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Volvo: Safety Beyond the Star RatingsBuying Certified Pre-Owned vs Used
What are the pros and cons of buying certified pre-owned vs used vehicles? When it’s time for the next ride, you can be ready with these tips.Car Buying Tips: Certified Pre-Owned vs Used
Considering the incessant climb of average new car pricing over the last few years, the debate about buying certified pre-owned vs used vehicles is more relevant than ever. Buying a used car is a familiar concept to most consumers as this type of transaction has been around since cars first hit the road.
What is Certified Pre-Owned?
The certified pre-owned approach is somewhat newer having first appeared with luxury brands in the ‘90s. These days, most automakers run a certified pre-owned program. The details vary but in general, the automaker will sell a vehicle through its certified pre-owned program after performing a thorough inspection and fixing any issues as we discuss in-depth here. Typically, the vehicles will be less than 5-6 years old with low mileage, be in excellent condition, and come with a factory-pre-owned warranty. Maintenance issues like we cover here – tires, brakes, oil changes, etc. – will also be addressed.
Honda goes a step further by offering different levels of pre-owned inventory from “True Certified+” with low mileage and model year limits to “True Used” with less stringent criteria. The automaker also includes perks like concierge service and complimentary oil changes depending on which level of pre-owned you choose. Honda’s broader range of what is allowed in its program also means more inventory. There are hundreds of the popular CR-V for sale, a crossover you can read up on here.
Be aware that an original manufacturer-certified vehicle is different from a dealership stating it has certified a car. The latter example may include a warranty, but it likely only applies if the vehicle is serviced at that dealer and the certification protocol may not be as robust as that of an original equipment manufacturer.
A major benefit of buying a certified pre-owned or used car is of course saving money, mainly in the depreciation department. As soon as a new car rolls off the lot with a buyer, the value drops – or depreciates – immediately. According to Progressive Insurance, a new car can lose 20% of its value in the first year of ownership. It will continue to depreciate quickly over the next 2-3 years before the curve of value versus age levels out.
What are the Benefits of Buying a Certified Pre-Owned Car?
A certified pre-owned benefit is that the vehicles offered are on the new side with low mileage and come with a warranty that is typically tacked on after the original factory coverage expires. For example, Toyota caps the age of a certified pre-owned vehicle at less than six model years, the mileage at under 85,000, and adds on a 12-month/12,000-mile vehicle warranty with a 7-year/100,000-mile powertrain warranty. Additionally, certified pre-owned cars can often be financed at the dealership and may include other perks like roadside assistance and connectivity subscriptions.
The other side of the certified pre-owned coin, depending on the manufacturer, is that the selection can be more limited than the used market due to the model year and mileage caps. For example, if you’re looking for a 2021 or 2022 RAV4 from Toyota’s certified pre-owned program, there are currently 54 for sale in a 250-mile radius, the maximum distance from a zip code. Searching with the same parameters here on Carsforsale.com yields nearly 150 options. As noted above however, Honda offers more certified pre-owned options so you need to do your homework.
What are the Benefits of Buying a Used Car?
Along with more inventory to choose from, the used marketplace is generally less expensive as you’re not paying for the 100+ point certified inspection process, warranty, and reconditioning that accompanies a certified pre-owned model. Though the price differential varies, you can find a certified pre-owned 2021 Toyota RAV4 XLE AWD with about 60,000 miles for $34,000. A used version of the same vehicle with similar mileage can be found on Carsforsale.com for $29,000. Other examples vary by less, in the $1,000 to $3,000 range, so it is worth spending time researching what’s out there.
Of course, saving money by shopping used brings its own set of challenges. Without a manufacturer providing coverage in the event the vehicle has issues, you’re on your own to determine if a used vehicle needs work. There’s a chance the car was run hard, missed important maintenance milestones, or has title issues. This is when it pays to bring a friend who knows what to look for and have the used vehicle inspected by a professional mechanic before making a purchase.
If you need the peace of mind of a warranty, there is an entire industry dedicated to providing third-party plans, but the coverage of these plans can be spotty so read the fine print closely. Alternatively, if the used vehicle you’re aiming for is still within the original factory warranty period, you may be able to set up a warranty extension with the manufacturer directly.
Certified Pre-Owned vs. Used: What is the Best Option for Car Buyers?
At the end of the day, the number of pros and cons of buying certified pre-owned vs. used for your next vehicle is roughly the same. However, the certified pre-owned route boils down to an expensive extended warranty. Yes, you will have the peace of mind that comes with factory-backed protection, but it will likely cost you from one to several thousand dollars more than a comparable used car. And your options will likely be more limited. If you’re not comfortable shopping for a quality used vehicle on your own, bring a knowledgeable friend. And if that’s not an option, enlist a trusted mechanic to help you make an informed decision.
