In case you haven’t heard, the used car market is getting oversaturated. Larger discounts on new cars mean that dealers have to slash prices on their used inventory. That’s good news for savvy consumers. Of course, a lot of car buyers can be a little apprehensive about buying a pre-owned car due to concerns about reliability and warranty coverage. This is why “certified pre-owned” (CPO) cars can be very appealing.
Certified cars will often carry a price premium over their non-CPO counterparts. A recent study in Automotive News indicated that millennial ca buyers were willing to pay up to $3,800 more for a certified pre-owned model. That’s a significant jump over older buyers who thought that CPO cars were only worth about $2,700 more, but it seems that a lot of buyers are willing to pay too much for the label.
What Is A Certified Pre-Owned Car
Before we get into the details on whether or not certified cars offer a better value proposition, it’s important to establish what “certified” actually means. There are basically two types of “certified” cars—manufacturer certified and dealer certified. A manufacturer certified car most undergo some type of standardized inspection process and if the vehicle meets a certain set of criteria the pre-owned car will get CPO status.
The certified car will usually have some kind of extension of the factory warranty term. Each brand has different standards and different warranty extensions for their CPO programs, some are better than others. Buyers should do their research to see what kind of additional coverage they are going to get and for how long.
In order for a dealer to put a CPO label on a pre-owned car, they have to pay the manufacturer a fee to complete this process. Often this fee is passed onto the consumer and the price of a CPO car will be listed higher than if it was not certified.
What consumers should watch out for are cars that are “dealer certified” and not manufacturer certified.
Dealers know that the “certified” label can justify a price increase, so the dealer will “certify” the car using their own criteria that may or may not be aligned with the manufacturer standards and the car may or may not have a warranty extension that is good at any other dealer from that brand.
Should I Pay More For A CPO Car?
As I mentioned above, the certified label is really all about buyer confidence. No one wants to purchase a used car—or a new one—that they have to dump a bunch of money into to keep running. A CPO model gives consumers some protection against defects and expensive repairs. However, if used car buyers pick the right vehicle, it may not be necessary to pay more for the extra coverage.
Let’s say you were in the market for an affordable pre-owned sedan. A 2014 Toyota Camry SE could easily be had with low miles for around $12,000 to $13,000.
Yet some dealers in the country seem to think that they can charge almost $20,000 for a similar 2014 Camry.
The Camry is one of…