When buying a vehicle, people basically have three options: new, non-certified used or certified used. While everyone knows what a new vehicle is, many people are unsure of the differences between a certified and non-certified used vehicle, and the pros and cons of each.
Savvy buyers look for the certified pre-owned (CPO) label, and dealers promote these vehicles, but does the certification really offer an advantage? Is a CPO vehicle’s detailed inspection really all that thorough, or are buyers merely laying out extra cash for an expensive limited warranty?
It’s important to know the facts, so you can help your customers feel like they’re getting the best vehicles for their money.
The warranty difference
A used vehicle’s manufacturer-backed warranty might still be in effect at the time of purchase. Consumers have to find out how much of the limited warranty is transferrable, if any, and how to transfer it to the new owner.
In contrast, both new and certified vehicles automatically come with limited warranties. For certified vehicles, the warranty is added prior to sale, after a repair facility performs an inspection and brings the vehicle up to minimum standards. The warranty gives consumers peace of mind, knowing a licensed mechanic has checked out the vehicle.
For consumers who want to buy a certified pre-owned car, the key is finding a reputable and responsible dealer. Since there is no governing agency for CPO vehicles, there's nothing to stop a shady sales lot from slapping the CPO label on vehicles that haven't faced a thorough inspection.
Manufacturer-backed CPO programs and some national brands, such as Kelley Blue Book and Edmunds, support high standards and back CPO vehicles through a variety of warranty options that come with the purchase of the vehicle. These vehicles must be inspected and, if necessary, brought up to program standards. The vehicles are then backed by an impartial third party, who is directed to protect the brand’s reputation and to encourage a positive consumer experience.
Repairs and reliability
CPO status isn't a guarantee that the vehicle won’t have a repair issue. Things go wrong with cars — even brand-new ones. But CPO status does mean the vehicle is probably in better shape than the average used car.
And if something does go wrong with a covered item during the CPO warranty, an ASE-certified mechanic will fix it without a large repair bill. Warranty protection, roadside assistance and rental car coverage all add up to peace of mind and help the buyer feel they’re purchasing a safer, more reliable vehicle.
Jason Garner, general sales manager of AUL Corp., a large third-party administrator of CPO programs and vehicle service contracts, notices “a significantly higher claims rate between non-CPO vehicles and CPO vehicles in the first several months of coverage, due to inspection, repair and reconditioning processes in place for CPO providers. Non-certified vehicles are brought in for repairs much more often during these first few months before there is an evening out of claims rates.”
When it comes to safety, newly minted CPO vehicles are often more reliable because mechanical quality and reliability have substantially improved in recent years. According to Michelle Krebs, automotive relations director at Cox Automotive Inc., “the record 11.5 years average age on the road is a testament to much-improved quality and durability.” J.D. Power adds, “Vehicle reliability as measured in the VDS (Vehicle Dependability Study) has improved at an average annual rate of 8 percent from 2009. In fact, overall long-term vehicle dependability is the strongest it has ever been, and the gap between initial quality and long-term dependability continues to close.”
CPO = peace of mind for buyers
So, are today’s CPO vehicles more reliable because they’ve been inspected, repaired and backed by a warranty — or because they’re built better and designed to last longer? Either way, the result is the same: peace of mind for buyers.
We’ve found that consumers purchase protection on their vehicles for one of three reasons: trust, safety or security. Whether the consumer is risk-averse or a risk taker, they want to be sure they can maintain their lifestyle if a major repair is needed. They might ask themselves, “How will I handle a large repair bill if something happens?” or “Without this coverage, will I leave myself and my family in debt?”
The CPO warranty provides critical peace of mind. Plus, the backing by an OEM or major third party builds trust, which consumers tend to lack for auto dealers. Buyers believe they’re getting a safer, more reliable vehicle.
So, is a CPO vehicle more reliable than a non-certified used vehicle? In the short run, the evidence says yes. And for the mid-to long range, CPO status gives buyers peace of mind, knowing they can maintain their lifestyle if something goes wrong with the vehicle.
“If your CPO car has a major repair covered within its warranty period, you’ll be thankful you have that warranty,” states Consumer Reports. “And the dealer’s inspection of a car for certification might sniff out items that could become big problems later.”
If your customer has a rainy-day stash of cash for emergencies, maintains an annual service contract for their major appliances, and belongs to an auto club for its free roadside assistance, then they are a prime candidate for CPO. They are willing to pay for peace of mind.
Advantage is in the eye of the buyer. They are indeed a savvy buyer if they can buy a quality vehicle at a good price and then sleep well, knowing that if anything goes wrong, they’re covered!
Rob Christman is the fixed operations director of sales at Cox Automotive.