What is Certified Pre-Owned?

by Noah Joseph | Apr 14, 2016

Buying a car is seldom a simple affair, but in one regard at least, it used to be a bit more straightforward: you were either buying a new car or a used one. But in recent history a new type of automobile purchase has emerged to blur the line. It’s called Certified Pre-Owned, and it bridges the gap between factory-fresh and second-hand.

A relatively recent addition to the retail automobile market, CPO programs started in the luxury segment with carmakers like Mercedes-Benz and Lexus. In the higher reaches of the market, a relatively higher proportion of customers opt to lease rather than buy their cars, and when their lease is up, those who choose not to buy their car off-lease will return it to the dealer and move on to something newer. That leaves dealers stocked with vehicles only a few years old and with relatively low mileage. But due particularly to the high costs typically associated with repairing and maintaining these high-end imports, the dealers had trouble selling them as used. So the industry developed the Certified Pre-Owned category in order to help get these often lightly used cars off of dealer lots and into the hands of customers looking for a good deal.

By now CPO programs have spread up and down the market to the point that you’ll likely be able to find a Certified Pre-Owned example of just about any type of car or truck you’re looking for, from a common Chevy to an exotic Bugatti. Each automaker sets its own terms, but the qualifying vehicles are typically no more than five or six years old, with fewer than 60,000 miles or so on the odometer, and which have not been in any significant collisions. Factory-certified technicians will inspect the vehicle and replace or repair any components that aren’t up to spec. Once reconditioned and certified, the vehicle will be sold with a warranty.

The terms of that warranty coverage, however, can vary, and make all the difference. So when considering buying CPO, make sure to read the fine print. For example, some CPO warranties take over after the original factory warranty expires, effectively extending it further. Others start on the CPO sale date, regardless of the status of the original warranty. They can last anywhere from a few months to a few years, and typically have mileage limits attached. Some automakers’ CPO programs, however, only offer a powertrain warranty and leave the rest unprotected. There may be a deductible as well, meaning that the buyer will have to cover small repairs out of pocket.

There are other disadvantages to take into account when considering buying Certified Pre-Owned. Those who, on the one hand, would otherwise be looking at (uncertified) used cars may find the added cost of certification (and all that it entails) pushes the final price outside of their budget. Others lured away from buying new by the prospect of a better deal – or the prospect of stepping up to something they otherwise couldn’t afford – may have to settle for a car that’s not equipped exactly the way they want it since they were originally ordered from the factory by someone else. But then, in a market where a large proportion of new car purchases are made off dealer inventory and not direct from the factory, that may not prove as large a factor for most buyers – especially if they’d veer towards a more common combination of options and trims anyway.

Customers should also be aware that not all new cars advertised as CPO are actually certified by the factory. Some dealers may offer their own certification, which may or may not be as thorough or trustworthy as those backed by the manufacturer. Those searching outside of their own local market may find that a vehicle advertised as "certified" comes only with a dealer’s warranty, which may not be transferable to another dealership’s service department and adds nothing to the equation. Major used-car retailers like CarMax, AutoNation, and Vroom.com may offer certification and warranties as well, which – like a dealer warranty – may offer some (if not all) of the assurance and benefits of a manufacturer’s CPO program.

No matter what kind of car you’re in the market for, and how you intend to go about acquiring it, you’ll have research to do if you want to make the smart decision. Buying Certified Pre-Owned isn’t foolproof, but for some consumers, it can take a good chunk of the guesswork and anxiety out of the scenario, leaving them with a good deal and a good night’s sleep.