Buying a used car always meant taking a risk, trying to decide if the seller is trustworthy, and crossing your fingers against driving home with a lemon. Certified preowned is a process of ensuring the quality of a used vehicle while raising the confidence of potential buyers – and getting a premium price.
Auto dealers created the certified preowned process about 30 years ago when vehicle leasing became popular for individuals who wanted to drive a recent model car. Leased vehicles were “used” but lightly so, usually maintained by the dealership, and were returned with low mileage when their two- or three-year terms were up. Selling these vehicles became easier when the dealers warrantied them against manufacturer defects for an additional period of time. The first dealers to offer certified preowned programs were luxury brands Mercedes and Lexus.
Americans buy 17 million new vehicles and 40 million used vehicles each year. We keep our vehicles an average of about 8 years, which means those who sell their vehicles before they show heavy use may be eligible to sell or trade them to a dealership for inclusion in a certified preowned program.
Types Of CPO Cars
Manufacturer certified used vehicles are offered through the vehicle brand. Be sure to double-check the warranty to confirm that the manufacturer is behind the certification before buying, because a dealer may play with the wording, offering the warranty through that location alone. The benefit of a manufacturer’s certification is that vehicles in need of repair or service may be taken to any participating dealership within that brand. People often travel long distances to find and purchase a vehicle with certain attributes, such as color, premium sound system, and high-end trim, so the assurance that a local dealership will honor the certified program standards in its servicing is key.
Seller-certified preowned vehicles may offer many of the same assurances against breakdown but service is likely only available at the point of sale. Buyers should determine, in writing, if an expensive purchase is perhaps supported by a local partnership which would honor the certificate of service if the original dealership closed.
Don’t be lulled into comfortable complacency by the CPO sticker on the vehicle. Purchasing an automobile is a significant investment. Do your homework in order to determine if it’s worthwhile to pay the difference in price between the CPO deal and another vehicle for sale that is the same make, model, and year. Read the fine print in the warranty, and take the vehicle to a trusted mechanic for a once-over to ensure the information the dealership is providing is accurate and complete. For instance, a VIN check, which supplies the information on the vehicle history report that you get with the purchase, will show how many owners the car has had, the climate where it was kept, whether it was in any accidents, and whether it has been totaled. Find out if any modifications made to the vehicle – even those in place before your purchase – can negate the warranty.
Benefits Of Certified Pre-Owned Cars
Typically, certified preowned vehicles offer the assurance of many of the same things a new vehicle purchase does, including:
- Low mileage
- Recent vintage (six years old or newer)
- A multi-point inspection of major components
- Same or similar features as a new model
- Free maintenance
- Extended warranties on major components like drivetrain
- Roadside assistance.
Typical CPO Programs
Toyota’s certified preowned vehicles get a 7-year/100,000 mile limited powertrain warranty, a year of free roadside assistance, and a 160-point inspection along with other perks. Ford’s certified preowned vehicles go through a 172-point inspection by dealer-trained technicians. Buyers get extended comprehensive as well as powertrain warranties with roadside assistance and special low-interest financing deals. Mercedes’ CPO program goes further, warrantying the electrical, climate control, locks, and audio components along with powertrain and other major mechanical systems.
Purchases and Car Depreciation
Depreciation is the amount of value a vehicle loses as it ages. All vehicles begin to depreciation the moment they are sold, but some do so more quickly than others for a variety of reasons including the manufacturer, the vehicle’s condition, and the mileage accrued. Buying a used car or truck is a hedge against depreciation because the buyer avoids the immediate loss of investment that takes place with all new vehicles, but it’s important to understand depreciation when shopping for a used vehicle to ensure the prices are in line with the vehicle’s actual value. Check not only the “blue book” value but the prices on the same model and trim on vehicles for sale in your region. Demand for a particular vehicle can drive the price of used cars in a particular region as well.
Most vehicles depreciate by nearly 50 percent of their value in the first five years. Vehicles that depreciate quickly include the Chevy Volt and Nissan Leaf electric vehicles as well as many luxury models including:
- Maserati Quattroporte;
- Lincoln MKT and Lincoln Navigator;
- GMC Yukon XL;
- Infinity Qx60,
- BMW SUV models X1, X3, and X6.
Rare, low-mileage sportscars that are usually kept as second vehicles and carefully cared-for vehicles are among those that depreciate slowly. Brands that, in general, retain value because they are known for reliability and longevity are Toyota, Honda, Ram, Jeep, and Porsche. Larger model vehicles that are very popular in the U.S. and which retain their value include:
- Jeep Wrangler models,
- Toyota Tundra, Tacoma, and 4Runners,
- Nissan GT-R and Frontier,
- Porsche 911,
- Subaru Impreza WRX.
Small, economical cars that retain their value can be a win-win with lower initial purchase prices, low cost to own and operate, and good resale values. These include:
- Subaru Impreza and WRX,
- Honda Civic and Fit,
- Toyota Yaris iA, Corolla iM, and Prius C,
- Volkswagen Golf R,
- Ford RS.
