Most manufacturers and almost every dealership offer certified pre-owned vehicles (CPO). What is a certified pre-owned vehicle and are there some industry or federal standards? In reality, it is another option for buying a new or used vehicle, but the distinction and benefits can get very complicated from that point on.
Why buy a CPO? Many buyers want the major part of the vehicle’s depreciation to be absorbed by the original owner. Some people only buy used vehicles and never consider new. Others only buy new vehicles and never consider a used vehicle. A CPO may be a good compromise, satisfying the buyer’s needs and budget while offering new car benefits. Buying a CPO may allow a person to get into a luxury type vehicle at the same price level as a more basic vehicle. And a CPO may offer more peace of mind than buying a used vehicle.
Basically, there are two types of certified pre-owned vehicles. Factory or Manufacturer-backed CPOs seem to offer the most value because the manufacturer and dealer both have a vested interest. Factory certified pre-owned backed programs are available only to franchise dealers.
Benefits of a Manufacturer backed CPO:
The vehicle inspection and checklist of a manufacturer backed CPO must meet the manufacturer’s criteria. Age, mileage and condition of vehicle may be restricted by the factory. The dealership may be subject to factory audits and review for compliance to manufacturer CPO standards and vehicle condition.
Dealerships generally have an added investment or cost to meet the factory standards and offer the customer the full benefits of a factory CPO. Added benefits may include additional factory warranty coverage, extended powertrain coverage, vehicle history report, 24-hour roadside and travel assistance, extra keys, matching tires, and special interest rate incentives. Factory CPO’s carry the manufacturer’s warranty, which are generally better because of the broader coverage. The manufacturer’s goal is to satisfy the customer with a quality backed product and there is a vested interest in future brand sales.
CPOs also serve as an opportunity for the customer to become familiar with the manufacturer, model and the dealership.
Dealer Certified Pre-Owned Backed Programs:
With a dealer’s Certified Pre-owned vehicle program, the dealership chooses what benefits to include in the program as well as what level of standards, inspection, and repairs they are willing to perform. A reputable dealer could create a dealership certified pre-owned backed program, which may closely match a factory backed CPO program. However for the same effort and cost, why wouldn’t the dealer represent the factory backed plan? Perhaps the vehicle’s overall condition may not meet factory standards. A dealership may also choose to certify used vehicles that don’t represent their brand or manufacturer. In this case a reputable dealer could offer a program that offers a customer a similar peace of mind. Obviously, it is important to read the fine print as to what is really covered as far as additional warranty, who performs the repairs, who is insuring the repairs, reimbursement policy, deductibles, etc.
Another option is to buy a vehicle still under the original transferable factory warranty. This option can also offer peace of mind with bumper to bumper coverage depending on the manufacturer. An additional extended warranty can be purchased to offer similar coverage as a CPO vehicle. Again, it is important to review the fine print as to what is really covered. Generally, a manufacturer’s warranty may be the best option.
Whether a vehicle is covered by the factory or dealership, it is important to know what is and what is not covered. For example, “Powertrain” coverage can differ greatly among dealerships and warranty plans. Generally a manufacturer or factory extended warranty is more flexible, offers broader coverage and is more convenient. After all, manufacturers have a vested interest in wanting the customer to return and buy their brand of vehicle.
The bottom line is peace of mind and value, but it is necessary to understand the real details of the vehicle inspection checklist, the warranty coverage details and any other optional coverage. The best advice is to select a dealership that is transparent and willing to share the details, benefits, inspection and coverage of your factory certified pre-owned vehicle. Sometimes, a customer may find that buying a new vehicle is a better value than either a CPO or used vehicle. A reputable dealer will present the customer with the options that can assist the customer in making the best decision. FBN
By Alan Chan
Alan Chan is the owner/dealer at Babbitt Ford
Lincoln in Downtown Flagstaff. He presents
a unique dealership viewpoint because of his
background as a mechanical engineer, MBA,
former CPA and financial advisor. Babbitt
Ford is one of the oldest Ford Dealerships in
the nation. Chan continues the Babbitt Ford
tradition established in 1912 offering outstanding
customer value and customer service. He
has been with the dealership
for more than 25 years.
Chan can be reached at
alanchan@babbitt-ford.
com or 928-774-5063.