Certified pre-owned vehicles are white hot now with year-over-year increases of more than 8%, according to information from AutoData.com, and that's a problem.
The problem is unsuspecting consumers might get taken advantage of either in price or warranty protection because certified pre-owned vehicle sales are so white hot.
Unsuspecting consumers may be taken advantage of by new car dealers who sell certified pre-owned vehicles. Certified pre-owned vehicles command higher prices and profits than their comparable uncertified counterparts.
It's going to be tempting for new car dealers to push customers into vehicles who may have left the lot without purchasing anything. The dealers can't afford to completely sabotage their new car sales but they can get wary customers into a used vehicle and make the consumers feel as if they were the beneficiaries of a benevolent sales representative.
Too many consumers buy vehicles based on what they think their monthly payments should be, which is really the wrong way to buy a new vehicle. Consumers who state they have, for example, $450 to spend per month may be told by a new car dealer that a certified pre-owned vehicle is going to be a better deal for them.
The new car dealer will outline the strong warranty, the thorough inspection, and the lower price as good reasons for buying a certified pre-owned vehicle. The unsuspecting consumer is going to be pleased because the car dealership has apparently saved them money by putting them into a less expensive vehicle.
And, my answer would be, yeah - right.
What the dealer has done is sold you a vehicle that is more profitable to the dealership. Used cars return a higher profit than new cars in most cases, especially because so much information is available on new-car pricing. Consumers know what dealers pay for their vehicles from the manufacturer and expect to pay only a little bit more (and I'm aware dealers make money by selling volume or certain vehicles that the manufacturer is pushing with dealer incentives).
As always, you're best protection when buying a used car is knowing how much money you have to spend - and not what you want your monthly payment to be. Always negotiate the buying price and not the monthly payments.
Unsuspecting consumers can also be sold used vehicles that aren't certified pre-owned, in spite of what the dealership tells them.
Dealers can only sell certified pre-owned vehicles for the manufacturers that franchise them. For example, a VW dealer can only sell certified pre-owned Volkswagens. It cannot sell manufacturer certified pre-owned Toyotas. Yet, some new car dealers are selling certified pre-owned vehicles that they don't sell as new cars.
How are they doing this? By offering independent certified pre-owned programs, which are really just extended warranties that have been given the fancy title of certified pre-owned. Most consumers are not aware of the difference and end up purchasing highly restrictive warranties that only benefit the company backing them and the dealership selling them.
An extended warranty sold by a new car dealer on a used car has nowhere near the extended coverage of a manufacturer certified pre-owned vehicle. The owner of a vehicle with a certified pre-owned warranty from a manufacturer can bring it into service at any of the manufacturer's dealerships across the country for service.
Some extended warranties require the customer to pay the costs upfront and then be reimbursed by submitting a claim - a reimbursement that is never prompt in its appearance.
Be alert when shopping for a new vehicle. Certified pre-owned vehicles are not always the great bargain they are presented to be and some certification is suspect at best and can end up costing - not saving - your money.