Q: What is a Certified Pre-Owned Car?

December 17, 2013 12:53 PM

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Purchasing a used car can be a great way to save money while obtaining a quality vehicle. It can also be a decision you eventually regret, as many used car purchases are completed without full knowledge of the vehicle's condition. Purchasing a certified pre-owned car is a way to help ensure that the vehicle you're getting is in a condition that's worthy of the price. With a certified pre-owned car, the vehicle is guaranteed to be in a specified condition, with inspections made before sale to back up that guarantee.

The idea behind certified pre-owned cars originated in the 1990s with luxury car manufacturers who leased out their vehicles. After the leasing period on the vehicles ended, car dealers wanted to find a way to sell the previously leased cars for as much as they could. By repairing any problems with the vehicles and then certifying their condition, car dealerships were able to sell them at premium prices. The automobiles were presented as being a step above uncertified used cars, and dealerships often added extra incentives to the sale, which helped entice buyers at the higher prices demanded. As the process gained popularity, the type of vehicles sold extended beyond previously leased cars to include those cars received from any source as long as they could pass the manufacturer-supplied certification conditions.

There are a variety of reasons to consider purchasing a certified pre-owned car. Obtaining financing for the vehicle is easier than doing so for an uncertified used car. The financing company knows that the car meets the required standards of the manufacturer for a vehicle that's in good condition. Another reason for making the purchase is that manufacturers and dealers often offer warranties that deal with common problems that can arise after purchase. This additional warranty is one of the reasons why the vehicles can be sold at prices that may be equal to or higher than their Kelley Blue Book value. The price is often up to 10 percent more than an uncertified vehicle of the same make and model.

In addition to the incentives added, the buyer doesn't have the same issue with car depreciation as a new car buyer does. When a new vehicle is purchased, it immediately loses a large chunk of its value the moment it's driven off the car lot. This loss in value continues throughout the automobile's lifetime. Depreciation on a certified vehicle is not as steep. Since the car is already in a used state at purchase, it loses its value much more slowly in comparison. This allows the buyer to recoup a larger portion of the purchase price with a later sale in comparison to that received when selling a new car later as a used vehicle.

Not all used cars can be certified. For a used car certified by a manufacturer, the standards are so high that the car must be fairly new, usually no older than between four to six years, often less. Dealers or third parties may certify cars, but their standards might be less than those of the manufacturer. When making the purchase, you should use caution. Regardless of whether it's certified by the manufacturer or by a third-party certification program, the vehicle is still a used car and should be thoroughly inspected by an auto mechanic you trust before you make the purchase. You should also obtain a maintenance history for the certified pre-owned vehicle and check it against a vehicle history report that you can get from a third party online.

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