Are “certified” used cars worth the money?

Many people assume there is some tangible benefit to drinking certified organic coffee or talking with a certified financial planner, but can the same be said for buying a certified used car? Certainly, sales of Certified Pre-Owned (CPO) vehicles have been steadily rising in recent years, according to consumer researcher J.D. Power and Associates. But not all CPO programs are created equal and it takes more than a cursory tire kicking to discern the deals from the duds.

“With a certified used car you’re getting the manufacturer’s guarantee on the fitness of the vehicle, so you should be able to have greater peace of mind,” says Michael Turk, a lawyer and director for the Automobile Protection Association (APA). However, he notes that CPO programs can differ wildly in what they offer, with some providing lengthy extended warranties, while others promise little more than a thorough going-over. “You really have to do your homework,” says Turk. “If all you’re getting is a detailed inspection report, then why bother?”

Let’s take a look at exactly what’s being offered. Certified vehicles are backed by the original manufacturer and sold through its network of factory dealers. Typically, these are newer model, low-mileage cars that have passed through a rigourous inspection process. But each automaker has their own variation on the certified program, with the best ones offering additional guarantees, roadside assistance and other benefits normally associated only with new cars. But there is a premium to be paid for these perks and not everyone agrees the higher price is always justified.

“You should expect to spend at least $300-500 more for a certified used car, but the question is, is it worth it?” asks Phil Edmonston, author of the Lemon-Aid Used Car Guide. J.D. Power and Associates pegs the certified premium even higher at up to $1,600 over the price you would pay for the identical car at your neighbourhood, independent used car dealer.

What you get for that extra money depends largely on where you’re shopping. For instance, If you’re buying a certified pre-owned car from a Honda dealer, your used vehicle will come with an extension of the original powertrain warranty up to 6-years or 120,000 km, whichever comes first. In addition, you’ll have seven days or 1,000 km to exchange the vehicle for another one if it doesn’t live up to your expectations. And as a bonus, Honda dealers can also offer you financing rates as low as 0.9 per cent. A typical bank rate on good credit at an independent dealer is about 8 per cent. The APA’s Turk calls that a “huge advantage” for the majority of consumers who require financing over three to five years.

Toyota also offers a similar certified program, but some of the domestic automakers like Ford and Chrysler have watered down versions of the CPO system. Ford offers no extended warranty at all, but does give buyers a cooling off period with a money-back guarantee for the first 3-days or 500 km of ownership. Ford also throws in one year of free basic maintenance and roadside assistance. Chrysler, on the other hand, offers little more than a 3-day or 500 km exchange period.

Still, for consumers with a deep-rooted anxiety about buying used cars, the experts agree that the right certified vehicle can be a good choice. The key lies in doing your research and reading the fine print. With that in mind, here are the top five tips from Turk and Edmonston on how to find the best, certified pre-owned vehicle:

1/. Brand power: Many people prefer buying used cars over new because of the steep depreciation that goes along with that new car smell. But vehicles from Japanese automakers, like Honda and Toyota, tend to lose value at a more glacial pace, making them still quite pricey even after a year or two. However, domestic vehicles like Ford and General Motors products depreciate much faster and represent better used bargains.

2/. Second opinion: Although certified vehicles are subject to a detailed inspection, that doesn’t mean you shouldn’t also get a second opinion. A certified car is not the same as a new vehicle and that means brakes, tires and exhaust will all have some wear. An independent mechanic can take a look at these common maintenance items and make sure the dealer’s mechanic didn’t miss anything. Expect a labour charge of about $80-$100 for an independent inspection.

3/. Background check: While you’re getting your certified vehicle checked under the hood, it’s also a good idea to check out its life story. And because even dealers can get tricked, a vehicle history report from a web-based service like CarProof (www.carproof.com) or CarFax (www.carfax.com) is a great way to check for hidden accident claims, unpaid liens and odometer fraud. CarFax reports cost $25 for a single history or $30 for unlimited reports. CarProof charges $35 to $60 for each report, depending on the depth of information provideds.

4/. To the point: Most certified vehicles are put through a myriad of examinations during the certification process. Often, anywhere between 100 to 300 “points” must be checked off before they can join the elite ranks of used cars. Buyers should ask for the checklist and keep it on file so that if something does go wrong, they can check it against the initial inspection and see if it was something that was certified.

5/. Extended care: Peace of mind is paramount for many used car buyers and that’s why factory certified cars often come with extended warranty protection. But not all extended warranties are created equal, so buyers need to ask exactly what is covered and for how long. Some warranties are simply extensions of the original protection up to six years, while others start a new warranty period when you pick up the keys. And some manufacturers like Ford and Chrysler offer no extension beyond the remaining factory warranty. Also, make sure it’s the manufacturer and not a third-party company backing the warranty.

* First published in MoneySense magazine

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