Should I Buy A Certified Pre-Owned Car?
When purchasing a car, consumers used to have three options, buy a new car, lease a car, or buy a used car. Each type of car had its specific advantages and disadvantages that car buyers would decide which the best fit was for them. However, within the last six to eight years, another option has been made available to the consumer, the Certified Pre-Owned car (CPO). The CPO came about as a way to sell former leased cars that were only two to three years old, in very good condition, and whose lease had just expired. In many cases these previously leased cars were luxury cars such as a Lexus or Mercedes. Therefore, a CPO provided a way for used car buyers to purchase a high-end vehicle that they would not normally be able to afford. It is estimated that about 50 percent of CPOs are luxury cars.
CPOs appear to be here to stay. In addition to the number of off-lease cars that can be converted to CPOs, many automobile manufacturers have been struggling to the point that they are desperate to find ways to maximize their sales revenues. In 2005, about 1.6 million CPOs were sold, which accounted for about 10 percent of total automotive sales in the US. Furthermore, according to JD Power and Associates, 38 percent of late-model used car purchasers bought a CPO.
What Exactly Does A CPO Mean?
With a manufacturer's CPO, car makers take their later model vehicles, less than five years old, subject them to vigorous inspections, in some cases recondition certain parts of a car up to standard, and apply an extended warranty and other incentives so they can resell their CPOs at a premium, used car price. This is intended to benefit both car manufacturer and buyer. The manufacturer will maximize on their profit margin while the buyer will receive an almost new, higher end car with a limited warranty that should be reliable.
Advantages of Buying a CPO
Besides the ability to buy a higher class car than you would normally be able to afford new, due to the car's depreciation, CPO buyers like the extended warranty and rigorous vehicle inspection that a CPO offers. This appears to give the car buyer piece of mind that he or she has bought a near new car which can be relied upon to operate properly. Additionally, some manufacturers will include a vehicle's car history from companies such as Car Fax.com
Some manufacturers will include other incentives like a free initial oil change, 24 hour roadside service, detailing, other options and even low financing rates that can help make the car more affordable.
Although determining which cars qualify as a CPO differs from manufacturer to manufacturer, usually luxury manufacturers are the most selective when deciding which of their vehicles qualifies as a CPO. Therefore, since luxury manufacturers have higher standards you are more prone to getting a better condition, lower mileage CPO when buying a luxury CPO vehicle.
Despite the fact that different manufacturers advertise more extensive inspections, they all basically cover the same areas of a vehicle. However, you may still wish to carefully review the points from an inspection. The same holds true for vehicle warranties, which can vary quite a bit from a few weeks to a couple years. Some manufacturers may even offer an exchange or return policy.
Disadvantages of Buying a CPO Car
The downside of buying a CPO is that you will pay a premium used car price for the extended warranty, rigorous inspection and other incentives a manufacturer offers. This is why it pays to shop around and negotiate with a dealer. A CPO's price also will differ depending on its geographical area. So how much you negotiate will be partly dependent upon this factor.
Another down side is that the certification premium that you pay for your CPO will not increase the resale value of your CPO when you decide to sell it or trade it in.
Some finance companies may not be willing to finance any premium (the extra cost you pay for a CPO) on a vehicle, especially if that premium is above the Kelley Blue Book value.
Although a rigorous inspection may give the car buyer more piece of mind about the condition of the CPO he or she is buying, and it is logical to think that such an inspection should decrease your chances of buying a car with problems, this does not guarantee that you will not encounter used car problems.
Since the CPO market has grown quite a bite over the years, manufacturers are not the only places offering a CPO now. Independent dealers and used car mega stores have joined in the market. However, most consumer reports suggest that manufacturer backed CPO programs offer newer cars in better condition. This is in part because a manufacturer knows that it has to stand behind its brand name. Also, with a manufacturer backed program, you are assured that your repairs covered by warranty will be honored by a manufacturer dealer across the country.
Certified Pre-Owned Car Conclusion
Buying a CPO offers you another option when considering buying a car, new or used. Regardless of the path you believe is right for you, consider the tips offered in this article, do your homework, always negotiate a final price and remember that your final goal is purchase a vehicle that fits your needs and is in good condition and reliable for the best price possible.