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What Does Certified Pre-Owned Mean?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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There are tons of words thrown around in car advertisements: new, brand-new, used and certified pre-owned. Brand-new may be a fancy way to say new, but a certified pre-owned vehicle is much more than a dressed-up definition of used. We break down what it means to buy a CPO, if you should get one, when you should avoid one, pros and cons and alternatives to CPO vehicles.

What does certified pre-owned mean?

A CPO vehicle is a type of used car with the original automaker’s seal of approval.

To be a CPO vehicle, a car should:

  • Be 6 years old or younger and have 80,000 miles or less.
  • Pass inspections done by a technician who is trained and certified by the original automaker. Most inspections to determine if a car is good enough to be a CPO vehicle require that 150 to 200 specific parts pass a check.

When does a certified pre-owned car make sense?

Buying a CPO makes sense if you want extra peace of mind when buying a used vehicle. It may especially be worth it if:

  • It doesn’t cost much more than a used car.
  • It’s less expensive than a new car and provides the same type and length of warranty — or an extended warranty you buy separately.
  • Potential repairs might break your budget — a CPO generally comes with an extended warranty.
  • It makes a big difference in your APR.

Certified pre-owned versus used. Because CPO cars are considered less risky, lenders usually give lower auto loan APRs for CPO vehicles versus used vehicles. The difference may or may not be enough to make a large difference in the bottom line of what you pay in interest, but it’s probably worth asking a loan officer when you begin shopping around for auto loan rates.

How to shop for an auto loan. Don’t simply get a loan through a dealership as dealers regularly increase APRs. You should shop around for the best auto loan rates. Potential lenders could include your credit union, bank or online lender. Don’t make one of the common mistakes people make when they need a car loan and do check out our auto loan marketplace when you’re ready to see potential rates.

Where can you get a CPO car? From a car dealership (not a car lot) of the brand you’re seeking. For example, you could get a CPO Toyota from a Toyota dealership; a CPO Ford from a Ford dealership. You can’t get a CPO Toyota from a Ford dealership.

How do you find the value of a CPO car? To know what you should pay for a CPO vehicle, you can look up its value on a free industry guide website, such as Kelley Blue Book or Edmunds.

When should you skip on a certified pre-owned car?

Despite all the benefits of a CPO vehicle, the price is almost always higher than a regular used car, perhaps thousands of dollars higher.

A CPO car may not be worth it if:

  • It’s much more expensive than a similar used car that passes inspection.
  • It costs the same as a new car.
  • It costs more than a used car with a comparable extended warranty you add on.

Pros and cons of a certified pre-owned car

Pros.

  • Vehicle is generally younger with fewer miles than other used cars you may find for sale.
  • You may have greater peace of mind knowing it passed a thorough inspection.
  • An extended warranty is often included.
  • Potentially lower APR on your auto loan for a CPO versus a regular used car.

Cons.

  • Higher prices
  • You can only get a CPO from a dealership, which may not provide the best shopping experience if you prefer to buy a car completely online

Alternatives to a certified pre-owned car

If a CPO doesn’t seem worth the extra cost, there are other ways to buy a new-to-you set of wheels:

Buy a used car. A regular used car can be just as good as a CPO car and has a lower price tag. If you are concerned about the quality of a used car that hasn’t been certified, you could have it inspected by an independent mechanic, most likely for a fee. We tell you what to look for when buying a used car.

Buy your own extended warranty. Plenty of third-party companies offer extended warranties for almost any type of vehicle. But make sure you understand what you’re paying for: Extended warranties typically begin after the manufacturer’s warranty ends but refer to the entire length of time the car is covered.

For example, if you buy an extended car warranty of six years, 72,000 miles on a Toyota, the car would be covered for a total of six years or 72,000 miles, not an additional six years and 72,000 on top of Toyota’s usual 36-month, 36,000 mile warranty.

There are several companies that sell auto extended warranties and you could get a few different quotes to determine what’s best for you and your car.

Buy new instead. If you are that worried about potential repairs you may have on a used car, consider a new car. Yes, new cars are typically more expensive than used, but you could wait and watch for sales and rebates, consider less expensive models or look at different trim options of a model you like. A lower trim level could mean getting cloth seating instead of leather, but you would still have that model of car.

Lease a new car. New car leasing almost always has lower payments than new car financing. And, of course, a new car is covered by a new car warranty. You can check here for more on leasing.

The bottom line

A CPO car can be a smart purchase if it’s less expensive than a new car and comes with almost all the benefits of one. A CPO car may not be a smart purchase if a regular used car with a less expensive price tag provides just as many benefits. To see which offers you may qualify for on a potential auto loan, consider starting with LendingTree.

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Terms

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LendingTree is our parent company

LendingTree is our parent company. LendingTree is unique in that they allow you to compare multiple, auto loan offers within minutes. Everything is done online. LendingTree is not a lender, but their service connects you with up to five offers from auto loan lenders based on your creditworthiness.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jenn Jones
Jenn Jones |

Jenn Jones is a writer at MagnifyMoney. You can email Jenn at [email protected]

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Navy Federal Credit Union Auto Loan Review

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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If you are shopping for an auto loan, it’s helpful to get quotes from multiple lenders to ensure you receive the lowest possible interest rate and most favorable terms. For members of the military and their families, Navy Federal Credit Union could be an option.

Here’s what we found out about Navy Federal Credit Union and its auto loans.

About Navy Federal Credit Union

Navy Federal Credit Union, which was founded in 1933 and is headquartered in Vienna, Va., serves the military community. Its “once a member, always a member” policy means that you can continue to use the credit union if you or your family member leaves the military.

The following groups are eligible for membership:

  • Active-duty members of the Air Force, Air National Guard, Army, Coast Guard, Marine Corps and Navy
  • Delayed Entry Program (DEP) enlistees
  • Department of Defense officer candidates/ROTC participants
  • Department of Defense reservists
  • Veterans, retirees and annuitants

Parents, grandparents, spouses, siblings, children and grandchildren in a military family are also eligible, as are household members. Department of Defense civilian employees can become members, too.

Consumer Financial Protection Bureau action against credit union

It’s important to note that in 2016 the credit union was ordered by the Consumer Financial Protection Bureau, or CFPB, to pay $28.5 million after an investigation found that, among other things, it was improperly restricting account access for members with delinquent loans. The CFPB accused the credit union of making false threats of legal action and wage garnishment, threatening to contact delinquent members’ commanding officers and lying about the consequences of falling behind on loan payments. Of that total, $23 million would go to victims who received threatening letters. The credit union was required to correct its debt collection practices.

Navy Federal Credit Union: At a glance

When shopping for an auto loan, it’s crucial to get several quotes, no matter your credit score. If you have an array of loan options, you’ll have more negotiating power with a dealership.

APRs

APRs for Navy Federal Credit Union auto loans, which are based on creditworthiness, currently start at 2.99%.

Here’s a breakdown of APRs based on the type of vehicle:

  • New vehicles: 2.99% to 6.29% for loan terms between up to 36 months and 96 months
  • Late-model used vehicles: 3.29%* to 4.79%* for loan terms between up to 36 months and 72 months
  • Used vehicles: 4.99% to 6.29% for loan terms between up to 36 months and 72 months

Used vehicles older than 20 years are paid back at a collateral loan APR, which can be between 8.09%* and 8.9%* for loan terms between up to 60 months and 180 months. Preapproval isn’t available for this type of loan.

Your rate could be higher, depending on your credit profile and the value of the vehicle.

Active-duty and retired military members may be eligible for an additional discount with direct deposit to a Navy Federal Credit Union account. To get the discount, call or visit the credit union.

Vehicle requirements

Navy Federal Credit Union has specific vehicle requirements for its auto loans. For new vehicles, the minimum loan amount is $30,000 if seeking a term of 85 to 96 months. Used vehicles are 2017 models or older, or any model year with more than 30,000 miles. Late-model used vehicles can be model years 2018 to 2020 with 7,500 to 30,000 miles.

Boat, motorcycle and RV loans

The credit union also offers new and used boat, motorcycle and recreational vehicle (RV) loans. These loans only apply to recreational vehicles, so full-time RVs aren’t eligible. Here’s a breakdown of APRs based on the type of vehicle:

  • New boats: 6.05%* to 8.75%* for loan terms between up to 36 months and 180 months
  • Used boats: 8.05%* to 9.2%* for loan terms between up to 36 months and 180 months
  • New motorcycles: 7.25%* to 8.6%* for loan terms between up to 36 months and 84 months
  • Used motorcycles: 8.09%* to 9.35%* for loan terms between up to 36 months and 72 months
  • RVs (collateral loans): 8.09%* to 8.9%* for loan terms between up to 60 months and 180 months

These rates are based on creditworthiness, so your rate may be higher.

As with auto loans, there are specific requirements when it comes to boats, motorcycles and RVs. Check with the credit union for details.

Refinancing

Navy Federal Credit Union also offers auto loan refinancing.

Here’s a breakdown of APRs based on the type of vehicle:

  • New vehicles: 2.99% to 6.29% for loan terms between up to 36 months and 96 months
  • Late-model used vehicles: 3.29%* to 4.79%* for loan terms between up to 36 months and 72 months
  • Used vehicles: 4.99% to 6.29% for loan terms between up to 36 months and 12 months

Members may be eligible for $200 cash back 61 to 65 days after completing their first scheduled payment when refinancing from another lender.

A closer look at Navy Federal Credit Union auto loans

Highlights of Navy Federal Credit Union auto loans

A down payment isn’t required to get a Navy Federal Credit Union auto loan, but making one could improve your loan-to-value ratio, which could boost your chances of getting approved.

If you have a limited credit history, you may still get approved with a co-applicant.

You could get a decision about your application in just a few minutes. The credit union offers preapprovals, so you know how much money you can spend on your vehicle before you start shopping. If you get preapproved, your rate will be locked for 60 days.

The credit union offers an auto buying program, through a nationwide network of dealers, as a straightforward way to buy a new or used car. You can even get special military prices if members need to buy a new car while overseas.

You can get optional guaranteed asset protection (GAP) insurance for existing or new auto loans through the credit union. It also offers some discounts on GEICO auto insurance, depending on your state of residence.

Lowlights of Navy Federal Credit Union auto loan

If you don’t have ties to the military, you won’t be able to access Navy Federal Credit Union’s services, including its auto loans.

If you are approved for an auto loan, you must either pick up your check in person at a branch or receive it via mail. There may be a fee associated with mailed loan checks. If you had a co-applicant with a different mailing address, the check and promissory note will be sent to them. Some applicants may find this inconvenient, especially if their co-applicant lives far away.

On the credit union’s website, minimum interest rates are noted in detail for used vehicles, new vehicles, boats, RVs and motorcycles. The website, however, doesn’t note its maximum interest rates or discuss specific credit requirements for auto loan approval. The credit union did not respond to emails requesting this information.

How to apply for a Navy Federal Credit Union auto loan

To apply for an auto loan from Navy Federal Credit Union, you’ll first need to become a member. You can apply at a branch or online, and you won’t be charged an application fee.

Make sure to gather contact information for both you and your co-applicant, if you have one. If you’ve picked out the vehicle you want, you’ll need its 17-character vehicle identification number (VIN), the state where it will be registered, the dealer or seller’s name and the mileage reading on the odometer.

If you don’t have a specific vehicle in mind, you’ll need an estimate of the type, age and price of the vehicle you want to buy, including the warranty, title, tax and license fees minus the down payment. You’ll also need to know about how long of a loan term you’d prefer.

The credit union requires personal information, including employment and income details for both you and your potential co-applicant. It’ll ask for your current housing information, too. The credit union already has identity information about its members, and it’ll base its decision on your credit history, the amount of money you want to borrow and the value of your collateral.

You’ll receive a text or email from the credit union to let you know whether it approved your application. Most applicants get a decision in about five minutes.

The fine print

Navy Federal Credit Union’s website doesn’t indicate whether it charges any additional fees for auto loan borrowers. The only fee mentioned is the one that the credit union may charge to mail a physical check to an applicant or co-applicant, as mentioned above.

Who is a Navy Federal Credit Union auto loan best for?

The credit union is a great option for people with ties to the military who want to work with a credit union that has friendly policies and decent interest rates.

Like many credit unions, this one offers competitive interest rates for those with good credit. Even if you are already a member and know you’ll apply for an auto loan with this lender, it’s still important to shop around for the best rates so you can be sure you are paying the lowest possible amount for access to the money you need to buy a car.

*Rate accurate as of August 22, 2019

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rachel Morey
Rachel Morey |

Rachel Morey is a writer at MagnifyMoney. You can email Rachel here

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Buying a Car: When to Walk Away

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Buying a car can be a stressful experience for anyone. For some of us, the anxiety begins before we start negotiating financing or even step foot onto a car lot. But no matter how eager you are to get the experience over with, or how persistent a salesperson is, you should never buy a car without being certain it’s right for you.Ron Montoya, consumer advice editor for Edmunds, says that dealerships are good at applying pressure. “There’s always a sense of urgency that ‘today is the best day to buy the car,’” he says. “While that may be true for the seller, it’s not always the case for the buyer.”

According to a 2018 Cox Automotive study, you may be tempted to give in to the pressure after spending a whopping three hours at a lot, which is the average amount of time buyers spend. But no matter the circumstance, you should always be prepared to walk away in the presence of red flags.

How do you negotiate in “good faith?”

Like most things in life, a bit of preparation can go a long way. Here are some of the ways you can reduce your risk before approaching a dealership or private seller when buying a car:

Review your budget and credit

Doing your financial homework can help you determine what price range is truly affordable for you, instead of letting a salesperson decide. Loan payment calculators can also help you get a realistic view of affordability by taking interest rates and fees into account.

Get loan preapproval

Another factor in determining affordability is the amount of financing you get approved for. Having a loan preapproval from your bank or credit union, before visiting a dealer, has several benefits: it sets realistic expectations about the maximum sales price you can shop for and helps you avoid more expensive or even potentially predatory dealer financing. If the dealer can beat your preappoved loan offer either through one of its lender partners or through the manufacturer, you’ll know you’re getting the best deal possible.

Research market prices

Montoya, who purchases fleet vehicles for Edmunds, an auto industry research firm which tests cars, says the best way to prepare for a purchase is to understand the market price of the car you want. You can do this by looking up values through sites like Kelley Blue Book or Edmunds, checking out a variety of ads and car-buying websites, and even by getting a few price quotes, so you can compare them to the offers you get from a dealership.

Research promotions

Having a sense of manufacturer and dealer promotions can not only help you narrow down which models to buy and which lots to visit in your area, but it can also help you understand if the dealer is truly offering a “one day only” sale, or if it’s just a tactic to pressure you into buying.

What are the warning signs that you should walk away from a car deal?

Interacting with a salesperson who’s been trained to haggle and close the deal might leave you feeling outwitted. Some level of stress is normal, but these are the real red flags to look out for:

Prices change after your initial negotiations.

For example, your trade-in value is lower than what you discussed or your monthly payments are higher. You should also look out for add-ons you didn’t agree to, like an extended warranty or a “service contract” that increases the overall price tag. Montoya says it should be a deal-breaker when written terms don’t match what you discussed.

The contract isn’t final.

It’s easy to assume that signing a contract means your deal is final, but some dealers include contingencies, including “spot deliveries” that might be “yo-yo transactions” meant to intentionally deceive buyers.

If your contract states, for example, that your financing isn’t final, you may be asked to come back later and get a different loan with worse terms, for the car you’ve already taken home. If the dealer won’t state in writing that your financing is final, they may be breaking the law. This is a definite sign that you should walk away.

You’re being pressured.

Brent Miller, executive director of a community center where musicians work, practice and perform in San Francisco, recently shopped for a new car. Miller says despite visiting a reputable dealership for his purchase, the salesperson repeatedly pushed him to make unwanted decisions. “It was amazing how much pressure there was to sign the contract without reading everything, even before I had a loan offer,” Miller says.

If you’re encouraged to buy a different car than the one you’re shopping for, or to close the deal without looking over the numbers, Montoya says you should walk away.

The seller is withholding information.

It’s a red flag if your salesperson gives unclear information about pricing and loan terms. If you can’t get a straight answer on what your monthly payment will be, the length of your repayment term or your interest rate, you shouldn’t sign a contract. A good tip is to keep your focus on the out-the-door price of the car — if you get the lowest price possible, a good monthly payment should follow.

Discriminatory practices

If you feel a dealer is attempting to take advantage of you based on your citizenship status, income or other factors, you should go elsewhere. One way dealers do this is by marketing to you and conducting negotiations in your first language and then offering you a contract in a different language, with higher fees. Regardless of the circumstances, never sign a contract if you’re unsure what it says.

How to walk away from a car deal

So you’ve attempted to negotiate a deal with no luck, or you’re simply uncomfortable with the transaction. It’s completely within your rights to walk away at any point before, and in some cases even after you sign your contract.

During negotiations

At this point, walking away is as simple as putting one foot in front of the other. Montoya advises that even if the dealer already pulled your credit information, you’re still under no obligation to stay. While you may be concerned about the hit to your credit, know that making multiple auto loan applications within a short period of time will have a small impact on your scores.

If you’re having trouble ending the negotiations, Montoya suggests shutting down persistent salespeople by shifting the blame to someone else, like your spouse…even if you’re not married.

Whatever your explanation, walking away or telling the dealer you’re going to shop around is perfectly acceptable. If you really are interested in buying the car, walking away may also be a useful negotiation tactic.

Once you’ve seen the contract

Regardless of the time and effort invested by both parties, you are under no obligation to sign any contract you’ve been presented. At this point in the process you can still simply say “no” to the dealer.

After signing contract

If you sign a contract and drive away with a car, but then get called back based on a contingency, you may be able to walk away from the deal.

If you’re called back because financing fell through, you can demand to get your down payment back and unwind the entire transaction. To complete the process you’ll need to make sure that the application and contract are cancelled and that you get copies of all the documents.

If, on the other hand, you simply wish to return the car because you’ve changed your mind, your options may be limited. Some state laws may allow you to return your car if you discover it’s a lemon, but contrary to popular belief the “cooling off period” unfortunately doesn’t apply to cars.

In some circumstances you may have a special option to cancel, particularly when it comes to buying used cars. New York state law, for example, gives you a set amount of time to file paperwork and cancel your contract. Your dealer may also have a special clause that gives you time to reconsider and return your vehicle. But if neither your state nor your contract stipulates that you can cancel, your best shot is to ask the dealer to give special consideration to your case.

The bottom line

The best way to avoid a bad deal is to be your own biggest advocate. Educating yourself about market prices, understanding affordability and researching consumer protections in your state, all before you talk to a salesperson, can help you stand up to pressure and recognize red flags quickly.

Ultimately you shouldn’t be afraid to walk away, no matter how difficult the dealer makes it to leave. Both the car and the financing have to work for you. “I want people to buy a car when its right for them and do it on their own time,” says Montoya, “not a dealership’s time.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Sarah Brady
Sarah Brady |

Sarah Brady is a writer at MagnifyMoney. You can email Sarah here