Why Buying a Certified Pre-Owned Car is Just Plain Smart

Christian Wardlaw | Nov 01, 2017
New car smell, single- or double-digit numbers on an odometer, and the pride associated with driving the latest and greatest redesigned vehicle are powerful intoxicants, but they cost vehicle buyers plenty of money in terms of depreciation.

What's depreciation?

That's the decline in a new vehicle's value, which starts from the moment you sign on the dotted line.

If you pay $30,000 for a set of new wheels, by the time you drive it home from the dealership it is worth $27,000, according to VIN check company Carfax. By the end of the first year, you could sell it for about $24,000. And after three years, it will be worth about $17,000.

Auto Sales.jpg

Auto Sales

Of course, these values are based on averages. Some vehicles depreciate more, and some depreciate less. But with rare exceptions, all new vehicles lose value over time, and the biggest chunk of that value evaporates during the first three years of ownership.

To avoid this financial hit, smart car buyers choose a lightly used vehicle, one that isn't very old and has relatively low miles. Someone else has absorbed the brunt of the blow as far as depreciation is concerned, and such vehicles will remain reliable for years to come.

Adding an extra layer of confidence to a used-vehicle purchase, certified pre-owned (CPO) programs offered by car companies can provide peace of mind. Though CPO vehicles are more expensive than, say, a used car sold by a neighbor down the street or by a stranger via online advertising, such programs typically include the following benefits:

  • A vehicle identification number (VIN) check and vehicle history report
  • A thorough inspection and reconditioning to bring the vehicle as close as is possible to new condition
  • An extended warranty, with roadside assistance coverage
  • Free trial periods for satellite radio and/or connected services
  • Ability to finance, or lease, at lower interest rates based on your credit score

Granted, these benefits have a cost in terms of higher prices for CPO vehicles. But many people find them worthwhile, and CPO vehicles always cost less than equivalent new vehicles.

For example, a new 2018 Honda HR-V LX with a continuously variable transmission and front-wheel drive costs $21,310. As this article is written, a certified used 2016 Honda HR-V LX with a CVT and 10,342 miles on it is available within 25 miles of my house for $18,481. That's a savings of $2,829.

Aspirational buyers could find even more value in a CPO vehicle, when compared with a new vehicle. A new 2018 Toyota Camry XSE with a V-6 engine and a set of floor mats will set you back more than $35,000. As this article is written, my local Mercedes-Benz dealership has a certified used 2014 E350 Sedan for sale, with fewer than 24,000 miles on it, for $34,895.

When you buy a CPO vehicle, you won't be the first owner, putting the first few thousand miles on it. You won't be breathing original new-car smell. Depending on the model you choose, you might not be driving the latest version of it, either.

You will, however, line your wallet with thousands of dollars in savings and with no significant compromise in terms of vehicle condition, warranty, or performance. Imagine how you could invest that money so that it appreciates, or spend that money on something meaningful like a vacation for your family.

Undeniably, buying a CPO used car is just plain smart.

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