The ABCs of Buying a CPO

Date posted: February 3, 2014


If you’re in the market for a used vehicle, you’ve probably heard the acronym CPO several times. CPO stands for certified pre-owned, which is simply a used car that is usually less than 5 years-old, has been inspected, repaired if necessary, and issued an extended warranty. A CPO vehicle offers a car owner peace of mind knowing that their vehicle is in great condition, and they have an extended warrantee should anything go wrong. However, the three little letters tacked on the end of a used car can be a pricey way to buy some peace of mind.

A CPO vehicle is not the best route for everyone, but for some it can be the answer.

When is a CPO Right for You?

Those that will particularly benefit from buying a CPO vehicle are those that want the perks of buying a new car, but without the steep prices. Those that are willing to pay for some peace of mind, rather than taking a risk should also look into buying a CPO. A certified car comes with no surprises, and the warranty will stave off any near future problems as well.

New cars depreciate by thousands of dollars the moment they are driven off the lot, but by buying a CPO you avoid these prices and still get the warranty and good condition of a brand new car.  Bear in mind if you are looking for a specific make and model, it may be difficult to find it. CPOs vehicles are not available by the masses, and you may not find the exact car you are looking for without driving quite a ways.

The Perks

Because a CPO vehicle is more expensive than a regular used-car, dealers offer many incentives to seal the deal.

  • Warranty: One of the main reasons buyers decide to go with a CPO is because of the extended warranty. Sometimes an extra $1000-$2000 for a warranty can save you much more.
  • Buyback/exchange program: A buyback option can remove the stress or hesitation with buying. You can try out the vehicle stress-free, and if you don’t like it, there are problems or you change your mind you can exchange the vehicle.
  • Vehicle inspection and certification: Every CPO vehicle is inspected and is certified
  • Factory financing and incentives: Because CPO vehicles, while still less expensive than a brand new car, can be pricy many automakers will offer special financing rates or sometimes even a cash incentive
  • Roadside assistance: CPO buyers often get the extra benefit of roadside assistance. The assurance of roadside assistance in the event of an emergency promises even more peace of mind.

What does “Certified” Mean?

Certified means it has been inspected, any issues have been resolved and your vehicle has been given a stamp of approval. However, each manufacturer has their own definition of “certified.”  Not each manufacturer inspects the same things. Make it a point to understand their definition and get the details in writing, you don’t want to be surprised later on.

Factory-backed versus Dealer-backed Warranties 

Not all warranties are created equal. There are CPO factory-backed programs, and there CPO dealer-backed programs. The most desirable warranty to have is a factory-backed warranty. If your vehicle has a factory-backed warranty you can go to any dealership that is connected with that factory and they will honor the warranty. With a dealer-backed warranty you have to return to the original dealer, which can be a pain, to have your warranty honored.

On a note of caution, make sure you read the fine print of your warranty; you’ll want to know exactly what the warranty covers and what it doesn’t cover. However, you must also realize that no warranty is all-inclusive. Some warranties even require that you pay a deductible. In other words, make sure you know exactly what you are getting.

How Much Does Certification Cost You? 

In the previously-owned vehicle market, peace of mind can certainly be bought, as long as you’re willing to foot the bill.

The additional cost ranges from 2 to 8 percent of the original cost of the used-car.  The difference in percentages depends on the model and brands of the car, obviously the higher-end the car, the higher the percentage. A lot of buyers who choose a CPO vehicle are those looking to buy a high-end car or sports car. A CPO is definitely a more cost-efficient way to get that high-end sports car you’ve always wanted, without the high-end cost.  CNW Marketing Research tells us that on average, luxury buyers will spend $2,100-$3,400 more for their CPO vehicle than those that purchase non-certified pre-owned luxury vehicles. The margin is much lower for non-luxury vehicles. Non-luxury CPO buyers will spend $300-$1,750 more their vehicle than those purchase non-certified vehicles.

Do Your Homework and Come Prepared to Bargain

Don’t go to a dealership ready to buy a CPO vehicle without doing your homework. Doing your homework will help you ask the right questions, such as: Who is certifying the vehicle? How much more are you paying than your non CPO buying counterparts? What comes with the certification? Who inspected the vehicle? Was anything found wrong and was it fixed?

If you feel like the dealer is trying to charge you too much for the certification, bargain with them to lower the price or include more in the certification to compensate. Just because it has a price tag doesn’t mean it can’t be altered. And make sure that the dealer gives you a CARFAX report; you can never be too sure.

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