Is CPO For You?
When is buying a certified pre-owned car the right thing for you? To decide, you first need to understand the differences among used cars.
Older cars that are traded in when a new one is purchased become part of a dealer's used-car fleet and, as a rule, the dealer keeps the good ones and disposes of the bad ones.
For decades, used cars were seen by many consumers as piles of junk looking for a home. To them, "used" meant "abused." Then along came a wise marketing type who sought to change that image by calling used cars "pre-driven" or "pre-owned."
The change made it considerably easier to sell the cars, as dealers went from selling someone else's trouble to selling someone else's treasure.
The pre-owned car got an even greater image boost when Mercedes-Benz began selling "certified" pre-owned luxury cars in the late '80s. For years, consumers had suggested car dealers inspect trade-ins for damage and make repairs before putting them on used-car lots. Dealers, however, said that would be too costly and time-consuming.
Then manufacturers decided the time had come, and automakers came up with the idea of having dealers inspect and repair trade-ins before re-selling them, but with an added bonus that made the venture worthwhile — dealers would inspect and repair the cars out of their own pocket, and the factory would then offer a warranty on these "certified" pre-owned cars.
There are differences among certified used cars. There are certified pre-owned factory-backed programs and certified pre-owned dealer-backed programs. The biggest difference is that factory-backed programs offer a warranty that's backed by the factory at no cost to you, while with dealer-certified programs you usually have to buy an extended warranty from the dealer to ensure coverage.
"'Factory-backed' also means they are warrantied at any dealership selling the same brand anywhere in the country," said Art Spinella, president of CNW Marketing Research. "Dealer-certified means they usually have to be brought back to the selling dealership."
So why should you consider a certified pre-owned car?
"Because it gives you another option when buying a car," said Rob Gentile, director of web product management for Consumer Reports. "The average price of a new vehicle today is almost $30,000, but a certified pre-owned car gives you an alternative option to buying a new vehicle — an affordable way to save money by buying a car that's been inspected, repaired and warranted."
The key to certified pre-owned vehicles is that, unlike other used cars, they have been inspected, repaired and given a factory-backed warranty. The price of the car rises to defray the cost of those perks, but the higher price is offset by the consumer's peace of mind.
Auto industry experts estimate that up to 1.6 million of the 17 million used cars sold by dealers each year are factory-certified, and that 20 percent of shoppers who are happy with their used car will buy the same brand when they choose to buy a new car.
"Factory-certified has become very popular," said Jerry Cizek, former president of the Chicago Automobile Trade Association, which represents more than 500 new- and used-car dealers in the Chicago area. "One reason for offering certified pre-owned cars is that it's a way for automakers to keep you in their family. If they attract you into a pre-owned car and you're happy, you eventually will buy the same brand when you purchase new, and they are hoping for repeat new-car sales."