Yahoo Autos Certified Pre-Owned Cars and Trucks Can Offer Longevity for Less
Somewhere between breaking the bank for a new car and taking a risk on an as-is used one, there dwells the Certified Pre-Owned (CPO) vehicle. Automakers seem increasingly keen on selling CPOs, making them an enticing option for shoppers: a car or truck that has longevity for less. CPOs are priced below their new-vehicle peers, and they typically also have age and mileage limits and include manufacturer-backed warranties to help ensure there’s a lot of useful life left in the car, truck, or SUV.
You’re likely to find fewer of them on dealer lots than the as-is variety. James Spears, assistant vice president of auto experience at the USAA insurance company, said about one out of five used vehicles is a CPO. This is because they have to be in nearly new shape, with low miles and light use, and then also have to go through a manufacturer-approved list of inspection items. “So you are getting the cream of the cream,” Spears said.
While most CPO vehicles come with warranties, the coverage will vary. For instance, General Motors’ Buick, Chevrolet, and GMC CPO vehicles carry a six-year/100,000-mile limited powertrain warranty from the original in-service date, and the original bumper-to-bumper warranty is extended by 12 months or 12,000 miles. Both Ford and Toyota have a seven-year/100,000-mile powertrain limited warranty from when the vehicle was new, as well as 12-month/12,000-mile bumper-to-bumper coverage. Luxury automakers have this kind of coverage, too: both Mercedes-Benz and BMW add one year of limited warranty coverage with unlimited miles.
It is important for shoppers to know the difference between the automakers’ warranty and that of a dealership. Spears noted that, although some dealerships offer their own “certified” warranties, those are backed by the dealer, not the automaker. What the dealer offers may not be such a bad deal, but Spears said that the vehicle owner will be limited to that dealer’s stores, whereas with automaker-backed warranties service could be provided at any franchise in the country. We’d also add that manufacturer-backed warranties are beholden to a uniform set of standards set by the automakers, while dealers have discretion over their own warranties.
Some CPO vehicles will be so lightly used that much of the original new-vehicle warranty will be left, noted Tyson Jominy, head of data and analytics consulting at J.D. Power. “So it’s possible that with that CPO, you could get a year or more of a new-car warranty, and that’s a good thing,” Jominy said. “In some cases, you’re getting some very low-mileage CPO units that could’ve been a service loan car or a demo unit on the dealer floor.”
More typically, CPO vehicles you’ll find on dealer lots will be off-lease vehicles, Jominy added, and typically they will be two to three years old. After two straight years of record new auto sales in 2015 and 2016, a mass of off-lease vehicles has been returning to dealers. Jominy said that five years ago there were about two million lease returns, and this year there will be almost four million. “So there is an increased emphasis [by automakers] for CPO, that’s for sure,” Jominy said.
This is especially true of luxury automakers, which can have half of their sales or more consist of leases as customers pursue higher-end accoutrements but seek to keep monthly payments low, said USAA’s Spears. “It’s really a way to actually help the automaker with that off-lease product,” he said. “It’s a good deal for the consumer and great for the [automaker].”
So CPO buyers can potentially benefit from motivated manufacturers. Spears said USAA advises its clients to keep overall cost of vehicle ownership at about 15 to 16 percent of overall take-home pay. It’s why USAA has been advising many of its members to go CPO, as the cars often fall in that range. “Overall, if we do provide advice, you are going to see us lean toward a vehicle that’s pre-owned, a vehicle that’s been cared for, and a vehicle that has that warranty from the manufacturer,” Spears said. “And that all boils down to a CPO.”
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