A certified pre-owned vehicle bought from a dealer comes with some key benefits. Here’s how much more these certified vehicles cost you compared to just buying that same model used from a private party or independent used car dealer.
Those looking to save money on their next vehicle purchase would be wise to consider certified pre-owned (CPO) vehicles. These are newer used vehicles that have been owned by usually just one party and are often turned in after the expiration of a lease of about three years. Manufacturers stand behind these CPO vehicles in ways that they do not stand behind other used vehicles. They usually do a careful inspection, which they should document, and all CPO vehicles come with an added warranty backed by the manufacturer. This warranty augments and extends any existing warranty the vehicle may still be covered under.
Consumer Reports’ Mel Yu sums up CPO cars by saying, “Buying a CPO car is basically purchasing a pricey extended warranty for peace of mind against unexpected issues.” If something should go wrong during the CPO warranty period you can take that vehicle to any authorized dealer and it will be repaired according to the terms of the CPO warranty. That warranty has real value. However, CPO cars cost a bit more than their counterparts out in the used market. How much more is no longer such a mystery thanks to a new report.
iSeeCars analyzed the transaction prices of over a million used cars from the 2015 model year to quantify the price differences between CPO and equivalent non-CPO used cars. The group found that CPO cars cost, on average, 3.6 percent more than their non-CPO equivalents. However, the added cost does vary quite a bit. Mainstream vehicles seem to have the best CPO value. For example, the vehicle with the lowest percentage cost difference was the Jeep Wrangler. The CPO version will cost about $523 more than a non-CPO 2015 Wrangler. The 2015 Honda Accord has just a $322 higher cost as a CPO vehicle than a used Honda Accord of that same year. A Civic just $291 more.
Luxury cars have not just the highest dollar difference, but also the highest percentage difference. Take the Lexus IS 250 sports sedan. Its CPO premium was found to be over $2,000, which is about an 8% premium. The 2015 Mercedes-Benz E-Class was found to have a $2,500 difference in cost compared to non-CPO used cars of that same model. The top-ten highest premiums were all luxury models from brands like Cadilac, BMW, Volvo, and Audi. Luxury brands do offer longer CPO warranties, so it is not that surprising that they also have the higher CPO cost premium.
These estimates from iSeeCars are similar to the results calculated by Black Book and reported by Consumer Reports. “The average premium for a 3-year-old midsize car is about $850,” says Anil Goyal, senior vice president for Black Book, an auto-industry data aggregator. “For a luxury car, the average premium is about $3,000.” Deciding whether the added cost is a good value may well come down to just how much the peace of mind and fixed cost of ownership is worth to you.
Top of Page image courtesy of General Motors. Lower image courtesy of Mercedes-Benz