What is certified pre-owned? With new car prices reaching all-time highs, the allure of a late-model used car can be tempting. But how do you know what you’re getting? Sure, you might save a few thousand dollars on the deal, but will you end up paying it all back in car repairs?
This scenario has long been a sticking point for used car buyers. But there is a solution that can bring you peace of mind and still save you money in the long run. It’s called a certified pre-owned (CPO) car, and you can buy one from just about any dealer who also sells new cars.
What is Certified Pre-Owned?
A CPO car is a previously owned vehicle, usually less than 5 years old, with less than 60,000 miles. During the pandemic, some manufacturers like Honda and Acura started accepting older cars up to 10 years old with more miles on the odometer. (The age and mileage warranties vary by manufacturer.)
The original manufacturer backs certified pre-owned cars. A vehicle’s CPO designation comes after passing a detailed, multi-point inspection. They come with an extended warranty from the original date of service, good at any dealer in the country.
If you see a car that is “dealer certified,” know that the vehicle does not offer the backing of the manufacturer certification to make it a CPO car. Dealer certification standards vary by dealer, but the cars still go through an inspection process.
Are Certified Pre-Owned Cars Worth It?
If you’re debating between a new or used car, a CPO car is a great third option. You could buy a higher-end brand or trim level for less than the new version of the same car. “You can buy a two- or three-year-old off-lease vehicle and realize some savings,” said Matt DeLorenzo, former managing editor of news at Kelley Blue Book.
With a little legwork, you might find a similar vehicle without the CPO designation and save some money. A certified pre-owned car costs about 3.5% more on average, but the difference may be greater for luxury vehicles, around 7%, according to Black Book.
Although certified pre-owned cars are more expensive, many buyers consider the peace of mind of driving a certified vehicle to be worth the added cost.
To decide whether a CPO car is right for you, consider the following:
- Are you a used-car shopper who hates having to inspect the car and take it to a mechanic?
- Do you prefer used cars but want the security of an extended warranty?
- Are you OK without the latest vehicle styling and technology?
- Is it acceptable if a car has some wear and tear, such as dings and scratches to the exterior?
If you answered yes to most of these questions, a CPO car might be a fit for you.
How Much Does a CPO Vehicle Cost?
CPO cars, trucks, and SUVs generally cost more than non-certified used vehicles. This is to be expected, though, since CPO models undergo a detailed, multi-point inspection and reconditioning process. They also come with a manufacturer-backed warranty.
Often, these programs feature a long list of extras, including free maintenance, free roadside assistance, and a complimentary loaner vehicle. You may see a cheaper sticker price on a non-certified model, but it likely wasn’t inspected as thoroughly as a CPO model, and it won’t come with any of the extras above.
You shouldn’t settle for the sticker price on a CPO car. Just as you would if you were buying a new vehicle, you should negotiate the price of the CPO model to ensure you’re getting the best deal.
How Does a Non-Luxury CPO Program Work?
CPO programs vary. We’ll use Toyota’s as an example of what a CPO program from a non-luxury automaker looks like.
Each car must be seven years old or newer and have less than 85,000 miles. Qualifying cars undergo a 160-point inspection and come complete with a CarFax vehicle history report.
Every certified pre-owned Toyota gets a 12-month/12,000-mile bumper-to-bumper warranty and a 7-year/100,000-mile powertrain warranty. It’s important to note that the powertrain warranty begins on the car’s original purchase date.
Toyota also includes extras like one year of free roadside assistance, a complimentary loaner car, and travel reimbursement protection. The loaner and the travel reimbursement are only available if your car is in for a covered repair. Toyota charges a $50 deductible for all covered repairs.
If you want to know more about the ins and outs of CPO programs, read our guide on how they work.
How Does a Luxury CPO Program Work?
Like mainstream programs, luxury CPO programs differ between automakers. We’ll take a look at Mercedes-Benz to give you a basic idea of how a luxury CPO program works.
For a car to qualify as a Mercedes CPO vehicle, it must be six years old or newer and have less than 75,000 miles. Eligible vehicles are then put through a rigorous, 164-point inspection.
If the car still has coverage under its original new-car warranty (four years/50,000 miles), the warranty transfers to the CPO buyer. If the original coverage is expired, or once it does expire, the owner gets an extra year of certified limited warranty with unlimited mileage. There’s also an option to purchase one or two years of additional coverage, which also features unlimited mileage.
Extras include 24-hour complimentary roadside assistance and up to $300 in compensation for travel expenses incurred as the result of a covered repair.
Certified Pre-Owned vs. Used Cars
A CPO car comes with a complete inspection. Replacement parts or repairs for any damage occur before selling the vehicle. When buying a used car, the buyer must pay for an inspection and any subsequent repairs to get this same service.
A CPO car includes an extended warranty, a limited bumper-to-bumper warranty, and other services, such as 24-hour roadside assistance. A used car usually offers the remainder of the factory warranty, though only if it’s still in effect and fully transferable.
How Does a Car Qualify for Certification?
When the dealer acquires a used car through trade-in or lease return, they will put that vehicle through a multi-point inspection program administered by a factory-certified mechanic.
If the car, truck, or SUV meets the manufacturer’s criteria, dealers can sell it as a CPO vehicle. The fundamental factors for a potential CPO car are that it must be in excellent condition and be mechanically and cosmetically sound. Many are low-mileage vehicles.
If it doesn’t meet the CPO program requirements, dealers can fix the car’s problems, or the vehicle may face rejection from the program. Each automaker uses a different set of criteria. Still, the bottom line is that CPO vehicles will be the highest quality used cars.
Who Certifies the Cars?
A CPO car gets certified by the dealer and follows the manufacturer’s specifications and requirements. The dealer performs the inspection and makes necessary repairs, but the automaker fully backs the vehicle as if it were selling a new car.
Pros And Cons Of Buying Certified Pre-owned Cars
CPOs are often trade-ins or leased vehicles that have been returned to the dealer. They undergo a multipoint inspection, are repaired if necessary and then are put up for sale.
The advantage of purchasing a CPO is that you’re buying a used car that’s been thoroughly vetted rather than a standard car with an unknown past. Keep in mind that manufacturers have different CPO criteria for age, mileage and wear and tear.
- Nicer vehicle: A typical three-year-old CPO vehicle has fewer miles and is usually in nicer condition than a similar used car, according to Black Book, an industry pricing/value guide.
- Lower risk: The cars have passed a rigorous inspection and have an extended factory warranty, and dealers check to make sure any recalls have been performed.
- Lower APR: Manufacturers offer special APRs for their CPO vehicles, which are often lower than used auto loan rates you might see at banks or credit unions. You might even find 0% APR deals on a CPO car, but you typically need excellent credit to qualify.
- Extras: The manufacturer may offer perks like roadside assistance, free oil changes or a free trial for SiriusXM Satellite Radio.
- Higher price: A CPO vehicle will cost a few thousand dollars more than a similar used car that’s not certified.
- Fewer buying options: You can only get CPO vehicles from a branded dealership, so your shopping options are limited.
- CPO doesn’t mean perfect: A CPO car can still suffer from problems that commonly plague a particular model, or the dealer may not catch everything that’s wrong. Also, wear-and-tear items like tires aren’t replaced if there’s sufficient life left. You may be on the hook for these the same way you would for any other used car.
Some Certified Cars Aren’t Manufacturer-Sponsored
Keep in mind that not all certified used cars are manufacturer-sponsored. Some dealers have their own certified programs with similar benefits. However, they don’t come with a manufacturer-backed warranty.
Additionally, since the dealer is free to set its own parameters for certification, vehicle qualifications and the inspection process may not be consistent with manufacturer standards.
Are There Reasons a CPO Program May Not Be the Best Option for You?
CPO vehicles are more expensive than “regular” pre-owned cars. You’re paying more up front for the inspection, warranty, and various extras in the hope that you won’t have to sink money into the vehicle later.
However, there’s no way to forecast what may happen after the warranty expires, or how much repairs may cost. If you opt for a used car without certification, you could use the money you save to cover expenses later.
CPO programs also aren’t available for older cars, so if you like to buy low-cost, high-mileage rides, CPO isn’t for you.
To learn more, read our article on the pros and cons of buying CPO vehicles.
Which CPO Program Should I Choose?
Now that you have a general idea of what a CPO program is, how it works, and why you might want to buy a certified pre-owned vehicle, you’ll want to consider which company to buy from. That’s where our team of researchers and journalists can help.
We analyzed the CPO programs offered by most major carmakers to find which ones are best for consumers. We gathered data on everything from the lengths and coverage limits of their warranties, to the amount of any deductible you’d need to pay on repairs.
We also checked if the CPO programs throw in extras like complimentary maintenance or a free loaner vehicle if your car is in the shop.
What Is the Difference Between a CPO Car and a Service Contract?
A service contract is a coverage agreement initiated by an independent underwriter, not a manufacturer. Some states require insurance companies to underwrite service contracts, making it easier to verify their validity. Advertisements sometimes call these contracts “certified,” but the agreement is fundamentally different.
There are numerous options with a service contract covering mileage and age and who must perform the repairs. In many instances, a service contract requires the buyer to foot the bill for repairs upfront and then seek reimbursement.
Consumers must address reimbursement disputes with the contract administrator, not the dealer that performs the work. You can run the risk of the contract underwriter going out of business. If that happens, the business closure can nullify the prepaid contract, although the dealer may still be required to honor the contract as laws covering these services vary by state.
Remember, a service contract is essentially just breakdown insurance, and the automaker does not back these programs. Some of these contracts only cover moving parts or major mechanical components.
You are usually not required to get a service contract to obtain financing, so beware of any dealer that tells you otherwise. Some service contracts do not take effect until the manufacturer’s warranty expires and may come with high deductibles. Whatever you do, be sure to read the fine print.
What is the difference between used and certified pre-owned?
When it comes to a certified versus a used car, a CPO car has undergone an inspection and has been reconditioned to factory standards. The manufacturer will stand behind the condition of the vehicle through the warranty. CPO cars usually have lower mileage and are in better condition than similar used cars.
What is the benefit of certified pre-owned?
Peace of mind — you can buy a used car in good condition that’s backed by a factory warranty. A CPO car may be like buying new for a less-than-new price.
What is the best certified pre-owned car to buy?
Like any car purchase, the best choice is the one that fits your lifestyle and budget. Here’s a car loan calculator you could use in your budgeting. Check manufacturers’ websites for availability and incentives in your area. Hyundai’s CPO program has been recognized as a top program for its warranty coverage and service offerings.
Can you negotiate certified pre-owned prices?
Yes, you can negotiate certified pre-owned prices like any other car. Dealers have invested in inspecting and reconditioning the car to meet CPO standards, so they may be reluctant to budge, but it never hurts to ask. As always, do some comparison shopping to see if you’re getting a good deal.
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