Yahoo Autos Certified Pre-Owned Cars: Buying a CPO in an Age of Scarcity
Certified Pre-Owned (CPO) vehicles are one way to purchase a gently used car, truck, or SUV from a dealership with fewer miles than you might see on a traditional used-car lot.
Right now, with used-car prices up 10 percent in May compared to already climbing prices in 2021, it can be hard to get an affordable used car of any kind.
On the brighter side, trade-in values are up 72 percent over 2021, so you might be getting a deal on the other end of the transaction if you have a car to sell.
The present car market is much like the housing market. Go anywhere across the country and you'll find the same situation: It's a jolly great time to sell and an awful bad time to buy.
New- and used-car inventories are an agonizingly long way from recovering to pre-pandemic levels in early 2020. On average, according to J.D. Power, a new car sits at the dealer for only 36 days before it's snatched up. While car dealers are swimming in record profits and revenue despite less volume—in April, dealers more than doubled their average margins since last year and stand to make $5000 on every new car they sell—automakers don't have that luxury. They're eager to ramp up production, but since they can't right now, they're relying more on certified pre-owned (CPO) sales that come with factory extended warranties.
Used vehicles aren't the usual value play, at least not right now. In May, according to auction house Manheim, used-car prices were up 10 percent versus last year, which by then were already seeing double-digit rises from 2020. Inflation is at a 40-year high. So can you still get a deal?
Used-Car Inventory is Relatively Flush, But You'll Get Less Car For the Money
In 2021, Americans bought a record 40.9 million used cars. More than half were sold by dealerships (including non-franchised companies such as CarMax). J.D. Power said that average trade-in values surged by 72 percent in April. That, along with 2.2 million fewer new cars available for sale at the start of May, helps explain why your 2018 Toyota Camry is worth as much (or more) as the original sticker price.
Looking at the raw numbers, buying used looks like the way to go for most people right now. According to Cox Automotive, as of early May there were 2.5 million used cars and 1.1 million new cars in stock. CPO cars are a small fraction of total used-car sales—on track to hit three million this year—but they're often backed by low-interest financing that non-franchised dealers can't match. For now, the used-vehicle market has a 48-day supply and average prices that are nearly $20,000 less than a new car. When you consider that average new-car prices are cresting $45,000, the average used car has nearly 70,000 miles, and interest rates have already jumped, your money in 2022 doesn't go as far as it once did.
