Certified Pre-Owned Explained
By Joshua Levinstone
A few weeks ago I wrote an article breaking down the many details that go into extended warranties. I also briefly touched on Certified Pre-Owned cars as a comparison, because so many people are convinced that buying a CPO is the only way to go–something I don’t agree with.
Most people assume that a new-car dealership will have the best and safest pre-owned vehicles. And why not? If you want a good BMW, the BMW dealer would be the best place to buy one, right? But here’s the thing. New-car dealerships have about as much to do with the manufacturer as the cell phone kiosk in the mall does with T-Mobile.
It is actually much worse, but I won’t get into that–just google the history of car dealerships if you need a good cringe.
Anyways, I wanted to explore the realities of purchasing a CPO vehicle. ISeeCars.com did some research and put together a detailed table of the average price increases for a CPO vehicle vs a non CPO, and the results were (not really that) surprising.
A lot of the price hikes are as you would expect; with the European luxury brands having the most notable price increases. What is surprising is how much those average costs are. BMW, Mercedes and Audi (the cars we love, and sell) all had price increases of around $1,500, while Mercedes was over $2,000!
So what is that extra grand and a half getting you? Well, for Audi, BMW, and Mercedes, the answer is the same. Unlimited miles!–for one additional year from the original in-service date (when was was first sold). Now, unlimited miles would be great if you are driving for Uber or Lyft, but the coverage becomes void if the vehicle is used for commercial use. Oh, and you can only take the car to its manufacturer dealership… so, you know, don’t break down away from a city. Also, Audi charges an $85 deductible and Mercedes only covers the powertrain.
This may seem like a biased and pessimistic view of CPO programs, and yea, it is. Personally, I don’t see the benefits justifying the price hike. Though, I have sold cars for a long time, and I will admit, it does look good to see that a two-owner car was last sold as a CPO–not that it means anything, but perception trumps reality, and many car buyers feel at ease when they see that on the CarFax.
But the reality is simple. If a vehicle is serviced properly by a trained professional, it doesn’t matter where you buy it from. The value of a car isn’t determined at the point of purchase, but when you go to trade in or sell the car. Again, this sounds strange, but think about it. If you saved $2K on the price of a car, but end up spending $5 grand over the next few years of ownership, did you really get a good deal? Having to spend money on a tow truck, a rental car, and then the time you spend wondering what kind of bill you may be facing is stressful.
This, right here, is why CPO vehicles sound so great. They have been through a rigorous inspection and the coverage has been extended, and because it’s the manufacturer dealer doing the work, it has got to be perfect, right?
Again, the manufacturer dealership is not the manufacturer, and when you have a store selling hundreds of cars every month, how many service technicians do you need on staff to inspect and make all the repairs without skipping steps or rushing the process in order to move all of these vehicles?
At the end of the day, as a consumer, you want–nay! Deserve–a reliable vehicle and the piece-of-mind that it isn’t waiting to ruin your day.