The car buying process involves some big decisions, not the least of which is whether to buy a new or used vehicle. Buying new means you won't have to worry about any previous accidents or mechanical issues, but this assurance comes with a higher price tag and the high cost of depreciation. If you've decided that buying used is the right path for you, you'll bypass new car depreciation and likely save a considerable chunk of change. How much will you save, exactly? This will depend on another important decision - whether you go with a certified pre-owned (CPO) car or not. To help you decide, we'll break down what CPO means, define the difference between dealer and manufacturer certification programs, and address whether it's worth the extra cost.
What Does "Certified Pre-Owned" Mean?
You've likely seen the term "certified pre-owned" tossed around in dealerships, ads, and online car sites. Just like Volkswagen's tagline for their CPO cars, "Go with confidence", these programs are intended to instill a sense of confidence in the used car shopper. What exactly this term means will vary from one auto manufacturer to another (we'll cover a couple of examples in the next section).
Despite the range of programs, there are some common threads including a requirement for the maximum age of the vehicle and the mileage. The vehicle must also pass a list of inspection criteria, come with a warranty, and vehicle history report. CPO vehicles are commonly newer, low-mileage models that are just coming off lease. As you can imagine, a 2017 CPO vehicle you buy from a dealership will come with less risk than a 2010 car you found on a used car listing site with no certification or warranty.
Types of Used Car Certification Programs
Buying a used car doesn't mean you're giving up all peace of mind. You'll be able to find certification programs and warranties from manufacturers (factory), dealerships, and even used car lots like Carmax. Manufacturers typically offer the most comprehensive certifications for newer, low mileage used cars.
For example, Volkswagen's CPO program includes vehicles 7 years of age or less under 75,000 or 72,000 miles (depending on the model) that have passed a 100+ point inspection including engine performance, transmission, brakes, and steering tests. A model-specific limited warranty is included along with a vehicle history report, and 24-hour roadside assistance. Honda's CPO program includes two certifications: the HondaTrue Certified for 2015-2020 vehicles and HondaTrue Certified+ for newer vehicles from 2019-2020. A 7-year/100,000 mile powertrain warranty is included along with a 182 point inspection, roadside assistance, and two complimentary oil changes.
Although automakers created the certified car program, dealers have hopped on the trend to offer "dealer certified" used cars. The used car chain, Carmax, offers "Carmax Certified" used cars which means no flood or frame damage, and no salvage history. The car is required to pass a 125+ point inspection and must undergo a detailed reconditioning process. The most notable difference in the Carmax certification and a factory CPO is in the warranty. Carmax's is a 90-Day/4,000-Mile limited warranty with the option to purchase an extended service plan. Individual used car dealership certification programs vary, but you can expect a warranty similar to Carmax.
Are Certified Pre-Owned Vehicles Worth It?
A factory CPO vehicle will typically be priced significantly higher than a non-CPO vehicle because the warranty is more comprehensive, and the qualifications and inspections are more stringent. This adds up to a higher expense for the dealership which is passed down to the buyer.
CPO cars will only be available through franchised new car dealerships which have higher average used car prices than used car lots and private sellers. Due to the variance in pricing for CPOs and other certification programs, it's difficult to compare a CPO used car with a non-CPO used car apples-to-apples. According to U.S. News and World Report's pricing data, you can expect to pay about 17.5% more for a CPO.
The thorough inspection and warranties that CPO cars provide are great for your confidence, but they aren't as easy on your wallet. In some cases, the price difference between a new car and a low-mileage certified pre-owned car is negligible. Remember that even a CPO vehicle is still a used car and you'll need to do your due diligence to make sure nothing slipped through the cracks during the manufacturer inspection. This means getting it checked by an independent mechanic. According to Jalopnik, the more expensive the car, the more value you get buying a CPO model because repair costs are higher for luxury than for mass-market cars. When you're shopping for used cars, compare CPO models with non-CPO to see if the peace of mind is worth the extra costs.