• Buying Guides

What is a CPO Warranty vs Extended Warranty for Cars?

By Autolist Staff | February 1, 2019

One of the perks of buying a new car is the warranty. Most new vehicles come with a comprehensive, manufacturer-backed coverage plan of at least three years or 36,000 miles, whichever comes first. If you are working on a budget but are concerned about the risk that comes with buying a used vehicle, the next best thing you can get is a certified pre-owned car. CPO cars are late-model, low-mileage used cars that have been inspected and refurbished by the manufacturer and/or factory-trained technicians. They come with a certified pre-owned warranty which is an extension of the original warranty issued by the manufacturer.

If your budget is tight, you can purchase a regular used car (non-CPO) and get an extended warranty from the dealership or a third-party company. Extended warranties differ from CPO warranties in that they do not have the backing of the vehicle’s manufacturer. For this reason, they are sometimes called extended service contracts or service agreements. The differences, however, do not end there. Knowing what you get with a CPO warranty versus extended warranty can help you decide what coverage plan is right for you.

Eligibility

As the name implies, only late-model, low-mileage vehicles qualify for CPO certification and warranty. These vehicles have to pass strict inspection and reconditioning standards set by the manufacturer. For a non-luxury Toyota car to be certified pre-owned, for example, it must be seven years old or newer, have fewer than 85,000 miles on its odometer, and pass a comprehensive 160-point inspection. In this way, a CPO warranty is more than a mechanical guarantee. It is an extension of the manufacturer’s commitment to upholding the highest standards of quality.

Third-party warranty providers often don’t require used vehicles to meet any special conditions to get extended warranties.

Manufacturer Backing

Note that not all CPO warranties have the manufacturer’s backing. Some independent dealers have their own certification programs which they use to qualify used vehicles. Since the standards set by these programs are not consistent with those established by manufacturers, the warranties issued afterward are not sponsored by the respective automakers.

If you are buying a “certified pre-owned” Ford from a Chevy dealership, it is unlikely the CPO warranty you get is actually backed by Ford. Chances are it is an extended warranty disguised as a CPO warranty. You can only get a manufacturer-backed CPO vehicle from an authorized dealership that exclusively carries the manufacturer’s brand. (If the dealership is both a Ford and Chevy store, then it could be a true CPO vehicle).

Pricing

Certified pre-owned warranties also differ from extended warranties in their pricing structure. CPO warranties are included in the price of a vehicle. Extended warranties are negotiated and sold separately, usually after the purchase of a car. This does not mean that certified pre-owned vehicles are cheaper than non-certified used vehicles. As of 2018, non-luxury CPO cars cost roughly $1,500 more than non-certified used vehicles of the same make and model. Automakers bundle the cost of inspection, reconditioning, and the warranty itself into the price of CPO vehicles.

Additionally, CPO warranties come in standard packages that manufacturers put together. Many automakers offer a basic one-year/12,000 miles comprehensive CPO warranty on qualified cars. Others, such as Hyundai, offer an extended five-year/60,000 miles coverage with their certified pre-owned cars. Whichever coverage you get on the CPO vehicle you are interested in is what you take.

Extended warranties come with more flexibility. Depending on what you are willing to spend, you can get an extended warranty for any period between 30 days and ten years, and coverage for anything from the engine and transmission to the entire car.

Coverage

Certified pre-owned warranties vary from manufacturer to manufacturer, but most plans offer bumper-to-bumper and powertrain coverage. Vehicles that qualify for Toyota’s non-luxury CPO program, for example, get a 12-month/12,000 miles bumper-to-bumper warranty and a 7-year/100,000 miles powertrain warranty. Pre-owned vehicles from the luxury Lexus division get six years of limited bumper-to-bumper coverage with no limit on mileage. Many CPO programs also throw in additional benefits such as free maintenance, roadside assistance, and trip interruption coverage.

Extended warranties are usually not as comprehensive. They might limit coverage to specific items, and only up to a predetermined cost. The most basic warranty, for example, only covers repairs to major engine components, the transmission, and front and rear drive axles. The highest protection options—and the most expensive—are similar to manufacturer-sponsored bumper-to-bumper coverage plans. Buyers usually have to choose between an inclusionary extended warranty, which covers a few parts listed on the contract, or an exclusionary warranty, which covers everything other than a few components mentioned on the service agreement.

Claims

Many shoppers choose CPO warranties over extended warranties because they trust that a reputable automaker will do a better job of honoring a claim through its dealers than an unfamiliar third-party warranty provider. In most cases, if you have a CPO warranty and need repair work, you can visit any franchised dealership and the manufacturer will reimburse the cost of repairs. Most manufacturers have a broad network of partner dealers and participating mechanics, so with a CPO warranty, you don’t have to worry about towing your car across the state to get it fixed.

Many extended warranties from independent providers have strict limitations on where you can get your car repaired. You may need to take your car to the dealership where you bought it or to specific shops to have it fixed. There are usually no guarantees that appointed auto shops will use parts from the original equipment manufacturer.

Many third-party warranty providers have solid reputations, but some are sketchy. Before you get an extended warranty, you have to do your homework not just on prices and coverage, but also on providers’ reputations. A dishonest warranty provider, for example, may only reimburse a part of your repair costs under the pretext that the repairs would have cost less if they were done at its auto shop.

Similarities

Both CPO and extended warranties protect vehicle owners against defects in materials or factory workmanship. They do not cover damage caused by accidents, vandalism, or natural disasters. Most plans do not cover the body or interior components, wear and tear items such as wheels and clutches, or the costs incurred in routine maintenance. Either coverage plan may require subscribers to pay deductibles for repairs.

Final Thoughts

Keep in mind that extended warranties are high-profit items for car dealerships. Unless you are an industry expert, it is difficult to tell if you are getting a fair deal and if the price you pay for coverage will be worth it when your vehicle breaks down. A CPO warranty may inflate the cost of the car you are interested in, but it may end up being easier and cheaper to get.

Remember that the extra protection you get with a CPO vehicle allows you to dispense of the two fundamental safeguards you need when buying a used car: getting a vehicle history report and having an independent mechanic do a comprehensive inspection.

Whichever warranty you opt for, read the terms carefully to make sure you understand what it covers and what conditions apply. In many cases, and especially in extended service agreements, the fine print contains “ifs” and “buts” that a warranty administrator may use to deny you coverage. If you are not content with any of the terms you are getting, you can elect to do without a warranty and set aside the money you save for unexpected repairs.