Introduction to Certified Pre-Owned Program

#Lexus

A Brief History

Certified Pre-Owned programs were created back in the 1990s to help dealerships sell used vehicles coming back from leases. Most of the early CPO programs were from premium brands such as Mercedes-Benz and BMW. However, by the end of the '90s most manufacturers offered a CPO program, though some were more developed than others.

IntelliChoice handed out the first CPO Award in 2000 and the winner for the best premium program was a tie between Lexus and Jaguar, while the popular winner was Honda. Over the last twelve years of awards IntelliChoice has crowned three different popular winners (Honda, Volkswagen, and MINI) and five different premium winners (Cadillac, Jaguar, Lexus, Lincoln and Volvo).

What does a CPO Program include?

Not every CPO program is the same, which is why IntelliChoice does an annual analysis of each program to determine the best ones. IntelliChoice analyzes eight major elements of a CPO program:

  • Warranty
  • Inspection List
  • Vehicle History Report
  • Special Financing
  • Roadside Assistance
  • Return/Exchange Provisions
  • Compliance System
  • Brand Value

According to consumers, warranties and inspection lists are the most important areas. All manufacturer programs include a certified warranty, a certified inspection list, a vehicle history report and roadside assistance. All but two provide special financing options, and four of the 30 programs offer a return/exchange provision.

The certified warranty is the biggest difference among the programs. Many premium brands have a 2-year/50,000-mile comprehensive warranty extension, but some have a shorter warranty while others impose a deductible of up to $100. Popular brands have the biggest differences among the warranty offerings. Some offer only powertrain extensions; others offer extremely long powertrain coverage plus three or twelve months of comprehensive coverage. MINI offers a 2-year/50,000-mile comprehensive extension, which is comparable to premium brand warranties. Before purchasing a CPO vehicle make sure you understand the exact details of the certified warranty.

Every manufacturer has a certified inspection checklist, but each list has a different layout and different terminology. IntelliChoice created a 144-point standardized checklist in order to assess each list. In 2011, 12 of the 30 programs received an inspection score of 100%. You should carefully review the inspection checklist before you purchase a CPO vehicle.

Seven or eight years ago only a few manufacturers required a vehicle history report such as CARFAX, but now every program requires one. The report will check if the vehicle has had any flood damage, odometer problems, frame damage, been in severe accident or declared a lemon, as well as disclose its ownership history. If there are major title issues, the vehicle cannot be certified.

Most programs have special financing options that are very similar to what you find in the new-car market. Sometimes it will include a cash rebate on certain models, but it usually involves discount financing. This is an extremely important aspect of the program, because discount financing can help offset the premium that is imposed on a CPO vehicle. A dealership may charge you $1,000 or $1,500 more for a CPO vehicle compared to a non-certified one, but if you can save several hundred dollars in financing costs this can help offset that additional cost - while getting you a thoroughly inspected vehicle with a warranty extension.

Two elements IntelliChoice analyzes that are not actual program benefits are a program’s compliance system and brand value. The compliance system involves looking at the processes in place to ensure that a consumer is receiving the benefits promised by the manufacturer. Usually this involves training at the dealership level and dealer inspections by the manufacturer or a third-party organization. Brand value looks at how a brand performs in terms of ownership costs. IntelliChoice conducts a used-car ownership cost analysis on one- to three-year-old vehicles - the most common age for a CPO vehicle - and determines the brands with the best used-car ownership costs.

IntelliChoice also looks at roadside assistance benefits and return/exchange provisions, but these two areas are not very important compared to the aforementioned areas.

Vehicle Eligibility

Manufacturer-backed CPO programs can only certify vehicles within the same brand. So, Audi cannot certify a BMW or Lexus. In addition, every manufacturer has different age and mileage requirements. Some require that the vehicle still be under the new-car warranty, while others will allow a dealership to certify a vehicle all the way out to eight years or 100,000 miles. Most CPO vehicles will be two to four years old with around 30,000 to 40,000 miles. In addition to age and mileage requirements, as stated previously a vehicle needs to pass a vehicle history report and the inspection checklist, and it must be reconditioned to meet the manufacturer’s requirements for a CPO vehicle.

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