Buy peace of mind with certified, pre-owned cars

If you've ever purchased a used car, the fear of driving off the lot in a lemon may have crossed your mind. But if you're willing to fork over some extra cash, a certified pre-owned vehicle may provide you with the affordability of a used car and the peace of mind that comes with buying a new one.

Certified pre-owned vehicles are those that have undergone a rigorous inspection process by their manufacturers to see whether or not they adhere to manufacturer-set standards. Once an automobile meets those specifications, the manufacturer then puts it back on the market and gives the buyer some type of warranty and a stamp of approval that the car is in good condition. The consumer gets to drive away knowing that if something major goes wrong, the manufacturer will honor the warranty.

Of course there is a price for this manufacturer's guarantee. You can expect to pay anywhere from $1,000 to $3,000 more than you would pay for the same car without the certified pre-owned status.

However, more and more consumers are coming to believe that the certification is worth the money. The proof is in the steady increase in the number of certified pre-owned vehicles sold.

According to CNW Marketing Research, about 1.6 million certified pre-owned vehicles were sold in 2004, up from 1.2 million in 2003 and 506,000 in 2000.

Chrysler Group announced that 2004 sales of certified pre-owned vehicles set a record, as the manufacturer sold 100,360 certified pre-owned vehicles compared with 81,297 in 2003.

That number is expected to continue to rise, says Dennis Galbraith, senior director at J.D. Power and Associates.

"Certification, if it's done properly, is a win-win-win," Galbraith says. "It's better for manufacturers because it helps keep up the resale values. It's good for the dealers because certified vehicles tend to spend less time on the lot; they tend to get purchased quicker and that saves dealers money. And it can be good for the consumer because it gives them peace of mind and helps them to know that they really did get a better vehicle."

If you're shopping for a certified pre-owned vehicle, be warned that all programs are not the same.

The programs are "an expensive thing for a manufacturer to get involved in," says James Bell, publisher of IntelliChoice, an automotive information provider that rates programs. As a result, different manufacturers will inspect different facets of the car and will offer different incentives. For example, one automaker might offer a one-year, 40,000-mile warranty while another might give buyers a three-year, 39,000-mile warranty above and beyond the original warranty.

Despite the differences in the programs, car buyers really can't go wrong when it comes to certified pre-owned vehicles, says Bell. That's because car manufacturers aren't going to allow just any car to qualify for the program. They want to protect themselves from having to take on the costly repairs of a poor-conditioned car.

You won't find a 10-year-old car in a certified pre-owned program. Rather, the vehicles tend to be automobiles that are freshly out of leases and generally range in age from 18 months to four years old. There's a reason for this, Bell says.

"Tracing the service history is more difficult on an older vehicle, and the mileage might be just too big of a financial risk for the manufacturer to back any longer," he says.

One of the biggest areas of growth among certified pre-owned vehicles is the luxury market.

"Somebody might want to get that new Lexus, but can't quite make that fit in their budget," says Bell. "But they can get a two-year-old one. Somebody else has taken the depreciation, so it's a better price and they're able to drive a brand or a model that they're not able to afford as new."

When shopping for a certified pre-owned vehicle there are some key factors you should keep in mind:

• Do your homework: "I would encourage consumers to go online whenever possible and look at the different certification programs," says Galbraith. You can find comparisons of the different programs on sites such as intellichoice.com, autotrader.com and Kelley Blue Book. Get a feel for the differences in the various programs.
• Negotiate: While you can expect to pay for the certified pre-owned status, remember that there's usually wiggle room when it comes to the price. Don't just automatically assume the sticker price is the only price the dealer will accept. "My counsel is always to keep everything in negotiation," says Bell.
• Know your target car: Different certified pre-owned programs have different inspection practices. Ask the manufacturer to show you the inspection list and make sure the manufacturer inspects the parts of the car that you think are most important. You can also ask the manufacturer what specific repairs were made to that vehicle and that might influence your decision, as well. Check online sites, such as Consumer Reports, for detailed information on repair histories of various models.
• Read the fine print: Warranties come in all shapes and sizes. Make sure the program offers a warranty you feel comfortable with and make sure you understand the language. If you're buying a two-year-old car that comes with a one-year warranty that's tacked onto the original five-year warranty, understand that you'll have four years of coverage. Likewise, a warranty for 50,000 miles that went into effect when the odometer read 0 might not be a smart move if the car you're buying already has hit the 40,000-mile mark.
• Know who you're dealing with: Is the certification being offered by the manufacturer or the dealer? You don't want to have to depend on a dealer who might shut down or move away. You want the security of knowing the manufacturer stands behind the car and you can take it to any authorized dealer if you run into a problem.
• Stay true to your tastes: You might find a certified pre-owned vehicle that has a sickening smell or a scratch on the fender that you're not willing to deal with, says Bell. If you are not happy with the car, the certification really isn't going make you happy in the long run. "You're in charge of the buying process so if there's anything you don't like bring it up before you sign any papers," Bell says.

-- Updated: Aug. 17, 2005