What Does Certified Pre-Owned Mean?

Walking through a used car lot, it can be difficult to tell which car will be a reliable ride – and which one is hiding costly repairs. The worry of coming home with a clunker is enough to make any used car shopper nervous. But does buying a certified pre-owned car really ensure that the

Walking through a used car lot, it can be difficult to tell which car will be a reliable ride – and which one is hiding costly repairs. The worry of coming home with a clunker is enough to make any used car shopper nervous. But does buying a certified pre-owned car really ensure that the vehicle will be problem-free? Find out more about what the certified pre-owned label actually means, and how crucial it is for used car shoppers.

certified pre-owned

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What is a certified pre-owned car?

If you’ve been in the market for a used car, chances are you have come across ads for certified pre-owned cars. This is not just a jazzy phrase for used cars, but a specific type of used car program. Most carmakers – including Chevrolet, Ford and Nissan – offer used cars through their own factory-certified programs. These programs are backed by the vehicle’s original manufacturer, so the cars are sold and serviced at the same dealerships that sell the carmaker’s new vehicles. This means warranty repairs can be handled nationwide through any associated dealership, which is especially convenient if something goes wrong while you are traveling.

Even a dealer that isn’t formally linked with a carmaker may sell certified pre-owned cars, but it’s important to understand that these programs are not supported by the original manufacturer. Under a dealer-certified pre-owned program, the dealer establishes its own guidelines for inspecting the used cars, and either the dealer or a third-party company is responsible for handling vehicle repairs under the extended warranty.

In general, a certified pre-owned car is no more than 6 years old and has less than 100,000 miles. To receive a certification, the dealer puts the car through an extensive inspection. Some dealers will complete repairs or perform needed maintenance if something is found during this inspection. Typically, only the best used cars in the fleet are picked to be certified, which means the car likely hasn’t had extensive bodywork and hasn’t been in a major accident.

A certified pre-owned label (sometimes referred to as CPO) may also include additional coverage, such as an extended warranty. But buying an extended warranty is not the same as buying a certified used car. While both will cover the car for specific repairs, a standalone warranty usually doesn’t include a presale inspection.

Comparing certified pre-owned programs

Before you buy that certified pre-owned car, read the fine print. Programs vary wildly from one to the next, with no set standard in place. Audi, for example, has an inspection process that examines more than 300 items, and will only certify cars that are 5 model years or newer with fewer than 60,000 miles. Its transferable warranty covers the car for up to 100,000 miles, and extends for two years after the new-vehicle warranty expires.

On the other end of the spectrum is Volvo. Cars up to 5 years old with 80,000 miles can be certified with this carmaker’s program, with the total warranty extending seven years from the original in-service date. Volvo’s inspection process is not as complex as Audi’s, covering only 130 items. However, Volvo doesn’t charge a deductible for warranty claims, while Audi charges customers $85.

Experts agree that manufacturer’s programs tend to be better than other types of certifications. “Factory-certified means the vehicle has been inspected, needed repairs have been made and the car has been backed by a factory warranty,” writes Jim Mateja at Cars.com. “A factory-backed warranty means that if you buy a pre-owned Chevrolet, you have the same coverage you would if you bought a new car because any Chevrolet dealer will make the covered repair.”

Edmunds.com also recommends factory-certified cars over other programs, saying, “The manufacturer’s certified vehicle program is more reliable, can be used across the country, and won’t leave you stranded if your dealership shuts its doors. Vehicles that have been certified by the manufacturer go through more rigorous testing, and in many cases, offer similar benefits as those given to new car customers (e.g. roadside assistance, loaner vehicles).” If you are considering a dealer-certified car, get a copy of the warranty in writing to review first. Also, find out what type of inspection is included with the certification and ask if the warranty is transferrable.

Why you may want to pass on certified pre-owned

The most noticeable difference between a regular used car and a certified used car is the sale price. Kelley Blue Book lists the average retail price of a 2013 Audi A3 at $16,393. The average certified pre-owned price for the same A3 is $2,200 more, at $18,593.

Much of this price increase is due to the extended warranty, and Consumer Reports questions if that extra cost is worth it. Consumer Reports “has historically advised against paying extra for separate warranty coverage, often known as an extended warranty – one of the program’s main selling points. Actuarial data shows that you might be better served saving the cash you’re putting into the premium price of a certified pre-owned (CPO) and using it for a rainy day repair on a traditional used car.”

You should keep in mind that the dealer’s certification isn’t a guarantee that mechanical problems or other issues won’t arise later. Experts say you still may want to have the car inspected by a trusted third party (such as your mechanic) before you buy. You should also take a look at the dealer’s inspection report, and confirm that the Vehicle Identification Number (VIN) on the report matches the car.

Bottom line

The biggest advantage, says Mateja, is that “factory-certified pre-owned means peace of mind; with the inspection, repairs and warranty, you’ve saved the time and money it would have taken to find and make them yourself.” But because a certified pre-owned car will also have a higher purchase price, you will likely save money overall with a noncertified car. The cost difference varies between models, and a quick search will help you determine if the price difference is a few hundred dollars, or a few thousand. If you do opt for a certified pre-owned car, carefully read all of the warranty paperwork, and consider still getting an outside inspection.

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Tags: Tips and Advice, used car buying, used car buying advice, certified pre owned cars, used car shopping
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