"1. What are Certified Pre-Owned Cars?You
may have noticed that many vehicles formerly known as "used" are now
termed "Certified Pre-Owned" or "CPO." These programs originated in the
Luxury category due to the high rate of off-lease vehicles populating
the market in the past five years. Because these vehicles were in such
great shape and had lower mileage, manufacturers took a serious
interest in ensuring that they delivered a positive purchase and
ownership. As a result, they began to "refurbish" the vehicles and add
warranties and special financing. This trend has been growing year by
year and is quickly spreading to the majority of manufacturers who
market their cars in the U.S.
CPO vehicles are selling at a
growth rate of around 21% per year. The interesting thing about this is
that only 25% of car buyers started out intending to buy a CPO vehicle.
The majority of CPO buyers end up purchasing these vehicles as either a
lower priced alternative to a new car, or because the used vehicle they
found just happened to be a CPO.
Probably the best argument for
purchasing a Certified Pre-Owned vehicle is that most new vehicles
depreciate at a rate of approximately 20% per year. With this in mind,
the additional cost involved in the inspection, refurbishment and
warranty may still add up to a smart purchase. In any case, Certified
Pre Owned vehicles are here to stay and for many have provided an
excellent alternative to new car buying. 2. What Are the Advantages of CPO?A
variety of organizations have jumped on the bandwagon. Dealers and
several third-party suppliers have also begun offering certified
programs. The following features reflect only the automotive
manufacturer's CPO programs, which we believe offer the most benefits
to car buyers today.
Most programs:
Include only vehicles that are under 5 years
Have mileage limits of under 100,000
Use only vehicles that have had no major bodywork from prior accidents
"Refurbish" the vehicle after a multi-step inspection (75 to 305 inspection points)
Provide an extended warranty
Additionally, some programs offer:
Consumer cash incentives
Low interest loans
Lease programs
An exchange policy
3. How Are CPO Vehicles Priced?Since
CPO vehicles represent the "cream of the crop" of recently used
vehicles, you may be hard pressed to find a newer used vehicle with low
mileage and no body damage that is NOT offered as a CPO. That said, the
added value of the refurbishing and warranty creates an opportunity for
dealers to sell these used vehicles at a higher price. Currently, it
can be as much as $3,000 more for high-end vehicles, but the average
additional cost per vehicle is around $1,100 according to a recent
study by J.D. Power & Associates.
Kelley Blue Book
conducted an online survey among car buyers and found that the average
value a consumer perceives a CPO car to have is $1,596 per vehicle.
Each of the programs, however, must stand on its own merits along with
the marketability of the automotive brand itself. 4. What Should You Look for in a CPO Program?
According to our study, the trait perceived to be most valuable in CPO
programs is the peace-of-mind that comes with a multi-level vehicle
inspection and refurbishment. The addition of an extended warranty is
perceived to be the second most important trait among car buyers.
When checking out the CPO programs available, here are some tips to insure your own peace-of-mind in the transaction:
Tip #1: Inspect the points of the inspection
Each program boasts anywhere from 75 to 140 points of inspection. It is
safe to assume that the vehicle has been refurbished in these areas if
it passed the inspection through to certification. The key to looking
at these points is in identifying the major fixes that would have
otherwise cost you a bundle. Remember, many of these points would be
covered in a tune up, detailing or might even be part of a state safety
inspection required for all used cars sold by dealers.
Key inspection points:
VIN Inspection (emissions, service & recall, VIN code issues, etc.)
Tip #2: Get the warranty the vehicle warrants
Each CPO programs offers a specific, non-negotiable warranty. When
reviewing the warranties offered, research whether the particular model
has a history of maintenance issues or transmission failures and make a
judgment call from that perspective. If the make of the vehicle is
known for quality and low maintenance, it might justify a shorter
warranty. Most programs offer an extended warranty beyond the CPO
warranty, but each program differs in cost and features. You also may
want to research whether the vehicle still has any of the original
warranty left on it - this will only add to the length of the warranty
overall.
Tip #3: Look for special incentives and finance deals
One of the most unique features of CPOs is that finance and lease deals
are being extended to a used vehicle. This was virtually unheard of in
the past. This one key fact has turned many new car shoppers into used
car buyers and continues to drive sales of CPOs at dealerships across
the country."
