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Buying a CPO in the Age of Scarcity

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  • Pre-owned Vehicles (CPO) is one way to gently purchase a used car, truck, or SUV from a dealership with fewer miles than you might see in a traditional used car park.
  • Right now, with used car prices up 10 percent in May compared to prices that have already gone up in 2021, it can be tough to get an affordable used car of any kind.
  • On the brighter side, trade values ​​are 72 percent up over 2021, so you might get a bargain at the other end of the bargain if you have a car for sale.

    The current car market is very similar to the housing market. Go anywhere across the country and you will find the same situation: a great time to sell and a very bad time to buy.

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    Inventories of new and used cars are a very long way from recovering to pre-pandemic levels in early 2020. On average, according to JD Power, a new car sits at the dealership for only 36 days before it is hijacked. While auto dealers were swimming in record profits and revenue despite lower volume – in April, dealers More than double the average profit margins Since last year they are expected to earn $5,000 on every new car they sell – automakers don’t have that luxury. They’re eager to ramp up production, but since they can’t now, they’re relying more on pre-owned sales (CPOs) that come with extended factory warranties.

    Used cars aren’t the usual toy value, at least not now. In May, according to the auction house Mannheim, used car prices increased by 10 percent versus last year, which by that time had already seen a double-digit rise as of 2020. Inflation is at its highest level in 40 years. Can you still get a deal?

    US economy swells

    Saul LoebGetty Images

    The stock of used cars is relatively flush, but you’ll get fewer cars for the money

    In 2021, Americans bought a 40.9 million used cars registered. More than half was sold by dealerships (including non-franchise companies like CarMax). dinar strength She said Average trade values ​​rose 72 percent in April. That, plus the 2.2 million fewer new vehicles available for sale at the beginning of May, helps explain why the 2018 Toyota Camry is worth (or more) as much as the original sticker price.

    Looking at the raw numbers, it seems that second hand buying is the route most people should take at the moment. According to Cox Automotive, as of early May, there were 2.5 million used vehicles and 1.1 million new vehicles in stock. CPO vehicles represent a small portion of total used car sales — on track to reach three million this year — but they are often backed by low-interest financing that non-franchised dealers can’t match. At the moment, the used car market has an extension Sufficient for 48 days Average prices are about $20,000 lower than a new car. When you consider that the average prices for new cars It culminates in $45,000If a used car averages nearly 70,000 miles, and interest rates have already jumped, your money in 2022 isn’t going as far as it once was.

    CPOs are turning into older, high mileage cars

    Traditionally, CPO cars have mileage limits, so they look more attractive to buyers coming in for a new car and are in good enough condition that the automaker can warrant it for an additional year. They were usually late model, non-rent cars less than 40,000 miles in length. But many automakers are broadening their definition of a CPO vehicle.

    By autumn, April will Approval of non-Nissan vehicles With a six-year/100,000-mile warranty, which is slightly shorter than the seven-year/100,000-mile warranty that Nissan products get. General Motors launches Carbravo, a new consumer CPO that allows GM dealers to certify any brand’s vehicle. “We will be able to certify a used Toyota with 87,000 miles on it,” said a Chevy dealer. Car News. Ford sells all car brands under the Blue Advantage program With up to 120,000 miles It offers a 14-day / 1,000-mile return policy. Honda 10 year old car certification With no mileage limits under the HondaTrue Used program, though, Acura now limits mileage to 80,000 miles. More automakers are likely to join the old, high-mileage trend so they can take advantage of current demand.

    Lower quality checks, higher potential risks

    CPO vehicles are meant to undergo a lengthy inspection as dealer technicians check approximately 200 items on a piece of paper. The automaker sets terms and performs field audits, but CPO vehicles are not checked by factory personnel. Usually a technology at a dealer.

    This doesn’t mean every CPO is a potential risk – after all, there’s an extended factory-backed warranty to cover any issues that go unchecked – but it’s a hectic time as dealers scramble to sell cars as fast as they can in, so keep that in mind if you tend to Put all your confidence into a checklist, and keep your eyes open. To make matters even more confusing, automakers with high-mileage CPO programs now have multiple levels of CPO vehicles with separate names—each with wildly varying certification requirements. For example, Honda now has three CPO brands (HondaTrue Used, HondaTrue Certified, and HondaTrue Certified+) all with different warranty coverage and age restrictions. Ford checked 139 points for Blue Certified vehicles, compared to 172 points for Gold Certified vehicles. Not everything is for every buyer, and you might be better off with a newer non-CPO vehicle without the additional warranty coverage.

    All this is to say: it’s the most frustrating buyer’s market in decades. But if you have to replace a vehicle and you think a CPO is the way to go, make sure you know what the store has in store. The terms and conditions of the economy have changed.

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