Certified Pre-Owned Vs. Used: What You Need to Know

Many car shoppers stay away from new vehicles for financial reasons. But the industry is anything but clear when it comes to used cars. Terms are often confusing, as is the case when talking about the difference between “certified pre-owned” versus “used vehicles”.

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Are they really that different? What defines a certified pre-owned vehicle? And which should you buy? Here’s what you need to know about these terms.

What is a certified pre-owned car?

Certified pre-owned cars go through a rigorous process to make sure they meet criteria from the manufacturer.

The purpose of certification is to give buyers added peace of mind when they buy a car. Some CPO vehicles are eligible for better financing terms and lower interest rates because they’ve been certified.

Certified pre-owned vehicles first appeared about 30 years ago. Mercedes-Benz and Lexus were among the first to create programs that gave car shoppers an option between new luxury vehicles and traditional used cars. Since then, virtually every carmaker adopted a program of its own, from Ford’s Blue Advantage to Toyota Certified and more.

How does a car become certified?

Only the best used cars get certified. Each manufacturer defines their own criteria, but the concepts are almost uniform across the board.

Only used cars with low mileage and under a certain age can be certified. Hyundai USA, for example, only certifies cars less than 5 model years old with fewer than 60,000 miles. The requirements vary by manufacturer, but the premise remains the same: They’re sought-after used cars still in their prime.

Not every car that fits the age and mileage gets certified. They must also pass a long checklist to ensure there aren’t any issues. If there are, repairs have to be made to bring the vehicle up to standard. The repairs might be mechanical or cosmetic, but the goal is to provide high-quality cars. Most manufacturer inspections have at least 160 checkpoints.

Certified pre-owned vs. used: Is there a difference?

Any certified pre-owned car may also be listed as a used car, but not every used car can be certified pre-owned. First, they need to meet the age and mileage requirement, then pass the certification process. Both are technically “used” cars.

There are major differences between used and certified pre-owned vehicles that go beyond the vehicles themselves. There are features and benefits that distinguish one from the other.

Certified pre-owned vs. used: warranties

A new car has a warranty limited by time and mileage. It might be three-years/36,000-miles or five-years/60,000-miles, and manufacturers vary. When you buy a used car, you receive what’s left of the remaining factory warranty. So, if a car is 2 years old and has 30,000 miles on it, you might have just one year and 6,000 miles to go until the warranty expires.

For certified pre-owned cars, manufacturers back their certification with an extra warranty. Toyota Certified includes a 12-month/12,000-mile limited comprehensive warranty and a seven-year/100,000-mile limited powertrain warranty. Chevrolet extends the factory powertrain warranty to six years or 100,000 miles and adds a 12-month/12,000-mile bumper-to-bumper limited warranty. These assure quality, and may also help you avoid unexpected expenses.

Certified pre-owned vs. used: inspections and repairs

Dealerships are retail businesses, and businesses don’t like to spend unnecessary money. Dealers commonly do as little work on a used car as they can in order to sell it, leaving more money for profit. There can be problems with the car—nonworking air conditioning, for example—but the car still passes a safety inspection, so it can be sold.

A certified pre-owned vehicle has more stringent criteria. With an inspection that covers almost every part of the car, issues are less likely to slip through the cracks. And if it’s a CPO car, any issues have to be corrected to pass the inspection.

Certified pre-owned vs. used: financing

Compared with a bank rate for a used car purchase, most CPO programs offer lower interest rates, sometimes as low as new car rates. You might save hundreds of dollars in interest over the course of the loan.

That saves money, but it’s also a way that carmakers stand behind their product. The process goes through the company’s own captive lending so they take on the risk. They’re confident you’ll be happy with the vehicle and won’t default on the loan.

Are certified pre-owned cars more expensive?

According to Consumer Reports, you could pay about $850 more for a 3-year-old CPO car than the same vehicle that’s “used.” A luxury car is about $3,000 more.

The reason they’re more expensive goes beyond reconditioning costs. The price accounts for issues that could be covered by the warranty and any additional perks the program includes. Those perks can be roadside assistance, loaner cars when yours is in for service or satellite radio or OnStar.

If you look at the potential savings if a single warranty repair is required—a $1,000 power steering rack, for example—buying a CPO can pay off very quickly.

Who certifies pre-owned cars?

Only franchised dealers can certify a pre-owned vehicle, and that process is done on behalf of the manufacturer. That’s because aftermarket garages or repair shops can’t make changes to a car’s warranty. That’s one of the major differences with pre-owned versus certified pre-owned cars. You will only find CPO cars for sale at franchised dealerships.

Is a used car ever better than a certified pre-owned car?

Used cars can be in fantastic condition. A used car could be only-Sunday-driven, with regular oil changes and details, but it also might have been in a wreck or have a serious oil leak. You just don’t know for sure, though a VIN check could shed some light.

A used car is likely cheaper than CPO, and they’re more common. The question is whether the value added with the certification and the perks of a CPO vehicle are worth it to you. If you don’t think they are, sticking with a used car might be good enough.