The first factory-certified pre-owned cars were luxury models, starting with Mercedes-Benz in 1989 and followed by Porsche in 1991 and Lexus in 1993. Later Acura, BMW, Cadillac, Jaguar, Toyota, Saturn and Volvo joined in. Now, virtually every automaker offers a program.
Early on, certified pre-owned cars were seen as alternatives to new cars and, for the most part, were low-mileage cars coming off a lease. Now, even cars older than 5 years are sold as certified.
So, is it best to buy a certified luxury car or a certified economy one?
Because the rate of savings is the same, experts say, the amount of the savings is greater with a luxury car because of the money you save on depreciation.
Less-popular and smaller cars depreciate quicker because pre-owned luxury vehicles are popular, experts say.
Even factoring in new-car incentives, consumers save about $3,200 by buying a 2- to 3-year-old car; all that money comes in the form of depreciation that the original owner had to absorb.
And if it's a luxury certified pre-owned, the savings on depreciation is even greater, as much as three times that on a non-luxury car, because you are starting from a higher point, experts say.
You can expect to pay from $800 to $1,300 more for a factory-certified pre-owned car than a non certified used car of the same make and model because the price is kicked up to defray the cost of inspection, repairs and warranty.
That added cost is offset by the fact that you save about $2,000 in depreciation on a certified pre-owned 2- to 3-year-old car than a non certified one.
A non certified car usually has more miles that bring more wear and tear, plus older, worn components that will need repair.
Few people notice when a luxury sedan is more than 2 or 3 years old, so many buyers who want the image and prestige of a luxury car without that initial big price tag favor certified cars.
One of the reasons for buying a used car is to avoid absorbing the huge chunk of depreciation you will when buying a new car.
When buying new, you might have to pay $30,000, but depreciation on that car is 20 to 40 percent in the first two to three years, depending on whether it's a luxury or an economy car. If you wait two to three years to buy the car, rather than pay $30,000, you might only pay $20,000.