are looking at.
A large proportion of consumers prefer purchasing certified cars as they would encounter less hassle in the car-buying process as it allows them to get a like-new used vehicle for less money than they would expect to pay for a current model, while at the same time holding on to the security of a factory warranty. Other buyers get non-certified cars as in most of the cases these are considerably more affordable, and the cost of getting the vehicle inspected and buying the warranty coverage independently is in many cases more affordable than the cost of the certification.
Regardless if you fall in one or the other category, you will need to get a vehicle history report in order to avoid purchasing a lemon. This report will tell you the history of the title, report recorded mileage, major accidents and/or repairs along with other similar issues. To get this information, you will have to know the car’s VIN – Vehicle Identification Number.
To sum up, both manufacturers and dealers market a certified used car as they know that a consumer wants a hassle-free shopping experience and these CPO programs bring them more money in the bank. Of course, there are those savvy consumers that will verify the car’s title, get an extended warranty and hire a mechanic that will cost them less in comparison to what a dealer charges for certifying the used car. But most of us prefer the peace of mind that such a certified used vehicle can give and the responsibility of checking out the car handed out to the dealer. In the end, only you, the consumer, can choose between certified or non-certified.
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