CERTIFIED PRE-OWNED (CPO)
What are certified pre-owned vehicles?
A 2004 report by J.D. Power and Associates found that among non-luxury buyers, 71% of purchasers of certified vehicles became aware of certification at the dealership. "Even after the purchase, 60% of buyers say the primary reason they purchased a certified vehicle is simply because the vehicle they wanted happened to be certified." You must keep in mind that standards or requirements to identify used vehicles as "Certified Pre-Owned" are at the discretion of the manufacturer and, consequently, no two programs are identical. Mileage, age, inspection criteria, remaining warranty and factors of these important aspects will, can, and do change from one manufacturer to another.
Certified pre-owned vehicles are primarily units that are returned from lease customers or, as commonly referred to in the industry as "off-lease" vehicles. The auto industry provides many different makes and models of vehicles to lease customers and the selection of vehicles being returned at lease termination can vary greatly. There are also lease plans that allow the customer to lease for short periods and other plans that allow for longer periods. What you can find, for instance, is a 2 year old vehicle that is "certified" and on the same dealer lot you might find a 3 year old of the same make and model that is "certified." Mileage can also vary as lease customers have an option at the lease conception to "pre-pay" for mileage over and above the standard mileage permitted in a lease agreement.
If a CPO is what you are shopping for, you must remember that from same make dealer to dealer inventory of these vehicles including the models, mileage, color, and options will not be the same. What you will find to a large degree (from same make dealer to dealer) is:
Remember, an extended warranty is included in the purchase price of the vehicle and extended service contracts are sold separately. If a dealer attempts to "pack" or add the extended service contract as part of the selling price it is a violation of a Federal law. Read more on this under the heading "Extended warranty or extended service contract."
- consistency in the administrator of the extended warranty
- amount of deductible, if any
- availability of loaner vehicles
- road service and other major related items
Manufacturers can also include factory official vehicles in their certified pre-owned programs. The selling dealer should always be able to substantiate the origin of any vehicle bearing the CPO classification. Ask to see a AutoCheck report or documentation to verify the history of a vehicle.
Do all off-lease vehicles receive the classification of "Certified Pre-Owned?"
No, due to an inspection process outlined by the manufacturer, some vehicles will be deemed unacceptable. Vehicles that are returned and have obvious defects will immediately be removed from consideration for the CPO classification.
What guidelines do manufacturers require for the CPO classification?
As mentioned previously, it is at the discretion of each manufacturer to determine what earns the label of CPO with their vehicles. Common in the industry would be exterior/interior visual problems. In the same method that you would look at an automobile, the factory inspection is to some regard the same, yet much more detailed.
Start with the exterior:
- Even an untrained eye can see exterior damage if painting has been done and from one panel to another (front door and rear door as an example) is not the same shade of paint.
- Open and close a door or open and close the trunk and the fitting should be even and little effort required to close securely. The trunk compartment is checked for matting, spare tire and accessories.
- A visual inspection would include a walk-around to evaluate the hood, grill, bumper, front fender, door(s), rear fender, trunk, rear lights, rear bumper, passenger side rear fender, door(s) passenger side front fender, and front lights.
- This inspection also includes the roof, windshield, side glass, rear glass and mirrors. Tires/wheels are another key point for inspection.
The engine compartment receives a thorough testing. Here are some of the key points of the engine inspection:
- power steering
- belts & hoses
- ignition system
During this inspection the under carriage must be checked. Shocks, struts, exhaust system, and frame are just a few of the items that are being examined.
A road test will assure that the vehicle starts, idles, accelerates and shifts properly. This test will also provide for testing of the brake system, speedometer and interior noise level.
The interior is checked for wear and tear of upholstery and headliner. In addition, a partial listing of other items includes:
A vehicle is checked for maintenance and will receive an oil and filter change if necessary. Other filters will be inspected and changed if needed. Additionally, all fluids are checked and emissions tested.
- floor carpet and floor mats
- power door locks
- power windows
- cruise control
- sound system
- heating & cooling
- instrument panel and lights
- windshield wipers
- rear defroster
- glove compartment
- seat controls and seat belts
At this point the vehicle has been deemed acceptable for certification and the detailing begins. The engine compartment will be cleaned to remove dirt, dust, oil, and road residue (tar) and then a visual inspection will most often find any loose items. The trunk or cargo area will be vacuumed and detailed as needed. The interior carpeting and upholstery is vacuumed and all glass and instrument panel/dash cleaned and polished.
The exterior is now washed and waxed and if minor paint or surface scratches are detected during this process, touch up will be completed.
What is the warranty that was mentioned?
The warranties included with CPO vehicles are generally factory warranties (from the manufacturer) and are included with the purchase price of the vehicle. You only pay one price for the vehicle with the warranty included. Be cautious with dealers that assure you the vehicle is certified and then attempt to sell you an extended warranty. Again, extended warranties or just plain warranties are included in the purchase price of a product, including vehicles. Extended service contracts are sold as a separate coverage.
If you purchase a vehicle and the warranty covers 3 years or 36,000 miles (which ever occurs first) and you only keep a car 2 or 3 years and only drive 10-11,000 miles per year, why purchase an extended service contract? You will be duplicating coverage or paying for coverage after you have sold or traded the vehicle.
Your sales person should give you the exact mileage/months of the warranty included in the price. The remaining warranty (mileage/months) is most often based on the mileage at time of purchase. A factory warranty normally does not have a deductible but an extended service contract will, more often than not, require a deductible. Note that a few manufacturers do require small deductibles. The deductible can vary from one independent provider to another in dollar amount and per repair occurrence.
Ask specific questions concerning loaner vehicles when repairs are being made under warranty. Also ask about expenses such as towing, lodging and meals if repairs are necessary while traveling. This should be detailed in writing.
Since manufacturers use their own criteria for inspection, ranging from 100 items up to over 300, warranties that are included will also vary. Some manufacturers only offer vehicles that are up to 4 models years old while others offer 5 or 6 year old models.
How are certified vehicles priced?
Prices were not published in the 2004 J.D. Power and Associates report. A report released by Power in 2003 stated "On average, luxury buyers paid nearly $3,000 more for their certified used vehicle than did buyers of non-certified luxury brands, while non-luxury buyers paid $1,000 more."
While huge rebates and low finance rates have impacted the used car industry over the last few years, the certified pre-owned program has continued to increase. Consumer rebates and special rates appear to have softened to some degree and if, in fact, the price gap between new and used widens, certified vehicles will be in greater demand.
Shop wisely. Compare the CPO price to that of the same model new. If the difference is not as great as perceived (that you thought the savings would be in the thousands) then consider new rather than used. However, the choice is yours and we do not suggest or approve one over the other.
You will certainly want to speak with your credit union loan officer regarding the financing. The loan officer will work with you on a payment plan that is best suited for your needs. Many credit unions also offer extended service contracts at a substantial savings compared to dealer contracts. GAP (guaranteed asset protection) is available at most credit unions at a huge savings over the dealer price. Inquire about this protection at your credit union.
Should I test drive?
Yes, absolutely! Remember, since there are no two pre-owned vehicles alike, mileage and condition are the determining factors of a vehicle's worth. Don't purchase without driving first.