If you're not comfortable with the price premium you pay to buy a new car, but buying a used car makes you a bit nervous, there's good news. Right in the middle of those two options is the certified pre-owned vehicle. It's is a used car that's sold by a legitimate new car dealer right alongside all the manufacturer's new cars.
A certified pre-owned car — sometimes shorthanded as a CPO car — is a used car, but it's the very best in the used car market. Certified pre-owned vehicles are typically late model cars, sometimes only a year or two old. Factory-trained mechanics have inspected it and often made any needed repairs. And the car comes with a dealer's warranty that covers a whole range of possible car repairs in the near future. Because the vehicle has gone through this very comprehensive inspection, you can feel peace of mind about its mechanical condition.
Because a CPO car is indeed a used car, you can expect to pay far less than you'd pay for a new car. However, CPO cars sit at the top of the used car price range typically. According to Kelley Blue Book, you can expect to pay an additional $1,400 per car on average for a CPO car, compared to what you'd pay for the same used car that hasn't been inspected and certified. So you may be wondering: Can you negotiate the price on a certified pre-owned vehicle? There's a fair amount you can negotiate.
When you follow a smart process as you buy a CPO car, you'll be able to gather the information you need to be able to negotiate your deal, and you'll see just where the wiggle room might be. Take a look at how to buy a certified pre-owned car, including learning how to negotiate the price.
Check the Warranty
Not all warranties are the same when it comes to certified pre-owned cars. Some dealers may offer you a warranty for a certain amount of time, say, three years. Others may offer a warranty that covers a certain number of miles. What these warranties cover may also vary. If you purchase a car that comes with only a powertrain warranty, you could be in for some big repair bills if your air conditioning goes out. Read the fine print carefully: You might be buying a bumper-to-bumper warranty, or you might not. If you aren't getting the warranty, you think you're getting, and you may need to purchase an extended warranty.
Ask as well whether the warranty starts when you buy the car, or whether it started when the original buyer purchased the vehicle. If you're buying a late model car, the original factory warranty might still be in effect. Find out whether the original manufacturer's warranty overlaps the CPO warranty, or whether the CPO warranty picks up when the factory warranty ends. Make sure you know what's covered if you have multiple warranties on your new (used) car. In some cases, CPO warranties only cover the powertrain for 90 days — and that's not much of a warranty.
The warranty may be a place where you can do some negotiating. Is the dealer willing to increase the amount of time or number of miles covered, or can they provide you with an extended warranty of some kind? That's the kind of benefit that seems minimal now, but could be worth a lot in a few years.
Test Drive the Car
As with any used car, you should arrange for a test drive before you purchase a certified pre-owned vehicle. You want to do more than see how it feels to drive the car and whether you can see clearly in all directions. Check the mechanical operations of the vehicle. Do you hear any rattles? If you do, that could indicate that the vehicle has previously been in an accident. Also, listen for any noises when you turn on the air conditioning or the heat — these sounds can indicate the need for significant repairs.
As you steer, test to see if the car pulls to the right or left. If it does, there could be a problem with the alignment. See if the brakes feel mushy, and take the car out on the highway to check the acceleration as well as the braking. And of course, check all the electrical components (the stereo, speakers, phone charger, headlights, turn signals and tail lights). Also, take a look at the tires — if the tread is uneven, it could indicate issues with alignment or suspension.
Even if you're not a trained mechanic, a look under the hood is a good idea. At the very least, you can see if the engine looks clean. Take a look at the transmission fluid to see if it's clear (if it's black, that's a problem). And take a good look at the exterior and interior of the car as well. Do you see scratches on the paint or maybe stains on the upholstery? Are there other signs that the car was previously owned and driven by someone who didn't take good care of it? The answers to these questions will help you determine just what you're comfortable paying for the car.
Once you've done your test drive, you now have learned valuable information to discuss with the car dealer. If you've found any problems, consider negotiating with the car dealer and asking to have them repaired at no charge.
Check the Details of the Certification
Is the certified pre-owned car you're considering certified by the new car dealer or the manufacturer? Either can be the case. A manufacturer's certification is more valuable than a dealer's because it allowed you to take your used car to other dealers across the country for repairs and service — something that could be crucial if you end up moving out of your current area.
The certification should come with a checklist stating which components have been inspected and certified. Check to make sure nothing's been left off the list (especially if your test drive gave you any concerns).
Also, make sure that the used car you're considering actually is a CPO car. That distinction is especially important if you found it by strolling around a car dealership. Typically car dealers display cars from their CPO programs together, and it could be all too easy to wander away from the section of the dealership where they're kept.
Review the Inspection Reports and the Vehicle History Report
Yes, you want to drive the used car you're considering purchasing and check it out for yourself. But don't overlook the official inspection reports that are created as part of the certified car process. That report will tell you a lot about what you might have to pay for car maintenance in the near future. Are the brake pads about to wear out? Are there belts that will need replacing soon? The inspectors will look at parts of the car you can't see with a visual inspection, so it's essential to take their remarks into serious consideration.
Also, ask the car dealer for the vehicle history report. This report will let you know if the car has ever been in an accident so that you can check for frame damage. If the car dealer doesn't give you the vehicle history report, you should be able to order a copy of it from Carfax. Make sure you do order it. In some rare cases, unscrupulous car dealers don't inspect or recondition their used cars before declaring them CPO cars, but merely spray black paint on the engine to make it look new. If you run a vehicle history report and learn that the car's been in an accident — or worse, that it's been declared a salvage vehicle — walk away from the deal (which isn't really a deal at all).
If the car's history checks out, but you find some maintenance requirements coming due in the near future, ask the car dealer if they'd consider handling some of the maintenance right now — replacing the brake pads, for instance — as a way of getting a good deal on the car before you even try to negotiate the actual price.
Research the Actual Value of the Car
You already know you can expect to pay a premium for a certified pre-owned car — but is that price worth it? You might find the same car — the same year, make and model — being sold as CPO vehicles at several car dealers. How do you know which is the better deal?
Now it's time to do a little research. Kelley Blue Book and Edmunds both provide online car assessment and pricing tools, and they contain options for certified pre-owned cars, so you know you're comparing apples to apples. Fill out the checklists on these and similar sites to see if the price you're being quoted is realistic and fair. Once you have this information, check with other car dealers (and even private sellers, if you feel comfortable doing so) to see if you can find the same car for a better price.
You can also check sites like eBay to view completed auctions. That shows you not only the asking price for the car but also the final sale price.
Ask the Car Dealer Some Tough Questions
Can you return the CPO vehicle if it proves to be a lemon or to have significant problems? How much time do you have to make that return? If you do end up returning the vehicle, do you get a refund just on the purchase price? What about the license and registration fees? Will the dealer refund your sales tax?
Negotiate a Good Deal
Yes, you are allowed to negotiate when you're buying a certified pre-owned car. After all, you're paying a premium for that inspection and certification, so it just makes sense to try to negotiate the price down. This is where all the research you've done comes in. Have you discovered from Kelley Blue Book or Edmunds that the car is a bit overpriced? Did you find a vehicle on eBay or at another car dealer for a lower price? Now is the time to bring up that information and see how the car dealer you're negotiating with might respond.
Even if the car dealer is offering you a reasonable price at market value, you can still make a lower offer. This is also when to look for other perks — a better extended warranty or some minor repairs, for instance. You may feel uncomfortable making a counteroffer, but rest assured that the car dealer expects it. And don't worry: the car dealer will still make a profit. Just keep focused on the peace of mind you'll feel once you know you achieved the best price possible for your pre-owned car.
If you're not paying cash for your CPO vehicle, or if you're not coming to the dealer with a car loan in place from, say, your credit union, you may also have some room to negotiate around your financing options. Certified pre-owned vehicles don't typically come with the zero-percent loans that new cars sometimes sport, but you may be able to arrange lower financing than your dealer initially offers.
Be Ready to Walk Away
If you know what a fair price is for the car you want, but the car dealer you're talking to refuses to meet it, walk away. No matter the make and model of the car you're interested in, you can be confident that there are many, many certified pre-owned versions of this car available. Remember, car buying services give you access to used vehicles from all over the country, so you aren't limited to what's available on one dealer's lot or even in your region.
When you walk away, you might be surprised at how quickly the car dealer is suddenly willing to lower his asking price. And even if you just keep walking, don't worry — you'll find the right car at the right price very soon, thanks to all the resources available to you.