If you’re like me, you probably spend a more-than-reasonable amount of your free time perusing car listing sites just to see what’s out there. Or, perhaps you’re actually in the market for your next car. Whichever the case, chances are that you’ve come across the term “Certified Pre-Owned,” frequently abbreviated as CPO.
CPO is a program offered by OEM manufacturers that allows used cars to have warranties similar to those offered on new cars. On the surface, this seems like a great way to get new car peace of mind at used car prices, but is that really the case? (spoiler alert: no, that’s not the case at all). To find out whether or not CPO cars are worth your consideration, let’s take a more detailed look at exactly what CPO really means.
What exactly is a CPO car?
To put it as simply as possible, a certified pre-owned car is a used car that has been certified by the manufacturer. This means that the manufacturer is offering the used car in question with a warranty, just as they do with the new cars that they sell (meaning that if anything breaks on the car that is covered by the warranty, it will be repaired by the dealership with the customer only paying a small deductible). Because CPO cars are offered with a manufacturer-backed warranty, they can only be bought and sold at that manufacturer’s dealerships (i.e. you can only buy a CPO Audi from an Audi dealership, not a used car lot or private seller).
In order for a car to be offered with a CPO warranty, the manufacturer must inspect it first and. Only well-maintained, reasonably new, low-mileage cars are eligible for CPO certification. That’s because the manufacturer is offering the car with a warranty, and they don’t want to lose their shirt warrantying a car that will need lots of repairs. Most manufacturers require a car to meet the following requirements in order to be eligible for CPO: under 60,000-80,000 miles, 6-8 years old or newer, able to pass a multi-point inspection, has an acceptable and clean service history.
What does a certified pre-owned warranty entail?
The warranty that CPO cars offer varies from manufacturer to manufacturer. For example, BMW’s CPO program offers the following warranty for its CPO cars: a two-year and up to 50,000-mile extension to the new car warranty. The new car warranty from BMW is valid for up to four years and 50,000 miles. So the oldest BMW that can still be covered under CPO is six years old, with 100,000 miles.
So, when you buy a CPO BMW, it will effectively still be covered under the new car warranty. But what, exactly, does that mean? It means that your CPO BMW is covered against issues with materials and/or workmanship, as well as any powertrain-related problems. That includes engine, transmission, transfer case and differential issues. Importantly, things like brakes, suspension, and electronics are not covered.
Is certified pre-owned worth it?
So, now that we understand what a CPO car is, and how CPO programs work, let’s look at whether they’re worth it. Or if they’re just a dealer-sponsored money burning machine. On the surface, the obvious answer is yes, of course CPO cars are worth it. You’re getting a used car with a new car warranty, plus you know that it passed a stringent dealer inspection.
That’s all well and good, until you consider that buying a CPO car also includes the following: you’re forced to grossly overpay for the car, the maintenance items that generally cost you the most money are still not covered, and you paid a dealership a big chunk of change to do an inspection that you should probably do yourself anyway. I realize that claiming that CPO is basically a rip-off is a rather hot take, so let me explain myself.
The dealer is making money on CPO
To start, CPO cars are always going to be more expensive than equivalent non-CPO cars. This is because the dealer has to put in some extra labor in order to inspect the car, but a bigger portion of that premium goes towards pre-paying for the repair of issues that you probably won’t have in the first place. An important thing to understand is that dealers wouldn’t offer CPO cars if they didn’t make money on them a majority of the time. When you pay the 15% or so premium for a CPO car, you’re forking over your hard-earned money based on the assumption that your car will have issues.
This doesn’t make much sense considering that most cars go well past 100,000 miles without problems that will cost 15% of the value of the car. This especially doesn’t make sense when you factor in that the whole premise of CPO is that you’re buying a car that was inspected by the dealer, and that they deemed unlikely to have any of these major issues! Granted, most cars will require some repairs, but those repairs rarely cost more than the CPO premium. It’s clear that when you take a good look at the way CPO programs are structured, they don’t actually make much financial sense at all—they’re heavily stacked in the dealer’s favor.
And another thing… basic maintenance
Another major issue with CPO is that they do not cover basic maintenance costs. The cost of fluid changes, brake pad and rotor replacements, filter changes, and plenty of other basic maintenance items are still on you. If you want those covered, you’ll have to buy an additional maintenance package. Additionally, any problems that arise with an electronic system or the suspension won’t be covered (at least under BMW’s CPO program, and many others).
So if a shock blows out, a coolant thermostat goes bad, or your infotainment system dies, it’s still going to cost you. Finally, perhaps the biggest issue with CPO is that the multi-point inspection and guarantee of a clean service and accident history can be had for much, much cheaper if you’re a diligent buyer.
You should always have a PPI (pre-purchase inspection) done on any used car you buy anyway. That renders the dealer’s multi-point inspection useless. Additionally, you can run a CarFax report yourself, which shows you whether or not the car has a service and accident history that you’re comfortable with. This means that the many “benefits” of CPO are just examples of the dealer doing your due diligence for you. Don’t pay them to do these things when you can very easily do them yourself for much, much cheaper!
If it wasn’t clear, my final verdict on CPO is: it’s not worth the hefty premium. As I said earlier, manufacturers wouldn’t offer CPO programs if they didn’t make money on them nine times out of ten. So my closing advice is as follows: don’t buy CPO. Instead, buy a used car that has a clean service record and accident history, and one that has passed a PPI done by a mechanic you trust. And enjoy that extra cash you’ll have because you weren’t fooled into buying CPO!