There are benefits and drawbacks to buying a new vehicle, just as there are for buying a used one. What's truly great about certified pre-owned vehicles, a third option, is that they offer buyers some of the benefits of both new and used vehicles.

For example, new cars take a big depreciation hit in the first couple of years and used vehicles may not have the latest and greatest features. Enter CPO cars, which are relatively new used vehicles that have already taken the brunt of that depreciation hit while having many of the newest safety and connectivity features.

The CPO bandwagon has grown dramatically in recent years, and it doesn't appear to be stopping any time soon. According to a recent Manheim® report, overall CPO sales were up 5.1% in the first three months of 2016. Other studies indicate that sales numbers are expected to continue to increase in the coming years.

How Does a Car Become a Certified Pre-Owned Vehicle?

Certified Pre-owned Vehicles
The exact definition of what constitutes a certified vehicle can vary depending on who is doing the certification. Cars are typically certified by a manufacturer, and their CPO programs vary. However, despite the fact that the processes can be different, they usually share many similarities.

According to the DMV, you can count on the fact that any car that is labeled as manufacturer-certified will have gone through:

  • An inspection performed by a mechanic
  • A refurbishment
  • Come with a service contract backed by the manufacturer

When a dealer acquires a used vehicle, if it looks like it stacks up to the manufacturer's certification requirements, they will put it through a rigorous inspection process to make sure that it meets those requirements. Other these qualifications include an age limit, a mileage limit, and a no-major-body-work stipulation.

Basically, these are the highest quality used cars around. But again, each manufacturer will have their own set of standards when it comes to CPO vehicles.

The Differences between Manufacturer- and Dealership-Certified

If you are in the market for a CPO vehicle, you need to be aware of the fact that there is a difference between manufacturer certification (sometimes referred to as "factory" certification) and dealership certification.

For starters, the automaker of the brand in question will stand behind the certification of a manufacturer-certified pre-owned vehicle, while only the dealership backs the used vehicles they certify (if they do at all).

Manufacturer-certified pre-owned basics:

  • These cars have passed a certification process outlined by the automaker -
    The inspection and refurbishment processes that a vehicle goes through to become certified tend to be thorough with manufacturer-certified vehicles. Only franchised dealerships have the authority to sell a manufacturer-certified vehicle of that brand.
  • They (often) come with many benefits that you'd expect when buying a new car -
    Factory CPO vehicles typically come with a warranty, extended service contract, and other perks like roadside assistance. The automaker authorizes all of these things and stands behind them, which often gives buyers extra peace of mind.
  • You're covered everywhere you go -
    A great perk is that buyers can usually take their vehicle to any franchised dealership that sells that brand for maintenance and repairs. For example, if you have a CPO Honda vehicle, you can take it in for service at any franchised Honda dealership. The mechanics at the service departments of franchised dealerships are trained under the guidance of the manufacturer, meaning that they know the products as well as anybody.

As for dealership-certified pre-owned vehicles:

  • Certification standards vary -
    Dealership CPO vehicles are used cars that are not being sold by a manufacturer-licensed dealership, or ones being sold at a franchised dealer that aren't a model from said franchise (ex. a certified Toyota at a franchised Ford dealership). While a vehicle may go through some type of inspection and refurbishment process, the dealership sets the standards.
  • Drawbacks of it not being backed by an automaker -
    If a dealership CPO car comes with a warranty and/or an extended service contract, these will be backed by a third-party service. This probably means that any service or repairs that are covered have to be performed directly at the dealership where the vehicle was purchased. If the dealership closes, they'll have to look for another dealer that works with the warranty company.

Are You Interested in a CPO Vehicle?

When it comes to CPO vehicles, consumers would still be wise to approach the buying process as they would with a "regular" used car. Not only does this mean taking a test drive, ordering their own vehicle history report, and having it inspected, but they also need to inquire about all aspects of the certification process and warranty and service coverage that it may come with.

A CPO vehicle will typically cost more than a similar, non-certified used car, but the buyer can benefit from knowing that, if it was manufacturer-certified, it has been inspected and refurbished, and that it will come with extended warranty coverage.

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