New cars are getting more expensive, and it feels like everything else in life is following suit thanks to Trump’s impending tariff nightmare. Cars are cool, but they’re also depreciating assets that require lots of money to fuel, maintain, and repair. Used cars are cheaper than brand new ones, but most used cars lack the perks of buying a brand-new car, like warranties or maintenance plans. If you’re in the market to buy a car on a budget, but you’re wary of the potential for expensive repairs, then buying a certified pre-owned car might be the right choice for you.
Many car dealers will try to swindle you out of as much money as possible, so arm yourself with knowledge before encountering a smooth-talking salesperson. If you’re looking for a CPO car, be sure to seek factory-certified cars, not dealer-certified ones. In order for used cars to qualify as factory-certified CPO vehicles, they must meet certain quality criteria set by the vehicle’s manufacturer that usually includes things like mileage and vehicle age.
One primary benefit of CPO vehicles is their extended warranties that are backed by the manufacturer, so your new-to-you vehicle should have access to warranty coverage regardless of where you service it. Dealers can claim that any used car is dealer-certified, and though some dealers may offer extended warranties on dealer-certified vehicles, they may limit where you can have your vehicle serviced under the warranty. Here are some things to consider when buying a CPO vehicle.
CPO cars are usually more expensive than uncertified used cars
Vehicles must meet predetermined standards in order to qualify for a manufacturer’s CPO program. For example, BMW’s CPO program requires vehicles to be five years old or newer, have less than 60,000 miles, have an up-to-date Carfax report, have only genuine BMW replacement parts, pass several inspections performed by certified BMW technicians, pass a diagnostic and road test, and ultimately be approved by a service manager and the BMW Certified Manager. The BMW Certified vehicle inspection checklist is even made publicly available online, so anyone can see all of the inspections that these cars undergo.
The vehicle’s manufacturer is incentivized to only certify cars that they trust will be reliable because aside from the owner’s warranty deductible, any warrantied repair costs would be coming out of their pocket. This extensive certification process justifies a higher price than a non-certified used car, but that’s still lower than the price of a new car. As the buyer, it’s up to you decide if the peace of mind of a manufacturer-certified used car is worth the price premium over a non-certified used car.
Buying a used car without a warranty is a gamble
When you buy a used car, you save money on the initial purchase price, but if anything breaks and requires repair you’re on the hook to cover the full price. Some vehicles are more likely to break down than others, and some vehicles are more expensive to repair than others, so these are factors that ought to be considered before deciding whether to buy CPO or used.
If you’re buying a low-mileage car that has a great reliability reputation, then the extra cost of buying a certified pre-owned car may not make sense for you and your budget. If you’re like me and the fear of the potential for massive unanticipated expenses consumes you, then the peace of mind offered by a CPO car may be worth the price premium over a used car with no warranty. Unfortunately, like everything else in life, nobody can promise you which decision will be right for your particular situation, but educating yourself and weighing your options will help you make the right choice for you.
Alternatives to buying CPO
If the CPO cars you’re looking at are out of your price range or if you found your dream car but it isn’t certified, there are some alternatives. There are third-party aftermarket warranties that can be purchased separately, and depending on the cost and comprehensiveness of coverage, they might wind up being a better deal than paying the price premium for a manufacturer certified car. When considering an aftermarket warranty, do diligent research to make sure that the warranty covers what you want it to cover, and that you know where you can take your vehicle for repairs that will accept the aftermarket warranty. Read customer reviews, search YouTube or other social media outlets for testimonials from other buyers, and compare warranty offerings from different companies like Endurance, Complete Car Warranty, CarShield, and Carchex to name a few.
Alternatively, there’s a wonderful place called Carmax that exclusively sells used cars, but every car it sells comes with a 90-day or 4,000-mile limited warranty included in the price of the car. If you’re serious about your coverage, you can pay extra for the MaxCare extended warranty. Used cars sold by CarMax do tend to cost more than used cars sold by franchise dealerships or private sellers and CarMax does not allow haggling for lower-than-advertised prices, but CarMax does its own quality certifications before it sells a car. On its website, CarMax says it inspects over 125 details on every car before it’s offered for sale, though beyond never selling cars with flood or frame damage or a salvage title, the specific inspection points aren’t listed.
What’s our take?
I bought my 2017 Mini Cooper S from Carmax with 50,000 miles in 2020, and I paid extra for the MaxCare warranty that covered me for five years from my purchase date, or until the odometer reaches 125,000 miles. My Mini now has 95,000 miles on the odometer, and the warranty has more than paid for itself over the course of a couple repairs, plus I’ve never had a fault declined by the MaxCare warranty. Again, I am someone who values having the peace-of-mind offered by a warranty, so I feel that it was well worth the money.
Depending on what car you’re shopping for, your personal financial situation and the severity of your anxiety, you may not see the value in paying for a CPO used car or an extended warranty. Some cars have manufacturer warranties that can transfer between owners, like Hyundai. When new, Hyundai covers all of its cars with a 10-year or 100,000-mile powertrain warranty, and when the vehicle is sold to a second owner, the warranty changes to a five-year or 60,000-mile warranty from the original purchase date. Definitely less comprehensive than if purchased new, but still better than nothing as long as the car is within those parameters. Other manufacturers may allow warranties to be transferred to the second owner too, so do your research to see if the car you’re shopping for has such a perk.
What should you do?
If you’re on a budget that doesn’t afford a brand new car with a factory warranty but you’re not ready to take the gamble of buying a used car with no warranty at all, certified pre-owned cars offer a middleground compromise. The price isn’t as low as a regular used car, but you get the security of a warranty and comprehensive manufacturer inspections.
If your budget doesn’t account for the price delta of a CPO vehicle or you can’t find a CPO vehicle you like, then you’re going to want to do some research. Every car is different, every warranty is different, and every budget is different so don’t be afraid to compare aftermarket warranty companies, different transferable manufacturer warranties, or shop around at a place like CarMax. As the great Forrest Gump once sagely said, “life is like a box of chocolates, you never know what you’re going to get.”
