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. 

Pros

• 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

Cons

• 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.

Picture courtesy: http://blogs.cars.com/.a/6a00d83451b3c669e2017616815460970c-800wi