What Is A Certified Pre-Owned Car?

You have no doubt seen the term “certified pre-owned” for used cars offered by new car dealerships. But what is a certified pre-owned (CPO) car and how is it different than buying a used car privately?

In this guide, our team will take a closer look at CPO cars, where they come from, and what a certified pre-owned car warranty includes.

Carmakers offer extended warranties for certified pre-owned vehicles, but you can often find a better value and some added benefits by choosing a third-party extended warranty, also known as a vehicle service contract. We’ve researched what we think are the best extended car warranty providers and encourage CPO customers to begin their research by contacting our top picks for information on warranty plan choices and price quotes.

A certified pre-owned car, or CPO, is a previously owned vehicle, usually with no more than 60,000 to 80,000 miles and no older than five to seven years, though this differs by manufacturer. CPO cars are subjected to a comprehensive inspection by factory-trained dealer technicians, who replaces or repairs anything that does not meet the manufacturer’s specifications. After the CPO is serviced as needed, it is “certified” to meet a manufacturer-specified requirements, and then sold with a warranty.

CPO Basics

Certified pre-owned programs began with luxury brands, including Mercedes-Benz, back in the 1990s. Today, all major carmakers and even some exotic brands have certified pre-owned programs.

The terms of CPO programs vary from brand to brand. Many allow vehicles up to 5 years old and with less than 60,000 miles. Some programs include older cars with higher miles. Toyota CPO vehicles, for example, can be up to 6 years old with up to 85,000 miles. More typically, you are likely to find many CPO vehicles 2 to 3 years old and with about 30,000 miles.

The certified pre-owned package usually includes 24-hour roadside assistance and towing reimbursement, and sometimes perks like trip interruption expense reimbursement. Some carmakers also offer low-interest-rate financing on CPO vehicles, and some throw in a free trial subscription to satellite radio.

CPO Programs Are Not All The Same

The key attraction of a certified pre-owned vehicle versus a plain used car is that it has been inspected for faults and then given a warranty to cover the customer if problems should occur. The most important thing to remember about CPO warranties is that there can be a huge difference in coverage from brand to brand.

Most certified pre-owned programs give you the remainder of the vehicle’s original new vehicle warranty plus a CPO warranty on top of that. Those “extra” warranties are usually 1 year/12,000 miles, but some longer and some shorter.

For example, BMW’s CPO warranty provides 1 year/unlimited miles of coverage. Lincoln CPO vehicles come with a 6-year/100,000-mile comprehensive warranty, but that is from the vehicle’s in-service date. In essence, it is a 2-year/30,000-mile extension of the original vehicle warranty’s term – still a very good deal.

In addition to any remaining portion of its 3-year/36,000-mile new car warranty, Chrysler (including Dodge, Ram, and Jeep brands) provides a skimpy 3-month/3,000-mile bumper-to-bumper warranty on its CPO vehicles and extends the powertrain coverage to 7 years/100,000 miles. If the original vehicle warranty has expired, you get only the 3-month/3,000-mile CPO warranty.

The inspection usually begins by verifying a vehicle’s mileage and getting a vehicle history report from CARFAX or AutoCheck. This report will show service history and will also flag reported accidents and indicate severity of damage that was repaired. Certified used vehicle programs reject cars that have had anything beyond very minor damage.

During a CPO inspection, the tech will check:

• Engine operation
• Exterior and interior surfaces for damage
• Audio and navigation system functions
• Heat and air conditioning system operation
• Brake pad and rotor wear for remaining service life
• Tire condition, including tread depth
• All interior and exterior lights
• Power seats and sunroof operation
• All audio and navigation functions
• Backup camera functions
• Upholstery (stains or rips)
• Carpet condition
• Door latches and locks

If there are any outstanding recalls or service bulletins, the vehicle will be repaired or serviced as needed. Any due maintenance is performed, and certified pre-owned vehicles will get new tires or brakes if these do not meet manufacturer-specified requirements.

The tech will also road-test the CPO vehicle, usually for a minimum of 20 minutes, paying attention to operation of the accelerator, steering, braking performance, transmission shifting, and suspension. If the vehicle is equipped with safety features such as a blind spot monitor, these are checked. The tech will make sure the vehicle handles and rides as it should and will listen for any unusual noises.

Once the vehicle inspection and road test are completed, the tech will sign the form. The service manager and the dealer’s general manager may also sign the form afterward. As a customer, you will have the opportunity to look at the completed inspection form, along with the CARFAX or AutoCheck report. Honda allows you to view its certified pre-owned inspection reports for individual vehicles right from its website.

The Certified Pre-Owned Inspection: Are More “Points” Better?

When comparing certified pre-owned models among different automakers, you are going to see marketing that boasts about how many “inspection points” are covered. That’s a checklist of how many things the dealer technician must visually inspect or test. Some items specify, for example, acceptable brake pad service life remaining or tread depth on tires. A CPO program may specify new brakes or tires beyond those listed limits.

We do not recommend judging a CPO program by the length of its inspection list, however. In researching CPO programs of different brands, we found inspection checklists that vary from about 125 inspection points to over 300. Most are under 200 checkpoints, but keep in mind that the lower numbers may be including several items as one.

When you look at a certified pre-owned vehicle, the dealer can show you the multipoint inspection report, and you will see exactly what was inspected, tested, replaced, or repaired.

A critical reason that certified pre-owned programs are so popular, and why CPO vehicles are so prevalent at new car dealerships, is leasing. According to Statista, leasing accounts for nearly a third of new vehicle sales. Many of those leases run for 30 to 36 months, and some are shorter. While some customers end up purchasing their loaner cars when the lease term expires, the majority return them and lease another vehicle.

Those lease returns create a steady supply of young cars, SUVs, and pickups with fairly low mileage. That’s because leases restrict the number of miles you can drive, usually 12,000 miles a year or less.

Carmakers created the certified pre-owned programs as an efficient and profitable means of reselling these cars. With some CPO programs, you may notice current or previous-year vehicles with super-low miles. These are usually vehicles from dealer service loaner fleets.

The easiest way to get a longer certified pre-owned warranty is to buy the newest, lowest-mile CPO vehicle within your budget. That works out well with brands that start with generous new vehicle warranties, such as Hyundai.

A Hyundai CPO vehicle gives you the remaining time and miles from the brand’s 5-year/60,000-mile new vehicle limited warranty, and you also get what remains of the 10-year/100,000-mile powertrain warranty.

That coverage looks great if you buy a certified pre-owned Hyundai that is, for example, 3 years old and has about 36,000 miles. In that particular case, you’d essentially be getting 2 more years and 24,000 miles of Hyundai’s warranty coverage, plus the powertrain warranty. That’s a solid deal.

But let’s say you buy a CPO Hyundai that’s 4 years old and has 55,000 miles. In that example, you’d be getting only 1 year and 5,000 miles of coverage, whichever comes first (plus what remains of the powertrain warranty). You could find yourself out of the warranty before you’ve had the car for a year. That’s a strong reason to consider buying an extended auto warranty.

A certified pre-owned vehicle costs less than a new car, of course, but also generally more than a “plain” used version of the same car. That’s because you are paying for the certification process and warranty. Many buyers feel the difference is worth it for the added peace of mind that comes from the inspection, any refurbishment performed, and the warranty. For many CPO programs, we agree.

Here’s a tip: Read the fine print on dealer websites for certified pre-owned vehicles, especially if a vehicle price looks quite a bit lower than a similar car at another dealer. We found one major-brand dealer with this disclaimer buried at the bottom of the fine print for each of its CPO vehicles: “Price excludes $895 certification fee.” Other dealers of the same brand we looked at did not charge this fee.

Some might consider this practice deceptive, because the price advertised is specifically for a “certified pre-owned vehicle.” You cannot buy the vehicle without the certification, so why should the certification fee be extra?

If you compare certified pre-owned programs of different brands, you will see where some CPO warranties are excellent and others are a bit flimsy. A good alternative to provide peace of mind and the coverage you need is an extended car warranty.

An extended car warranty provides coverage after your manufacture’s and even CPO warranty expires. We recommend that you take a look at the pros and cons of extended car warranties, as well as reputable extended car warranty companies. These plans not only give you flexibility for where you can have your vehicle repaired, but also offer other high-value benefits that match or exceed those of dealer-offered extended warranties. Some of these include:

• 24-hour roadside assistance
• Towing allowance
• Rental car allowance
• Trip interruption reimbursement
• Tire replacement

Start your certified pre-owned buying experience by contacting one or more of these top-ranked extended warranty companies.