Cars

Why a Certified Pre-Owned Car Is Never a Good Deal

Published On 08/19/2016 Published On 08/19/2016

Certified pre-owned vehicles are nearly always advertised as the cream of the crop. In theory, they're the nicest, most meticulously maintained, lowest-mileage, and rigorously inspected used cars on the market. They're supposedly so great the manufacturer stands behind them, and they even come with an extended warranty, right? That's why they're so often sold at a premium price reflecting their pristine condition.

Just one problem: CPO vehicles are a complete and utter myth, and buying one is almost never a good deal.

Is it possible to find a great deal on a perfectly maintained vehicle that the previous owner treated like a family member? Absolutely -- but heed this warning: stay far, far away from CPO vehicles.

Flickr/Emilio Labrador

Certified pre-owned programs are little more than an expensive marketing scheme

There is absolutely no difference between a CPO vehicle and other similar used cars in today's market, except for one thing: the warranty. Here's the kicker, though: you don't really need an extended warranty these days, because most late-model cars typically don't have major mechanical issues. Consumer Reports recently performed an extensive study where it found that 55% of owners who had extended warranties on their vehicles never used them at all. They didn't even use them once.

Worse still, for the remaining 45% that did use them, well over half didn't get their money's worth from the warranty. That means the average buyer of a CPO car has a less than one-in-four chance of actually coming out ahead on the deal. Those are house odds the dealerships will take every single time, because the premium you pay for an extended warranty on a CPO vehicle is usually far greater than the benefit you reap.

Courtesy of Audi

Most CPO cars aren't inspected terribly closely

Many certified pre-owned programs verify just the really, really big things, such as a lack of obvious defects and a frame that hasn't been damaged in a serious collision. There is, however, a dirty little secret to those claims. The dealer auctions, where most CPO vehicles are purchased, already provide this information to all dealers with condition reports and post-sale inspections. When you buy a vehicle at a new-car dealership's CPO lot, all you're really doing is paying a stiff premium for a basic inspection that's already available to all car dealerships, whether it's CarMax or Bob Smith Auto Sales.

Flickr/Antrell Williams

The "certified" part of a CPO car leaves out the most important thing...

… and that's the prior owner. A certified pre-owned vehicle offers absolutely no information about how the prior owner drove and maintained that vehicle.

Zero. Zilch. Nada.

You need to know about the previous owner for reasons that go far beyond how they drove the car. Was the oil changed on time? Were the tires ever replaced? Is there an expensive repair already done to the vehicle that wasn't done precisely right? Even a former rental car can qualify as a certified pre-owned vehicle these days. Without knowing these things, you're opening yourself up to financial risk in the form of a shiny object that may become a rolling money pit.

Flickr/Ryan Gsell

The difference between a CPO and non-CPO car? Your willingness to pay.

The brutal reality of certified pre-owned vehicles is that there is absolutely no difference between those used cars that sold at a new-car dealership under a fancy name, and other similar used cars available elsewhere in today's marketplace. With a CPO vehicle, the manufacturer gets an extra cut of the profits, as does the dealership, the finance company, and other third parties -- from the auctions that inspect the cars, to the automotive sites and media sources that run the advertising. You're essentially just subsidizing a lot of big companies.

Compare the CPO prices to similar cars for sale

What should you do instead? Compare the CPO prices to other alternatives; chances are you'll find them to be cheaper and better. Shop both online and locally, and verify the car before you buy it. Most late-model vehicles bought on eBay through independent dealers such as Texas Direct are substantially less expensive than the ones at competing new-car dealerships. There are also dozens of other online-focused competitors such as Beepi, Vroom, Shift, and Carvana that offer the same late-model cars for a lot less money. If you want to go even cheaper, take a look at private sellers on Craigslist who aren't simply selling cars for a quick buck. No matter which way you go, always verify the maintenance history, and get the vehicle inspected by an experienced mechanic.

It doesn't matter if you're looking at a $20,000 car, $10,000 car, or $2,000 car: when it comes to used vehicles, it's always the laziest consumers who pay the most. Save the rubber stamp of guarantee that is a certified pre-owned vehicle and invest in things that matter more.

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Steven Lang is an auto auctioneer, car dealer, and former part-owner of an auto auction near Atlanta, Georgia. Feel free to reach him directly at his Facebook page

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