The pros and cons of certified pre-owned vehicles

Certified Pre-Owned is a term commonly used in car sales to refer to a vehicle that has received a manufacturer’s warranty after being previously owned.

For a car to qualify, the manufacturer requires a rigorous inspection and accepts only vehicles that fall within a strict set of parameters regarding their history, upkeep, quality replacement parts and other restrictions.

Some non-franchised dealerships may offer CPO options. Their process could still be extensive and legitimate, but without the warranty coming directly from the manufacturer, more risk may be involved.

The price of a CPO vehicle is considerably less than that of a new vehicle, while somewhat higher than a traditional used vehicle. The original owner of a vehicle tends to absorb the majority of the depreciation in value, however, so the price will be closer to that of a used vehicle than a new vehicle.

"Certified Pre-Owned vehicles are really in a 'Goldilocks' zone in terms of pricing," said Mark Arsen of LeithCars.com. "While being slightly more expensive than other pre-owned vehicles, this is easily justified by the reduction in risk they offer."

When dealerships select vehicles to go through the certification process, they choose their best. They don't want to waste time doing extensive inspections on vehicles they know will be rejected.

From these higher-quality vehicles, only ones that pass the manufacturer’s strict criteria will be granted the "Certified Pre-Owned" label.

The manufacturer has strong incentive to ensure the CPO criteria remain strict, because they agree to cover the cost of certified vehicle repairs in the warranties they offer. Since the selected vehicles are often newer models, there is likely time left on the original factory warranty, as well.

Between the dealer's initial sifting process, the onerous inspections to gain the CPO label and the warranty protections, purchasers of CPO vehicles significantly reduce their risks of having expensive repairs.

Certified Pre-Owned vehicles do have downsides, one being that there will likely be far fewer customization options than with new cars. Color, upgrades, gadgets and additional features will also be limited to what the original owner of the vehicle selected.

On the plus side, however, there are additional financial benefits, since one can buy higher-end vehicles without the same tax and insurance costs incurred when buying new.

"With a Certified Pre-Owned vehicle, a customer can get access to a class of vehicles that may have otherwise been outside their budget," Arsen said. "There are some trade-offs, but I think the opportunity to own a nearly-new, thoroughly-vetted vehicle at a fraction of its original cost makes it a pretty smart decision."