When choosing to buy a used car, there are many options available. A Certified Pre-Owned car (CPO) offers many benefits, but can also come with a high price tag. Sometimes, the advantages can be unclear. We’ll help you determine the pros and cons between CPOs and standard used cars.
Understanding Certified Pre-Owned and Used Cars
First thing first, let’s understand the terminology!
What is a Certified Pre-Owned Car?
A CPO is a used car that has been refurbished and inspected by a dealership to meet quality standards determined by the manufacturer. They often come with manufacturer-backed warranties and sometimes other perks like roadside assistance too.
CPO cars give quality assurance, as well as meeting safety, cosmetic and performance standards. Repairs are made before the car is sold so the new owner shouldn’t have to worry.
What Defines a Regular Used Car?
A regular used car is a secondhand car that has had one or more previous owners. Unlike CPOs, they usually come without guarantees and warranties.
Key Differences Between CPO and Used Cars
Certification Process and Inspection Standards
To be eligible for certification for CPO status, a used car will need to be a relatively recent model, be gently used, well maintained and have low mileage.
Each manufacturer will have their own certification and inspection standards. The car will normally undergo an intensive inspection of its interior, exterior and mechanics. It will also be taken on test drives and have its wheels inspected. Checklists are used to ensure that no part of the car is overlooked.
The car will undergo maintenance updates and any parts that are not up to standard will be repaired, reconditioned or replaced. Cars in CPO programs are normally recent models with low mileage. They must also have records from previous owners to prove that they have been well cared for.
If, at the end of the certification and inspection process, the car does not meet the high standards required, it will not achieve CPO status. Cars that do meet the standards, will be certified and covered by a warranty by the manufacturer.
Used cars will not go through the same process. It will be uncertain whether a used car has undergone an inspection by a dealer, and if so whether any issues were resolved. If any repairs are made, they are usually cosmetic to sell the car quickly.
For these reasons, it is important to get a copy of a used car’s Vehicle History Report (VHR) and ask a mechanic to make full checks before making a purchase.
Warranty and Coverage Differences
CPOs come with warranties backed by the manufacturer, meaning if any repairs are needed, they will be taken care of during the warranty period. That said, CPO warranties can vary depending on the manufacturer and are often not as extensive as new car warranties. Used cars, however, will only have a manufacturer warranty if it is fairly new and the warranty from its original purchase date is still valid.
Occasionally, a dealer will offer their own warranty but it is unlikely to have the same benefits as a manufacturer warranty. They may advertise a car as “certified”, but if it is not for sale within a manufacturer’s showroom or dealership, it is not a CPO.
In most cases, it is rare for a dealer to provide any warranty for a used car that is outside of its manufacturer warranty period. If a used car needs repairs in this scenario, you will have to take care of it yourself.
Vehicle Condition and Age Factors
CPO cars are often lease returns, this is because they are usually well maintained to honor lease agreements and would not have been overused due to mileage restrictions. To qualify for CPO status, a used car must be relatively new and have low mileage.
By contrast, a standard used car could be any age and is likely to have higher mileage and more wear and tear.
Price Comparison: Is CPO Worth the Extra Cost?
Generally, CPOs cost more than standard used cars. This is because the certification process itself is costly and this cost is then passed on to the buyer. In addition, the added warranty coverage offered raises the price. Moreover, CPOs are only available at franchised dealerships that are usually more expensive than used car dealerships.
In general, a CPO could cost hundreds or thousands of dollars more than a standard used car.
Pros and Cons of Certified Pre-Owned Cars
Advantages of Buying a CPO Vehicle
There are many advantages to buying a CPO:
- Factory-backed warranty: The warranty that a CPO carries provides peace of mind in case of any repairs that might be required.
- Lower risk of hidden defects: As the car has gone through a thorough inspection, there is less risk of hidden issues.
- Higher quality assurance: The fact that a CPO is backed by the manufacturer offers the best assurance.
- Higher resale value: CPOs usually have a higher resale value than standard used cars because they tend to be in better condition and come with manufacturer-backed warranties.
- Financing options: CPOs usually come with lower interest rates than standard used cars. This is because lenders are more amenable to better terms due to the manufacturer’s warranty.
- Additional perks: CPOs often come with extras like maintenance coverage and roadside assistance.
Disadvantages of Buying a CPO Vehicle
In spite of the numerous benefits, there are a few cons to be aware of:
- Higher cost compared to standard used cars: CPOs are usually more expensive because of the extensive certification process and warranty.
- Limited availability of certain models: There is generally a low selection of CPOs because they need to have low mileage and be relatively low in order to achieve CPO status.
Pros and Cons of Used Cars
Advantages of Buying a Standard Used Car
While we have outlined the benefits of buying a CPO, standard used cars also have plus points too:
- Lower upfront cost: Used cars are cheaper than CPOs because they haven’t undergone the rigorous inspection process or come with manufacturer backed warranties.
- Wider selection of vehicles: CPOs come in very limited quantities. There are many more models of cars at different ages and mileage available for standard used cars.
- Potential for private-party deals: CPOs will only come from a dealership. There is more negotiation space for standard used cars in private deals.
Disadvantages of Buying a Standard Used Car
There may also be some negatives to choosing a standard used car over a CPO:
- No certified warranty: Standard used cars come without manufacturer backed warranties, meaning they are less reliable.
- Higher maintenance risks: A standard used car may be less reliable because it has not undergone the same rigorous inspection process as a CPO.
- Potential hidden mechanical issues: A dealer may only repair cosmetic issues, so there could be hidden mechanical defects
Financing and Resale Value Considerations
Loan and Interest Rate Differences Between CPO and Used Cars
Many manufacturers have low-rate financing options for CPOs that are close to new car rates. That said, these deals are often reserved for buyers with high credit scores.
Loan terms for CPOs are often more favorable as dealers tend to have relationships with lenders. The lower terms that they offer reflects confidence in the CPO’s condition. This could also allow for longer loan times, resulting in more manageable monthly payments.
That said, a CPO is often thousands of dollars more than a standard used car and this may cancel any advantages of a CPO finance offer. Moreover, some banks and credit unions offer more favorable rates for newer used cars with low mileage regardless of whether they’re certified or not. Standard used cars tend to have more financing options as they are not limited to dealership options, and also have more negotiation power.
Depreciation Rates: Which Option Holds Value Better?
CPOs tend to depreciate more slowly than standard used cars because they are normally in better condition and have lower mileage. The extended warranties and inspections also add to their value.
Standard cars usually have higher mileage than CPOs, meaning they may depreciate quicker. A car’s mileage often directly corresponds to its depreciation rate. That said, standard used cars come in all kinds of conditions, making it difficult to give a direct comparison.
Resale Potential of CPO vs. Standard Used Cars
CPOs usually have a higher resale value because they are newer and in better condition. Moreover, many CPO programs allow the warranty to be transferred to the next owner, providing additional peace of mind to a potential new buyer. That said, the higher price and limited availability may deter some potential customers.
Standard used cars will usually have a lower price than CPOs because they come without warranties, which can be attractive to buyers. There is also often a wider selection of standard used cars as CPOs come in limited quantities. And, while CPO cars depreciate more slowly, standard used older cars would have already matured substantially, meaning that it may actually have a lower depreciation rate than a resold CPO, making it more attractive.
Despite this, the lack of warranty may be a higher risk to the buyer, causing them to be more cautious. There may also be a lower perceived value.
Which Option is Right for You?
Best Choice for Budget-Conscious Buyers
For the budget-conscious buyer, a standard used car would probably be the best option as CPOs often cost thousands of dollars more. That said, it would be recommended to have the car checked over by a mechanic for a pre-purchase inspection before purchasing and to also check the car's VHR.
Best Choice for Long-Term Reliability Seekers
For those who are looking for long-term reliability, a CPO will give you peace of mind. The manufacturer’s warranty is in place to ensure that any repairs are done efficiently and to a high standard. Moreover, the fact that it has gone through a thorough inspection before being put up for sale will give the buyer reassurance about the car’s future.
When to Consider a CPO vs. When a Regular Used Car is Enough
The choice between a CPO and a regular used car is a personal one. This can depend on both budget and appetite for risk.
A standard car may be enough for someone who is budget-conscious and values flexibility in their choice of car. That said, those who value reliability and warranty coverage may prefer to opt for a CPO.
Final Thoughts
There are pros and cons for both standard used cars and CPOs. While used cars may have hidden problems and be less reliable, they can be more financially viable for many, making them the only option. In these circumstances, it’s best to get the car checked by a mechanic before purchasing.
Meanwhile, the rigorous multi-point inspections that CPOs undergo gives buyers extra protection and peace of mind. While they are more expensive, they are generally more reliable.