What Does Certified Pre-Owned Mean?

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Updated on Thursday, February 21, 2019

Certified pre-owned car
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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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