Certified Pre-Owned Cars: A Reality Check
Managing Issues and Expectations on a CPO Car
Certified pre-owned (CPO) cars are popular with buyers who want to minimize the risk of buying a used car. They also can typically get more car for their money with a CPO vehicle than they can with a new car.
To be a CPO car, a vehicle needs to meet specific age and mileage requirements. It then must go through a thorough inspection at the dealership. If a car passes, it gets an extended limited warranty and will carry a higher price than a non-CPO model. Many people feel comfortable in paying that premium, though, because of the peace of mind a CPO program gives them.
As with many dealerships, lease returns or late-model trade-ins make up a large portion of the CPO inventory at Carson Toyota/Scion in Carson, California. Toyota requires dealers to put vehicles through a 160-point inspection process (174 points for hybrids). "If a car can pass the inspection, it will be certified," says Dianne Whitmire, fleet director for the dealership.
But a CPO car's perceived quality and its added cost also brings a set of higher expectations from buyers. Writing about his CPO problems in the Edmunds forums, one disenchanted buyer put it this way: "When I buy a certified car with 10,000 miles on it, I expect to not have any issues with anything for a good amount of time."
Is that a realistic expectation? Not always. Here's why.
Perfection Not Guaranteed
CPO doesn't stand for "Car Perfection Opportunity." But it's hard to fault consumers for thinking that it might. Every advertisement would have you believe that a CPO vehicle is just like new. Ultimately, though, a CPO car is still a used car. It may have gone through a 200-point inspection, but that doesn't mean that 200 parts were replaced.
"You can never take a used car and make it new again," says Michelle Primm, major partner at Cascade Auto Group in Cuyahoga Falls, Ohio.
To further complicate matters, not all cars labeled "certified" are manufacturer-certified pre-owned cars.
Dealer Certified vs. Manufacturer Certified Pre-Owned
Car dealers love to sell CPO vehicles. People are willing to pay more, the profit margins are higher and, in some cases, the vehicles need very little reconditioning. This is why some opportunistic dealers will slap an extended warranty on a car and call it "certified." Other dealers have been known to take a vehicle from another make, give it a third-party warranty and sell it as a certified car. (Think of a Chevrolet dealer selling a "certified" BMW.) This kind of thing can create a lot of confusion for consumers.
The cardinal rule is this: Only a manufacturer's franchised dealer can sell that manufacturer's CPO vehicles. This means that if a dealership can sell new Volkswagens, then it can also sell Volkswagen CPO used vehicles. It cannot, however, sell a Cadillac or any other brand of used vehicle as certified.
The problem is that many dealers will sometimes call their used vehicles "certified" because they've put them through a basic inspection or reconditioning. Such cars are not actual CPO vehicles. They have not met the manufacturer's criteria for inspection, nor do they come with a factory extended warranty. Additionally, only a genuine CPO vehicle can qualify for the additional perks of a CPO program, such as free roadside assistance and loaner vehicles.
If a car dealer tells you he will "certify the car" for you after you buy it, don't agree to it. No car can be certified after the fact. It probably means that the dealer wants to sell you an extended warranty under the guise of certification.
Avoiding CPO Problems
Here are a few ways to sidestep or resolve issues on a certified pre-owned car:
- Make sure it is a genuine CPO vehicle: If you want to buy a CPO Ford, make sure you go to a Ford dealer. Check the window sticker for the manufacturer's CPO logo and find out who is providing the warranty. If the companies match up, you're in good shape.
- Know what the warranty covers: A manufacturer CPO vehicle will always come with a limited warranty, or a limited warranty and a powertrain warranty, which will cover major engine and transmission components. (At this writing, Mitsubishi is the only carmaker whose CPO vehicles include just a powertrain warranty — albeit a 10-year one.)
A Honda CPO car, for example, will add two years or 40,000 miles to Honda's new-car five-year powertrain warranty, giving it a total of seven years or 100,000 miles from the date the car was new. Additionally, Honda will provide a 12-month/12,000-mile limited warranty, or extend any existing new-car warranty for 12 months or 12,000 miles. Some luxury brands, such as BMW, will include wear-and-tear items such as brake pads and rotors in the CPO limited-warranty coverage. It is especially important to know the differences between the two types of coverage. Not everyone does.
Matt Jones, an Internet sales manager for a Southern California Honda dealer, estimates that a quarter of his customers assume that a CPO car will have a new-car warranty for seven years. They're confusing the 12-month limited CPO warranty with the seven-year powertrain warranty. This can lead to false assumptions about what will be covered after the first year of owning that CPO car.
Every automaker's Web site lists the details of its CPO warranty. Take the time to read about the brand you're interested in and know what items are and are not covered before making a decision to buy. The Edmunds CPO comparison page can serve as a quick reference to the differences among the programs.
- CPO or no, check the car out: We scratched our heads when we read one buyer's complaints about his newly purchased CPO car, which turned out to have windshield cracks, front and rear bumper damage and wheel damage. (The car hadn't been detailed, either.) After the buyer publicly complained, the dealer made the car right. But we had to wonder how this sale ever took place to begin with. The dealer apparently sold a damaged car as a CPO vehicle, and the customer apparently didn't do a walk-around before taking delivery.
Don't buy blindly, trusting that a CPO car will be problem-free. Check it out for any obvious issues. And if you are concerned that a CPO car will have problems you might not be able to detect, consider bringing a mechanic with you to look it over before you buy it. He may be able to spot any issues that may have been overlooked in the dealer inspection. Just make sure you know what to do with the information when you get it.
Jones had a customer who wanted to be thorough and took her CPO car to a mechanic shortly after purchasing it. The mechanic told her she had 6 millimeters remaining on her brake pads. She went back to Jones and wanted to know why she was sold a car with "just 6 percent remaining," on the brake pads. He explained that brake pads are usually between 8 and 10 millimeters thick when new, so 6 millimeters was actually pretty good. She had misinterpreted the meaning of 6 millimeters. Perhaps she might have expected brand-new brake pads, but that wasn't what the CPO standard required.
- Be persistent: If you believe there's something amiss with a CPO car, follow up. This is precisely what an Edmunds editor's spouse did after he purchased his CPO Porsche 911. A few days after buying the car, he noticed that the tires were not the Porsche-approved "N" specification. When he researched the issue, he learned that Porsche will not approve a vehicle as a CPO unless it has tires with this specification. He was concerned that there would be warranty issues down the road if he used the non-spec tires that were on the car.
The dealer wasn't much help at first, but the buyer persisted, moving through the chain of command both at the dealership and contacting the automaker directly. The dealer eventually replaced the tires with all-new ones that met Porsche specifications.
- Understand that even CPO cars can have problems: In researching this story, we came across two instances in which consumers had trouble with their CPO cars shortly after purchase. Both believed their cars' problems should have been identified and corrected during the CPO process. But in both cases, the problems were flaws that were widespread in that make and model. The CPO process wasn't flawed — the cars were. One owner got her car fixed under warranty. The other is still unhappy with his car's steering-wheel vibration at higher speeds. But so are a lot of people who bought that same car new, and they're pressing on in a battle with the carmaker.
Are CPO Cars Worth the Money?
Just as with CPO vehicles, the CPO purchase process isn't flawless. There is some level of risk involved in buying any used car, but with a CPO vehicle, it is typically lower. Mechanics who are trained to spot trouble have inspected it. A manufacturer backs it with a limited warranty — and maybe a powertrain warranty, too. Depending on the program, you might have roadside assistance and a loaner-car program at your disposal. You have the manufacturer to turn to if you need help resolving an issue at the dealership level. All those are benefits you typically don't get with a non-CPO car.
Jones says he gets the same number of complaints on a CPO car that he does with the new cars he sells: not many. There's a good chance that will be your experience, too.