A certified pre-owned (CPO) vehicle is a late-model used car that has gone through a thorough inspection and reconditioning and has been given a factory-backed limited warranty. Franchised dealerships sell CPO vehicles to fulfill two common needs of used-car shoppers who are looking for a reliable car at a good price. CPO cars remove the uncertainty about the mechanical condition of the vehicle and present an attractive alternative to a higher-priced new car.

CPO vehicles also come with benefits not found on other used vehicles, such as access to loaner cars, roadside assistance and even maintenance for some brands. CPO cars take the guesswork out of used-car shopping: The vehicles are inspected, reconditioned and guaranteed to be in working order.

Which Cars Qualify?

When someone returns a leased vehicle or trades in a car during a new-car purchase, the dealership evaluates the vehicle's condition and considers it for the brand's CPO program. Taking Volkswagen's CPO program as an example, the car has certain requirements to meet: It must be no more than 6 model-years old, have less than 75,000 miles on the odometer, and have a clean title and an issue-free vehicle history report.

If the car falls within those guidelines, a factory-trained Volkswagen mechanic performs a 100-plus point inspection to ensure it measures up to the requirements of that manufacturer's program. The dealership that's performing the certification replaces or repairs anything that's worn beyond the limits of that manufacturer's program. If the mechanic finds any problems, they also are repaired, with the goal of bringing the vehicle as close to as-new condition as possible.

A Volkswagen dealership then sells the car with a limited two-year/24,000-mile warranty that covers, among other things, the powertrain, electrical system and air conditioning. Finally, Volkswagen gives the car two years of 24-hour roadside assistance for added buyer peace of mind.

Many other manufacturers have similar CPO programs with multipoint inspections and comparable warranties. Honda's CPO program, for example, includes a 182-point inspection, a limited seven-year/100,000-mile warranty on the powertrain, and a one-year/12,000-mile warranty on non-powertrain components. Plus the car continues to carry any remaining new-car warranty coverage.

To find out the specific benefits of each program, see our Certified Used Vehicle Programs comparison tool.

Benefits Come at a Cost

The dealership pays for the certification process, and that's reflected on the higher prices seen on CPO vehicles. Expect to pay an average of 6.2 percent more, or $1,127, for a 3-year-old non-luxury CPO vehicle, according to Edmunds sales data. If you are interested in a luxury vehicle, it will cost an average of 8.3 percent more, or $2,131, for a 3-year-old CPO vehicle. The price is negotiable, as with any used vehicle. But be aware that you'll be starting from a higher price than you would be with a non-CPO model.

One added bonus is that a CPO vehicle will often have special low-interest rates for those who qualify. These are usually lower than the rates you'd get for an ordinary used car.

The certification costs should be factored into the price of the vehicle. If you see them listed as a separate fee, this is a red flag: The vehicle may not be a genuine CPO vehicle.

'Certified' Doesn't Always Mean Manufacturer CPO

To further complicate matters, not all cars labeled "certified" are manufacturer-certified pre-owned cars. Here are a few of the ways you might encounter a certified car that is not part of a manufacturer CPO program.

Dealer Certified: Dealers will sometimes call their used vehicles "certified" because they've put them through a basic inspection and reconditioning and given them a third-party warranty. Dealers also sometimes take a vehicle from another make, give it a third-party warranty and label it as a "certified" car. (Think of a Chevrolet dealer selling a "certified" Ford.) This kind of thing can create a lot of confusion for consumers.

Third-party extended warranties might not cover the same items as the manufacturer's CPO warranty. The third-party warranties might require that you get the car serviced only at that dealership. Additionally, you might get fewer or none of the additional perks that you'd get from a manufacturer CPO program.

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 BMWs, then it can also sell BMW CPO vehicles. It cannot, however, offer vehicles from other brands as CPO cars.

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 manufacturer certification.

Carfax Certified: Cars with this label are not CPO vehicles. They have not met the manufacturer's criteria for inspection. They also don't come with the manufacturer's factory extended warranty. The Carfax certification refers to the guarantee that its accident data is correct and the clean-title vehicle in question was indeed never in an accident. 

NIADA Certified Pre-Owned: You might also encounter used cars labeled "NIADA Certified." Dealerships offering these cars are members of the National Independent Auto Dealers Association (NIADA). NIADA has created its own certification program that offers benefits that are similar to manufacturer CPO programs. There's a multipoint inspection, limited warranty and roadside assistance. There are options to increase the coverage and lower the deductible for a fee.

One major difference is that this certification can be applied to vehicles that wouldn't typically qualify for a manufacturer CPO program. The NIADA certified program can cover a vehicle that's up to 14 years old, while manufacturer programs would not cover a vehicle that's more than 6 years old.

NIADA and the dealerships selling the vehicle aren't the administrators of the limited warranty. That's handled by Warrantech Automotive Inc. As with any third-party extended warranty, it's a good idea to research the company and read consumer reviews before you buy product.

CPO Shopping Tips

Be sure you know who is certifying the car. Is it the manufacturer or the dealership? Familiarize yourself with what the manufacturer's CPO inspection covers during the certification process and what the warranty covers. If the certification is not from the manufacturer, which is what you'll find at independent used-car lots, "certified" has less value. Many of these car sellers don't have their own repair facilities.

Obviously if a manufacturer such as Ford Motor Co. stands behind a guarantee, it is more valuable. For one thing, any Ford service department will honor the CPO car's warranty. That's an important factor if you travel or have to move to another state.

CPO programs are ideal for shoppers who want to save money over the price of a new car but who also want to drive a near-new car with a solid warranty. While CPO cars offer many benefits, they are more expensive than the non-CPO used cars that you can buy from dealers and private parties.

When you're ready to start shopping, take a look at the used-car inventory on Edmunds. You can filter your search results to show only CPO vehicles. For more information on CPO cars, read Certified Pre-Owned Cars: A Reality Check and Certified Pre-Owned Cars Vs. Used Cars With Extended Warranties.