Hidden Benefit Of Certified Pre-owned (CPO) Programs

February 1, 2011

Readers of this website know that I'm a big fan of certified used cars. In fact, I loved selling CPOs when I was Internet Manger for a major car dealer because if there were problems with the vehicle after the purchase, my customers were protected. Now, when family or friends ask if they should buy a certified vehicle, I usually give an enthusiastic "yes." The only time I don't recommend certified vehicles is when someone's budget dictates an older, high mileage car. These usually don't qualify for certification.

Hidden Benefits

Certified pre-owned vehicles meet a higher standard to begin with. Then, they are rigorously inspected, deficiencies fixed, and they are given an extended warranty from the manufacturer, not the dealer. There can be other benefits depending on the manufacturer, such as 24/7 roadside assistance, a free vehicle history report, and so on.

However, a significant benefit that can save you a ton of money is incentive financing from the manufacturer. This is when the manufacturer offers a low APR for qualifying buyers of their certified used cars. Let's take two current examples. GM if offering 1.9 percent on loans on a wide range of GM certified used vehicles. Acura is offering 0.9 percent for a 24 month loan, and up to 2.9 percent for a 60 month loan on various Acura certified models.

Money Saved

"So what's a few points on a car loan," you ask? As it turns out, there can be real savings for the end consumer. Remember that used car buyers generally pay a higher interest rate on loans than new car buyers. Let's say you qualify for a regular used car loan at 6.99 percent. You're borrowing $15,000 over five years or 60 months. Your monthly payment is $297.

Then you find out the certified used car you want to purchase qualifies for a 1.9 percent loan through the manufacturer's lending arm. The same $15,000 loan over 60 months now cost $263 a month. That's a difference of $34 dollars. How much do you save over the term of the loan? $34 times 60 months comes out to $2040. What if you could have negotiated two thousand dollars off the selling price of the car to begin with? Doing so would have felt pretty good. Either way, the money is in your pocket and not the dealer's or the lender's bank account. Good job.

Where to Look

Cars.com offers a special web page that lists current incentives on certified used cars. Before buying a certified pre-owned vehicle, check their Incentives: Rebates & Financing Offers page for certified programs.
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