If you’re shopping for a used car, you’ve probably noticed that more than a few listings have “CPO” or “Certified” proudly stamped in their headline alongside a higher price tag.
The CPO label might instill confidence that this is a superior used car worth trusting. In fact, 74% of young shoppers are willing to pay more for a CPO car, and those who do place $3,800 more in value on them, according to Autotrader.
But what really is a certified pre-owned car? Personally, as someone who’s brokered used cars for years, I think CPO programs are mostly bunk.
What is a certified pre-owned (CPO) car?
A used vehicle becomes certified pre-owned when it:
- Has passed some sort of quality inspection process.
- Includes some kind of additional warranty.
Most commonly, the inspection process includes a “192-point quality assurance test” or some such, and the included warranty is an extension of the manufacturer’s limited warranty.
“Manufacturer Certified” vs. “Dealer Certified”
When browsing through CPO car listings on sites like Edmunds, you’ll see some cars labeled as “Manufacturer Certified” and others as “Dealer Certified”. Confusingly, many are simply labeled “Certified”, so you may have to dig into the description to find details.
You’ll want to ID whether the car is manufacturer certified or dealer certified because there can be a big difference.
For a vehicle to achieve the exalted “Manufacturer Certified” status, a dealer must take three steps:
- Pay the manufacturer a fee.
- Ensure the vehicle passes the manufacturer’s CPO quality assurance (QA) test.
- Include a warranty, typically an extension of the factory warranty.
To protect their brands, manufacturer QA tests for CPO cars tend to be pretty strict. You can generally trust manufacturer certified cars to be of higher quality than vanilla used ones.
Now, the second type of CPO is “Dealer Certified”, meaning the car has only passed the dealer’s standards of quality.
In some cases, a dealer certified car can be just as good as a manufacturer certified one. Some dealers will start their own certification process to avoid the fees and red tape of getting cars manufacturer certified, but still follow a rigorous inspection process and include a generous warranty.
More commonly, however, a “Dealer Certified” car is just a used car with a very basic warranty.
Dealers are smart; they know that if they sell a used $15,000 Kia Soul, they’ll only upsell a $750 warranty maybe 40% of the time. But if they bundle the car and warranty together and sell it as a “Certified Kia Soul” for $16,500, they’re more likely to sell the car and make more money in the sale.
When is a certified pre-owned car worth it?
A certified pre-owned car is just a used car that:
- Has passed some sort of inspection process.
- Includes some kind of extended warranty.
- May include perks like 24/7 roadside assistance.
According to Autotrader, CPO cars generally cost around $1,500 more than their used equivalent, so let’s itemize what you’re getting to see if CPO is really worth a month’s rent.
Is the CPO quality assurance worth it?
CPO cars are perceived as more dependable than their used counterparts because they’ve passed some sort of quality assurance test or “161-point check.”
But no dealer or manufacturer inspection process is a substitute for getting your own $150 pre-purchase inspection (PPI) from an independent mechanic before the point of sale.
The problem with a seller’s own quality inspection process is threefold:
- Seller inspections are inherently biased. When the party selling you the vehicle is also the source telling you it’s worth buying, there’s a conflict of interest. A seller or manufacturer may relax their standards if they’re trying to move a product fast. An independent mechanic won’t.
- Seller inspections are binary. CPO quality assurance tests are usually pass/fail. A seller might tell you that a car’s brakes and timing belt are “fine,” which may be true now, but a PPI might reveal that both components have under 30% life left, meaning you’ll be on the hook for a $2,000 repair within two years.
- Seller inspections are prone to human error. At best, a CPO vehicle’s quality assurance test is still prone to human error. A $150 pre-purchase inspection is at minimum a second opinion, and a second mechanic could catch potentially severe problems that the dealer’s mechanic may have missed.
All three are reasons why the Federal Trade Commission recommends that all used vehicle shoppers get a pre-purchase inspection, CPO, or otherwise.
In my experience brokering vehicle purchases, dealers push back harder if you try to get a PPI of a certified pre-owned car. They take it as an affront to their quality assurance process or will claim it’s redundant. Call it “a second opinion,” and if they still fight back, walk away.
In short, a seller’s own assurance that a car is in great shape isn’t really worth much until you verify it yourself via an independent inspection.
So the “quality assurance” attached to CPO cars isn’t worth $1,500 or, in my opinion, anything at all.
Is the CPO warranty worth it?
Most commonly, CPO cars will come with an extended factory warranty. If the vehicle was originally sold as new with a 3-year/36,000-mile limited warranty, the seller might extend that to 5-year/60,000 miles.
That means that if you buy it when it’s 2.5 years old and has 20,000 miles on the odometer, you’re essentially getting a 2.5-year/40,000-mile warranty.
Whether a warranty is worth the ~$1,500 CPO upcharge depends on three factors:
- Warranty length. Quite simply, how long will the warranty last you? Extended warranties typically cost around $400 per year on newer cars, so a “3-year/60,000-mile extended warranty” on a 2-year-old car is really only a 2-year warranty worth $800 tops.
- Warranty coverage. To accurately assess a warranty’s true value, you’ll want to carefully comb through its terms. Is it truly bumper-to-bumper? Or powertrain-only, meaning you’re on the hook for everything else?
- The vehicle’s reliability. You’re much less likely to cash in on a Toyota warranty than a Jeep warranty. If a historically reliable car passes a pre-purchase inspection, you’re probably fine driving it for years out of warranty.
In short, if you’re shopping for a historically unreliable car or one with expensive parts, a bumper-to-bumper warranty might be worth the CPO upcharge, depending on its length.
If you’re wondering whether the warranty alone might be worth the CPO upcharge on a certain car, call around to get some quotes on separate extended warranties.
So the quality “assurance” isn’t worth it, and the warranty probably isn’t worth it…but what about the added perks?
Are the CPO perks worth it?
CPO purchases often include free 24/7 roadside assistance, towing, and other travel perks. Basically, what you’re getting is a free AAA Classic membership, which would normally cost you ~$55-70 per year depending on your region.
I’ve seen CPO listings that include a whopping 10 years/100,000 miles of 24/7 roadside assistance, which adds $680 in value and may make the CPO upcharge worth it, especially if you (or your new car) are prone to breakdowns. But just one or two years of coverage certainly isn’t worth a big price hike.
Is buying a certified pre-owned car worth it? Probably not
In my opinion, most certified pre-owned cars aren’t worth the prices dealers are asking.
Now that dealers know that young buyers value CPO cars $3,800 more, I fully predict that we’ll see two trends in the certified pre-owned car market:
- CPO standards will lower to increase inventory and meet demand.
- CPO prices will rise arbitrarily.
While CPO might’ve started as a novel way to highlight superior used cars, it’s evolving into a misleading sales tactic used to overcharge unsuspecting car buyers by thousands.
A CPO deal might be worth it if it meets these criteria
Don’t get led into a false sense of security by the alluring term “certified pre-owned.” Do the math instead and ask yourself: are the perks of CPO objectively worth the extra money I’d be spending?
You’ll probably find that most of the time, CPO cars just aren’t worth it.
But in rare cases, a CPO deal might be worth it if it meets all of these criteria:
- It’s priced within $1,000 of a regular used car.
- It includes at least a 3-year/36,000-mile bumper-to-bumper warranty from time of sale, not manufacture.
- You’re highly likely to need the extra warranty coverage because the car is historically unreliable/expensive to maintain.
Basically, are you buying a historically unreliable car, and is the CPO warranty cheaper than a separate warranty?
But if you’re shopping for a historically reliable car, CPO programs hardly add enough value to justify the usual upcharge.
Summary
Certified pre-owned programs might instill buyer confidence, but more often than not, there simply isn’t enough increased value to justify the ~$1,500 price hike.
They offer quality assurance, but a $150 pre-purchase inspection conducted by an independent mechanic will provide a more thorough and unbiased look at a car’s true condition.
They offer extended warranties, but most used cars (especially reliable ones from Toyota, Mazda, and Hyundai), won’t need additional warranty coverage within their first 5 years/50,000 miles of life.
You’re better off buying a reliable used car that’s passed a pre-purchase inspection and taking good care of it.
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