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Time for a Replacement Vehicle? Consider CPO

Time for a Replacement Vehicle? Consider CPO

By Jeff Youngs, February 24, 2012
When you look at the vehicle in your driveway and decide it's time for a new one, that's only the beginning of the process. After calculating, weighing and balancing the various costs between new and used vehicles _ such as purchase price, operating expense, registration and insurance _ you come to the decision that this time a used vehicle makes more sense. Trouble is, with a used vehicle come concerns such as:

  • Inheriting someone else's headache

  • Gambling that the vehicle is mechanically sound

  • Taking time to comb the used-car ads and test driving clunkers

  • Hassles with having a vehicle inspected and road-tested

  • Higher interest rates for financing private purchases

  • Having to go to the DMV to handle transfer of ownership and registration paperwork

Lucky for you, manufacturers have really stepped up their certified pre-owned (CPO) vehicle programs, enabling consumers to have a nearly worry-free used-vehicle buying experience. All the guesswork is eliminated and you can be assured you've purchased the best possible used vehicle, and one that's backed by the manufacturer.

What Is a CPO Vehicle?
The concept of certifying vehicles originated in the 1980s and 1990s, when many premium, short-term off-lease vehicles flooded the market. Manufacturers needed to stem the resulting slide in new-vehicle prices that occurred in the wake of this oversupply of low-mileage used cars, and thus the concept of CPO was born.

Actually, before there was such a thing as a CPO program, buying a used vehicle was somewhat of a gamble. Sure, you might have been fortunate to wind up with a reliable and trouble-free vehicle, but you might just as easily have landed a lemon that cost a fortune in repair charges, and you had no recourse for compensation. The creation of this third vehicle category, CPO, reduced buyer risk considerably.

What do these CPO programs entail? Generally, they're limited to recent model year vehicles that are 5 years old and newer, with less than 60,000 miles on the odometer, and all of them undergo rigorous inspections and testing. Most manufacturer CPO programs offer extended manufacturer-backed warranties and some offer other perks such as attractive financing and roadside assistance. Yes, you will pay a bit more for a manufacturer CPO than a dealer's non-CPO vehicle, and certainly more than a privately-owned used car. But what you gain in peace of mind-and save in potential repair and actual operating costs-is usually well worth it.

To help make your decision even easier, results from the J.D. Power and Associates 2007 Used-Vehicle Sales and Certification StudySM reveal that consumers are generally quite satisfied with CPO vehicles. This proves even truer for consumers who purchase premium manufacturer CPO vehicles, such as Saab, BMW, Mercedes-Benz, Cadillac, Porsche and Audi, which are the top-ranked premium makes in the study (in No. 1 to No. 6 spot, with Mazda, a non-premium make, in the No. 5 position before Audi).

The study, now in its sixth year, covers 14 different makes and is based on responses from 6,231 consumers who purchased 2002-2006 CPO vehicles inJanuary, February and March of 2007. Additional sample for the remainder of the used-vehicle market was obtained from R.L. Polk registration data. The 2007 study utilizes the Used Vehicle Sales and Certification Index (UVSCI) which measures satisfaction on a 1,000-point scale. The index, which reflects the importance of each measure that CPO buyers place in their buying experience, weights price and the salesperson most heavily, with dealer inventory and the CPO vehicle delivery process as least important.

According to the findings of the UVSCI, actual CPO consumer satisfaction is highest with vehicle condition (753 points), while salesperson satisfaction is No. 2 (694 points). Price is lowest (613 points). Among the participating manufacturers who supplied a CPO sample, Saab, a premium make, generates the highest overall consumer satisfaction ranking (with a score of 732 points), due in large part to its high scores in the area of program features and price. With an average consumer-reported purchase price of $19,000, certified pre-owned Saab vehicles were about $6,000 less than Audi, and Saab was the lowest-priced premium make in the study. BMW ranked No. 2, followed closely by Mercedes-Benz and Cadillac, Mazda, Porsche, Audi, Chevrolet and Buick-all of which ranked above industry average.

Top Reasons Consumers Bought CPO
The study looked at the reasons consumers ultimately bought a CPO vehicle, and also gathered direct quotes from consumers about the CPO purchase experience. According to the survey data, respondents chose a CPO vehicle mainly because it had low mileage, was like new, and was exactly what they wanted. Positive recommendations for CPO vehicles, special financing, and any available money-back or exchange offer were among the least mentioned reasons for buying a CPO vehicle.

Actual customer responses taken from the study explain in greater detail why some consumers bought a CPO vehicle instead of a new one or a privately sold used one:

  • "Cars are getting so reliable these days that getting a used car makes more sense financially"

  • "I was able to step up to the turbo model with a CPO."

  • "Certified pre-owned higher end vehicle was an overall better value."

  • "Audi A4 certified came with a longer warranty and more features and appears to be a better vehicle."

  • "I could purchase a used vehicle with more features for less than a new vehicle."/li>
  • "The financing and warranty was better on the certified pre-owned BMW."

  • "The certified vehicle gave me the assurance that I was purchasing a vehicle with no known defects."

  • "The certified vehicle offered much better warranty protection."

  • "The assurance of a warranty for an extended period helped me to decide."

  • "I felt like I got the best of both worlds with the CPO. It was like new but cheaper and had the warranty and low miles that I could not find in a used car."

  • "I wanted the peace of mind that all repairs would be covered."

  • "With a CPO vehicle, I had the manufacturer's warranty and manufacturer certified technicians doing the ''pre-sale'' inspection."
Source: J. D. Power and Associates 2007 Used-Vehicle Sales and Certification StudySM

Keys to Buying a CPO Vehicle
Here are some key things to check and make sure you ask about when you're shopping for a CPO vehicle:

1. Research the dependability of the used vehicle you are considering. See the J.D. Power and Associates 2007 Vehicle Dependability StudySM for information about some of the most dependable models on the market.

2. Research the resale value of the vehicles you're considering: Many automotive websites will give you the prices you can expect for a given make, model, model year trim, mileage and condition. Be sure to keep this information handy when you evaluate the deal you are offered, but remember that CPO vehicles do command a premium for inspections, warranty extensions, and other perks.

3. There are many automotive websites that compare CPO programs to help you choose the one of most value to you. Make sure you understand the differences in the various types of warranties and ask the right questions: Is the original warranty transferable? How long was the original warranty? Is the powertrain warranty extended? Is the bumper-to-bumper warranty extended?

4. Review all the inspection points covered by the dealership technicians. Remember that manufacturers count inspection points differently (some group certain checks together), so more is not necessarily better. Make sure all major areas of the vehicle have been inspected (engine, transmission, steering, brakes, frame/chassis, air bags, powertrain, fuel system, suspension, brakes, etc.).

5. Make sure you are given a Vehicle History Report. Review it and ask questions about any accident history.

6. Learn who is certifying your vehicle. Dealers and even third parties can slap an extended service contract on your vehicle and say it has been certified. But companies providing extended service contracts can go out of business and consumers often move out of the selling dealership's service area-and another dealership may not honor it. With the manufacturer certifying the vehicle, you don't have to worry about the dealer or certification company going out of business, and your vehicle can be serviced at any of that make's dealerships. Manufacturers ensure that a rigorous list of items is inspected and reconditioned.

7. Benefits and incentives. Some manufacturers allow you to return the vehicle within a few days. Others offer special financing incentives. Be sure to find out if your plan covers these benefits.

8. Make sure you test drive the vehicle.

Armed with the information here, you've got a game plan for shopping for that much-needed replacement vehicle. Remember, today's CPO vehicles take much of the concern about buying a used vehicle out of the equation, giving you the confidence you need in today's real-world used-vehicle buying experience.

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