How CPO Programs Work

Bloomberg / Getty Images Certified pre-owned (CPO) cars have become a very important option for buyers looking for a trustworthy, high-quality vehicle at a lower cost than a new car. CPO cars differ in many ways from the general pool of used cars for sale by private owners. Cars don’t depreciate the same amount each

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Certified pre-owned (CPO) cars have become a very important option for buyers looking for a trustworthy, high-quality vehicle at a lower cost than a new car. CPO cars differ in many ways from the general pool of used cars for sale by private owners.

Cars don’t depreciate the same amount each year. Rather, the biggest drop in value occurs in the first three years. Savvy car shoppers know this, and they recognize that cars a few years old are basically like new. Automakers and dealers know it too, so taking back some of the best cars they make as trade-ins or lease turn-ins is a win-win for both CPO dealers and buyers.

CPO vehicles are not the cheap used cars you might find on Craigslist or in a small, private used car lot. Rather, CPO cars are relatively new – usually six years old or newer, with fewer than 80,000 miles. The cars are typically acquired at closed auctions for dealers of specific brands or from the same authorized dealerships that sold them new.

When these 1- to 6-year-old vehicles return to the dealership, the dealer’s CPO team takes extra steps before offering them for sale again. The first step is a document search. The manufacturer’s dealer checks that the vehicle has not been in any serious accidents. Next, the dealer checks its database to ensure the vehicle has been fully maintained. If it was maintained elsewhere, the dealer will review the receipts from when the car was traded in. In the case of BMW vehicles, the first four years of maintenance are included in the purchase price of the vehicle. The assumption is that the cars coming back were generally maintained as recommended. Taking these extra steps provides the customer with a higher-quality vehicle and protects the dealer from future problems.

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Next, the dealer conducts a careful inspection of the vehicle and corrects any issues. Any due maintenance is performed, and worn items – like tires – are replaced if necessary. The exterior is detailed and the interior is given the full spa treatment. Once complete, the vehicle can officially be called certified pre-owned. It’s then granted special warranty coverage backed up by the manufacturer.

Certified pre-owned vehicles are a big business. Lexus dealerships now count CPO sales as one-quarter of their business volume. Dealers and manufacturers treat CPO vehicles the same way as new cars regarding warranty and support, so it is in their interest to make sure the vehicles they offer are top quality.

[Read What Does Certified Pre-Owned Mean] 

Each automotive brand has its own certified pre-owned program, so shopping for a CPO car from brand to brand requires familiarization with the all-important warranty. After all, from the buyer’s perspective, the warranty is the main reason to buy CPO. Even a non-CPO used car with life left on its original warranty won’t get the additional time and miles afforded by a CPO program. Typically, nonpremium brands offer a one-year “bumper-to-bumper” warranty on CPO cars. They also add many years of drivetrain warranty to the package. In some cases, a CPO car is new enough to be covered by the original new car warranty. Buyers should look closely at how much added protection they get on top of that original warranty.

Premium brands are where the idea of certified pre-owned cars first started. Since a good amount of premium vehicles are leased, a greater number of relatively new cars are sent back to dealerships to be resold, creating a large pool of CPO vehicles.

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The mileage and the age of a vehicle help determine if it qualifies as a CPO vehicle. By keeping the pool relatively new, dealers can offer CPO cars as “premium” used vehicles. With an added bumper-to-bumper warranty for one or more years, you can take comfort knowing any problems with the vehicle will be handled at no additional cost. Compare that to the uncertainty of used car shopping, and the CPO process becomes easy to understand.

This predictable cost of ownership is the real key to the CPO concept. A buyer who opts to take home a new CPO car can enjoy years of ownership with no repair costs. If a problem does arise, some dealerships will offer a loaner vehicle while the repairs are made. A fixed, or predictable, cost of ownership and top customer service is very important to small business owners seeking cars to resell. 

There is one thing to watch out for when shopping for a CPO vehicle. Some unscrupulous dealers will offer a “certified” used car that isn’t a manufacturer-authorized CPO vehicle. In cases like this, there are significant differences in the warranties offered. Only new car dealers sell certified pre-owned vehicles. However, some CPO vehicle warranties are transferable. Be sure you are clear on what you are getting.

CPO cars allow buyers to drive almost-new vehicles that have already depreciated. With a warranty no different than that of a new car, CPO vehicles offer consumers a viable alternative with a lot less risk than buying used.

Tags: used car buying, used car buying advice, certified pre owned cars, advice
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