Certified pre-owned (CPO) cars, trucks and SUVs are late-model vehicles with low mileage and no significant damage. Typically, these cars are two to three years old though some can be up to six years old. Most have 10,000 miles or less per year on them and have never been in a major wreck (a history report on the VIN should show up with no major accidents).
Both dealers and manufacturers may run their own Certified Pre-Owned programs and each can set their own standards for CPO vehicles.
What Do You Get With a CPO Vehicle?
You receive two basic things with a CPO car versus a standard used car. You get a thoroughly inspected car with a warranty that may cover certain repairs if something goes wrong. This gives you peace of mind rather than having to worry if you bought a lemon. You also receive a slightly used, reliable, nearly new car for less than the price of an entirely new vehicle.
Look for manufacturer-sponsored CPO programs as opposed to dealership-backed ones. Manufacturers sponsor certified pre-owned vehicles with a warranty that is often more robust and comprehensive than one offered by a dealership.
You may also find additional perks from a manufacturer CPO program, such as free roadside assistance, complimentary loaner cars and special financing deals.
What Do Car Manufacturers Do for CPO Programs?
Manufacturers vary in their certified pre-owned vehicle programs. For example, Volkswagen takes cars with a clean title that are no more than 6 years old and have less than 75,000 miles. Then, a factory-trained Volkswagen mechanic performs a 100-plus point inspection to see if the vehicle meets the manufacturer's standards. The dealership replaces or repairs any part that fails the inspection. The goal is to bring the car as close to as-new as possible. The Volkswagen dealer then sells the vehicle with a two-year, 24,000-mile warranty to cover the powertrain, electrical and air conditioning. You also get peace of mind with 24-hour roadside assistance.
Honda vehicles undergo a 182-point inspection before having a seven-year, 100,000-mile warranty on the powertrain and a one-year, 12,000-mile warranty on everything else. Each car continues to have any remaining new-car warranty coverage. Ford offers a similar program to Honda.
Manufacturers may not have the exact same standards for each CPO vehicle, but the concept remains the same. You’re buying a car that’s higher quality than most used vehicles, but you will likely have to pay a higher price to do so.
What About the Costs of CPO Vehicles?
All things being equal with the same make, model and mileage of a vehicle, CPO cars cost more than ordinary used cars. For example, the average price mark-up for a 3-year-old, midsized, certified pre-owned car is $850, while a CPO luxury car may cost an additional $3,000 versus a standard used vehicle, according to Black Book.
However, the perks you get with a CPO program may outweigh the costs. You receive peace of mind for your purchase versus a non-certified used vehicle with no warranties. A CPO vehicle will have undergone a much more thorough inspection process, has been better cared for during its previous ownership and comes with a more thorough warranty.
Another perk of CPO ownership comes from free maintenance up to a certain mileage point. Dealers may offer to have oil changes and tire rotations as specified by the manufacturer. Free maintenance lowers your costs during the time period of the deal. Once that maintenance package is up, you are responsible for all subsequent costs.
Lower financing costs also come into play with CPO vehicles. Lenders -- working with or through an automaker -- can typically offer lower interest rates, comparable to new or non-CPO vehicles. This helps lower your monthly payments.
What's the Bottom Line With CPO Cars?
The bottom line is that you should go with what you need in a used vehicle. If you want a well-maintained vehicle that drives like new and has the backing of the manufacturer, a certified pre-owned car may be a wise choice.
On the other hand, if you need basic transportation that gets you from one part of town to another and you’re on a tight budget, you may consider an ordinary used car.
It’s worth remembering that sometimes it can be financially wise to skip the extra cost of a CPO vehicle. If the car you’re interested in has an excellent reputation for reliability (same for the brand itself), it may be smarter to save yourself the extra cost of CPO since the odds that you’ll need it are lessened by that vehicle/brand’s track record.
Either way, you should still practice due diligence when buying a used car. Get an inspection done by an independent mechanic on a used vehicle -- especially if you’re buying it privately -- to make sure everything checks out.