Here’s The Truth About Certified Used Cars (CPO)

If you’re buying a used car, you’ve probably noticed that more than a few ads proudly say “CPO” or “Certified” in the headlines, as well as a higher price tag.

The CPO mark can instill confidence that this is an excellent used vehicle to trust. In fact, 74% of young shoppers are willing to pay more for a CPO vehicle, while those who truly value them by $ 3,800, according to Autotrader…

But what really is an certified used car? Personally, as someone who has sold used cars for years, I find CPO programs mostly pointless.

What is a certified used vehicle?

A used car becomes certified used when it:

1. Has gone through some kind of quality check process.
2. Includes some kind of additional warranty.

Most often, the verification process involves a 192-point quality check or something similar, and the included warranty is an extension of the manufacturer’s limited warranty.

Read more: Looking for a new (used) car? Here are 4 of the best used cars

“Certified by the manufacturer” or “Certified by the dealer”

As you browse CPO vehicle listings on sites such as Edmunds, you will see that some vehicles are labeled “Manufacturer Certified” and others labeled “Dealer Certified.” Oddly enough, many of them are simply labeled as “Certified,” so you might have to dig through the description to find the details.

You need to determine if the car is certified by the manufacturer or the dealer because that can be a big difference.

In order for a vehicle to receive the high status of “Certified by the Manufacturer”, the dealer must take three steps:

1. Pay the manufacturer a fee.
2. Make sure the vehicle passes the quality assurance (QA) of the CPO manufacturer.
3. Include a warranty, usually a factory warranty extension.

To protect their brands, CPO car manufacturers’ quality tests are generally quite stringent. You can generally trust certified car manufacturers to be of better quality than vanilla used cars.

Now the second type of CPO is “Certified Dealer”, which means that the car has only passed dealership quality standards.

V Little In such cases, a dealer certified vehicle can be as good as a manufacturer certified vehicle. Some dealerships start their own certification process to avoid the fees and bureaucracy associated with obtaining an automobile manufacturer certification, while following a rigorous verification process and include a generous warranty.

More often than not, however, a “dealer certified” vehicle is just a used vehicle with a very simple warranty.

Dealers are smart; they know that if they sell a used Kia Soul for $ 15,000, they will only sell an extra $ 750 warranty, perhaps 40% of the time. But if they combine the car and warranty and sell it as a “Certified Kia Soul” for $ 16,500, they are more likely to sell the car. and make more money selling.

Read more: Former Car Salesman Told It All: How to Beat Car Dealerships in Their Own Game

When is a certified used car worth?

A certified used vehicle is simply a used vehicle that:

1. Passed some kind of technical inspection.
2. Includes some sort of extended warranty.
3. May include bonuses such as 24/7 roadside assistance.

According to AutotraderCPO vehicles typically cost about $ 1,500 more than their used equivalent.so let’s take a closer look at what you get to see if the CPO is really worth the month’s rent.

Is the CPO quality guarantee worth it?

CPO vehicles are considered more reliable than their pre-owned counterparts because they have passed some sort of quality assurance test or “161 point test.”

But no dealer or manufacturer verification process replaces getting your own $ 150 PPI from an independent mechanic to the point of sale.

The problem with a seller’s own quality assurance process has three parts:

• Seller checks are inherently biased. When the party selling you the car is also the source telling you it’s worth buying, there is a conflict of interest. A retailer or manufacturer can loosen up their standards if they are trying to promote a product quickly. An independent mechanic will not do this.
• Seller checks are binary. CPO quality assurance tests usually pass / fail. The salesperson may tell you that the car’s brakes and timing belt are in order, which may be true. currentlybut the PPI can show that both components have less than 30% of their lifespan, which means you will have to pay $ 2,000 for repairs over two years.
• When checking the seller, human errors are possible. At its best, CPO vehicle quality checks are still subject to human error. A pre-purchase inspection for $ 150 is at least a second opinion, and a second mechanic can identify potentially serious issues that the dealer mechanic may have missed.

All three reasons why Federal Trade Commission recommends that all buyers of used vehicles undergo a pre-purchase inspection, CPO or otherwise.

In my experience in car brokering, dealers are more reluctant if you are trying to get the PPI of a certified used vehicle. They take it as an insult to their quality assurance process or say it is unnecessary. Call it a “second opinion,” and if they still resist, leave.

In short, the seller’s confidence that the vehicle is in top shape does not really matter much until you verify it yourself with an independent inspection.

So the “quality assurance” that comes with CPO cars is not worth $ 1,500 or, in my opinion, nothing at all.

Is the CPO guarantee worth it?

Most often, CPO vehicles come with an extended factory warranty. If the vehicle was originally sold as new with a 3 year / 36,000 mile limited warranty, the seller may extend it to 5 years / 60,000 miles.

This means that if you buy it when it is 2.5 years old and has 20,000 miles on it, you are essentially getting a 2.5 year / 40,000 mile warranty.

Whether the guarantee is worth the $ 1,500 CPO markup depends on three factors:

• Guarantee period. Simply put, how long will the warranty last? The extended warranty usually costs about $ 400 a year on new cars, so a 3-year / 60,000 miles extended warranty for a 2-year vehicle is actually only a 2-year warranty, which costs a maximum of $ 800.
• Warranty coverage. To accurately estimate the true value of the warranty, you need to carefully study its terms. Is it really from bumper to bumper? Or just the drivetrain, which means you’re all else on the hook?
• Vehicle reliability. You are much less likely to make money with Toyota warranties than with Jeep warranties. If a historically reliable vehicle is inspected before purchase, you can probably drive it for many years without a warranty.

In short, if you are buying a historically unreliable vehicle, or a vehicle with expensive parts, the warranty is from bumper to bumper. could cost a CPO co-pay, depending on its duration.

If you’re wondering if a single warranty might be worth the additional CPO fee for a specific vehicle, call for a quote on individual extended warranties.

So the “guarantee” of quality is not worth it, and the guarantee maybe not worth it … but what about the extra benefits?

Are CPO Benefits Worth?

CPO purchases often include free 24/7 roadside assistance, towing, and other travel perks. Basically, you get free AAA Classic Membership, which usually costs ~ $ 55-70 per year depending on your region.

I’ve seen CPO listings that include a whopping 10 years / 100,000 miles of 24/7 roadside assistance.which increases the cost by $ 680 and can offset the additional CPO costs, especially if you (or your new car) are prone to breakdowns. But one or two years of coverage is definitely not worth the significant price hike.

Should you buy a certified used car? Probably no

In my opinion, most certified used cars are not worth the prices dealers ask for.

Now that dealers know that younger buyers value $ 3,800 more CPO vehicles, I fully predict that we will see two trends in the certified used car market:

1. CPO standards will be lowered to increase inventory and meet demand.
2. CPO prices will rise arbitrarily.

While CPO may have started out as a new way to draw attention to superior used cars, it has evolved into deceptive sales tactics used to inflate thousands of unsuspecting car buyers.

CPO deal could worth it if it meets these criteria

Don’t fall for the false sense of security with the tempting term “certified pre-owned”. Instead, do the math and ask yourself: Are the benefits of CPO really worth the extra money I would spend?

You will likely find that in most cases, CPO cars just aren’t worth it.

But on rare occasions, a CPO deal could worth it if it meets all of these criteria:

1. Its price does not exceed $ 1000 compared to a regular used car.
2. It includes a minimum 3-year / 36,000-mile bumper-to-bumper warranty from date of sale, not manufacturing.
3. You will most likely need additional warranty coverage because the vehicle is historically unreliable / expensive to maintain.

Primarily, Are you buying a historically unreliable vehicle, and is a CPO warranty cheaper than a standalone warranty?

But if you buy historically reliable car, CPO programs are unlikely to add enough value to warrant the usual surcharge.

Summary

Used Certified Programs can instill confidence in a shopper, but more often than not, there is simply not enough increased cost to justify a ~ $ 1,500 price increase.

They offer a quality guarantee, but a $ 150 Independent Mechanic Inspection will allow a more thorough and impartial assessment of the vehicle’s true condition.

They offer extended warranties, but most used vehicles (especially the reliable ones from Toyota, Mazda and Hyundai) will not require additional warranty coverage for the first 5 years / 50,000 miles.

It is best to buy a reliable used vehicle that has been inspected before buying and take good care of it.

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