Thursday, January 9, 2014

Buying Certified Pre-Owned Cars

A certified pre-owned car (CPO) is a car that has either been traded in or bought for resale. Automakers have dealers inspect and repair trade-ins prior to resale out of their own pocket, and then offer a warranty on the certified pre-owned cars. 

  • Avoids high depreciation costs
  • Car has already been inspected/fixed and comes with a warranty, giving you peace of mind
  • CPO programs create vehicles with higher resale values, providing increased bargaining power when it's time to trade the car in. 
  • Reduced-rate financing options are often available for CPO purchasers
  • Just because the car is certified does not mean that it comes trouble-free. You should still have a mechanic inspect the car and take it back to the dealer for repair if any problems are found.
  • Though you avoid new-car depreciation, you still have the traditional higher mileage and used-car damage that new-car buyers don't need to worry about.
Factory-backed programs
  • Vehicle has been inspected, repaired, and backed by a factory warranty at no cost to you
  • Sends representatives periodically to ensure inspection and repairs have been made.
  • Auto manufacturers tack on anywhere from 2-8% of the original used-car price for the certification sticker. Typically, the higher-end the model or brand, the higher the percentage.
Dealer-certified programs
  • Offer extended warranties at a cost; often require deductible payments and exclusions for any "normal wear and tear" repairs and owner abuse.
  • Warranty may require you to to always return to the same dealer for service or repairs
General tips

  • Whether you decide to go with a factory- or dealer-backed program, always be sure to thoroughly read the warranty agreement, including the fine print and age/mileage limits.
  • Know the details of the return policy, from time frame to what refunds are covered.
  • Ask to see the certification checklist to make sure all major components have been inspected. Be sure to look at the vehicle repair/maintenance history as well.
  • Take the CPO for a thorough test drive.
  • Always negotiate - you can still haggle the price down for any CPO.

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