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At car dealers, 'certified pre-owned' is the new used

THURSDAY, JUNE 16, 2016

In the past, the big question for car shoppers was whether to buy a new or used car. They liked the money they saved by buying used, but feared getting a lemon. New cars were easier to shop for, but that first year’s depreciation was a budget-killer.

Now frugal car shoppers are flocking to a third choice: certified pre-owned cars, also called CPO. Introduced more than a decade ago, they keep climbing in popularity, and sales in the first quarter of 2016 exceeded last year’s first quarter by 5.2%. Some 22.4% of all used cars now sold at franchised dealerships are CPO, according to a study by Edmunds.com.

To be clear, we’re not talking about a heap on Joe’s Car Lot with “Certified!” painted on the cracked windshield. True CPO programs are backed by the manufacturer and provide “the peace of mind that comes with a new car purchase,” says Jessica Caldwell, Edmunds.com director of industry analysis.

In CPO programs, a dealer takes in a clean, low-mileage used car either on trade-in or coming off lease. Factory-trained mechanics inspect the car and recondition it. The now-CPO car is sold at a premium — about $1,400 more than a dealer’s normal price — but it includes an extended factory warranty and other benefits.

Nearly all carmakers now have CPO programs, but what they offer differs widely. The most important features are:

● Age and condition of the cars included in the program. Most carmakers won’t certify a car that is over six years old and has been driven more than 75,000 miles.

● Length of warranty extension in years and mileage. Most programs extend the warranty by two years and 24,000 miles, but many add value with longer powertrain warranties.

● Number of points in the inspection. Mechanics check at least 100 different factors and provide a written report of their findings.

● Other included benefits. Some programs give free maintenance, while others provide loaner cars and even trip interruption reimbursement.

“CPO is arguably the best way to buy a car,” says Karl Brauer, senior analyst at Kelley Blue Book. A study by AutoTrader.com (which owns Kelley Blue Book) backs this up, finding that 64% of shoppers chose CPO cars because of the certification and 57% did so because of the included warranty.

While CPO shopping nearly duplicates new car shopping, the savvy buyer still needs to know what to look for. Here’s a roundup of some special points just for CPO shoppers.

CPO buying tips

● Know exactly what the CPO program includes. Understand how long the bumper-to-bumper and powertrain warranties (covering the parts that move the car) last.

● Do your own visual inspection of a CPO car. Some have less wear and tear than others.

● If you have any doubts about the car’s condition, ask to see the CPO inspection report and ask the salesperson for the vehicle inspection report.

● Carefully check CPO pricing on sites such as Kelley Blue Book, Edmunds.com or the National Automobile Dealers Association before you begin negotiating.

● Be ready for the upsell when signing the sales contract. You already have an extended warranty but it can be lengthened — for a price, of course. Paint and fabric protection, anti-theft devices and other items are also likely to be pushed.