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Should you buy a certified used car, truck or SUV?

As much as you can expect the sun to rise tomorrow, you can expect new vehicles to become more expensive as time advances. According to the latest data from Kelley Blue Book, the average new car transaction price in September was $ 35,742. That's two percent more than in the same period last year.

This average price, as you'll see later, is too much for many Americans to afford comfortably. Fortunately, there is a less expensive alternative to new car ownership that can provide a consumer with the same security as a new car, while spending only 50 to 75 percent of the money they would have spent on a new vehicle. This alternative is the Certified Preowned (CPO) program of your preferred car manufacturer.

CPO programs usually make the most sense for luxury car buyers.

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What is a CPO car?

A certified used car vehicle is a used vehicle that has little indication that it has been used before purchase. CPO cars are usually off-lease units that have returned to the dealer where they were first resold. Once the original lease has expired, the original lessor often returns the car in exchange for a new lease or buys something else.

Typically, these off-lease cars are about three years old, with less than 1

2,000 miles per year of previous maintenance, but on the high end, many automakers will not consider a used car for manufacturer certification if it is older than six years and has more than 75,000 miles on the clock.

CPO cars are often well maintained, damage free, and come back to the dealer with relatively few miles on the odometer, because of the mileage limits inherent in new car leases. When a leased vehicle is returned in poor condition, the original landlord is faced with high charges to compensate for any damage or extra mileage.

The restrictions on the first owner ensure that the dealer has a steady flow of high-quality used cars for sale and thus gives the dealer the opportunity to make a second profit. Of course, CPO cars can come from regular dealerships, but many come from off-lease businesses.

With certified used cars, you can buy a new vehicle at a price that is significantly lower than that of a new car.

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If a vehicle is deemed to have passed the certification process after the initial inspection, the dealer must send its vehicle identification information, the VIN of the vehicle, a multipoint checklist, and a payment to the car manufacturer to obtain the vehicle , Once all necessary repairs have been made and the mandatory vehicle history report is checked out, the manufacturer gives its approval as to when the vehicle can be offered for sale on the dealer premises as a CPO vehicle.

Once you purchase this CPO vehicle, you will receive a manufacturer's warranty similar to a new car warranty. For most vehicle brands, this means that nationwide, no repairs can be made to all dealers of the manufacturer for a duration and mileage longer than the original warranty period.

Also, as with a new car, CPO buyers have the option to finance or lease, usually at lower interest rates than a normal used car. Once the customer signs and starts his paperwork, he has access to a 24-hour roadside assistance, to a free towing service, travel interruption insurance, and a rental car that can be used during the maintenance or repair of the CPO car. Speaking of service, Lexus stands out among other automakers by including one of their CPO cars for free maintenance for the first 20,000 miles or two years you own.

And there is another advantage. For each CPO vehicle that came with factory-installed satellite radio, regardless of manufacturer, the new owner will receive a free, three-month trial of SiriusXM

A CPO car costs more than a conventional used vehicle, but it will still be a lot less expensive than a new car.

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How much more does CPO cost?

At this point, it's probably worth noting that so far I've only talked about luxury brands. Because CPO is usually worthwhile only for luxury cars. Their greater complexity means a greater likelihood of repairs, which often cost more than a mainstream vehicle. CPO luxury cars usually cost thousands more than their conventional counterparts, but if that ultimately saves thousands on the guaranteed repairs, you might end up standing high.

These benefits can not become mainstream, reliable transportation. If you buy something that probably does not require major repairs in the first six years and 100,000 miles, have it checked by a mechanic and when it gives its blessing, drive away. At this point, even spending $ 500 on the CPO program, or even an extended warranty, will be superfluous.

Why is a CPO car better than a normal used car car? [19659006] Yes, you will have to spend more money, but for these extra Benjamins you get a lot more security knowing that the car is in good condition and that it is covered by a warranty that is comparable in length and milage with a new car warranty.

How do you know that it is in good condition? The multipoint test. At the bottom, Porsche performs a 111-point inspection, while its cousins ​​at Audi are more intense with their 300-plus-point inspection. Regardless of how many items are checked, these inspections ensure that the most important mechanical, electronic, emission and safety components of a car meet specifications. If some of them are not, they will be repaired, even if the problem is cosmetic.

Apart from the different levels of investigation, there are other aspects that make some CPO programs better than others. Do you expect to earn a lot of miles with your next car? Audi, Bentley, BMW, Infiniti, Lexus, Mercedes-Benz and Volkswagen offer unlimited mileage guarantees. Is free maintenance a must? Looks like a CPO Lexus could be in your future.

They may be less expensive than new cars, but CPO vehicles offer perks that some new vehicles do not match.

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You may want to trade your CPO car within the first few days if you're unhappy with it. You have this opportunity with Buick, Chevrolet, GMC and Mercedes-Benz.

You should probably avoid a CPO program that includes a deductible with guaranteed repairs. Chrysler, Dodge, Ford, Jeep, Lincoln and Ram all come with a deductible of $ 100, while Hyundai, Mini and Nissan have a $ 50 deductible.

Regardless of what you are looking for in a CPO program – and this applies to all cases where you spend a great deal of money – you should check the fine print and make sure that you think about the CPO deal

If you Worried that you need to spend a few hundred to a few thousand dollars more on a CPO car than a comparable used vehicle, remember that you are still paying thousands less than what the equivalent new set of wheels would cost. Plus, CPO can add some money to the price of the car, but that leaves a little more negotiating space, so remember, if you crack numbers.

Living with a CPO car is very similar to living with a brand new set of wheels.

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Living with a CPO Car

In addition to the dealership's assurances that they are getting a like new car for what is hopefully a reasonable premium over a used car price, CPO cars come with their own manufacturer-backed warranty extending the life of the original new car warranty.

Let's take a look at the case of a roadshow employee who bought an Audi TT in 2014 with 21,000 miles on the clock for $ 18,000 less than the original MSRP. At the takeover he had about a year and 29,000 miles on the original factory warranty of his TT. Once this ends, the CPO warranty will be extended and the original warranty extended for one year without mileage limitation.

So, essentially, my colleague saved almost 20 giants by having a new car with a two-year, unlimited mileage warranty. This is a spanking deal.

The average person can not afford a new car

As we spend in our recent How much money should you spend on a new car article, it's best not to budget more than 10 percent Your monthly take-home payment for a car payment. In collaboration with Roadshows Car Loan Calculator the average new car volume of $ 35,742 is equivalent to a monthly payment of $ 518, up 20 percent after a 72-month period of 5 percent interest. (For those who have not been shopping for new vehicles for some time, 72 months seem like a very long time – that's it, but it's also the new normal.)

Considering the "10 percent of the monthly Income- Home "policy, which means someone clearing $ 5,180 a month can afford the average new car comfortably. If the $ 5,180 net income per month is 75 percent of the gross income, that person's annual salary would have to be $ 82,880 – much higher than the last reported average median income of $ 50,135 and $ 39,923 for full-time men and women (19659003) Certified used cars, trucks and SUVs are becoming more popular every year

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The average person can afford a used car

According to Edmunds data, the average price for used cars in the first quarter of this year was $ 19,657. That's 55 percent of what an average new car costs. According to Consumer Reports, it's not uncommon to spend $ 3,000 more on a CPO luxury car than its CPO counterpart, so we add $ 3,000 to this average transaction price and repeat the above roadshow Car Loan to determine how A lot of a person needs to earn to make an average CPO luxury car, truck or SUV.

Our magic math machine says that paying $ 328 is just right for someone with a monthly net income of $ 3,280. Annual gross income is $ 52,479. This is much closer to the average income of men and women working full-time and year-round in the US. (If you're curious, you only have to spend $ 45,600 a year to afford the average used car.)

According to Automotive News, 2,646,295 CPO cars, trucks and SUVs were sold in the US in 2017 – the highest annual CPO sales for seven years in a row. The publication also states that CPO sales increased by 3.3 percent in the first half of the year, meaning that 2018 will exceed the previous year's figures. It seems that more car buyers are taking advantage of CPO programs.

You could save money and buy a conventional used vehicle if you've focused your eyes on something non-luxury known for its reliability [19659004] Heldenbilder / Getty Images

CPO programs are not perfect

If you decide to buy certified pre-emptive rights, keep these two principles in mind: First, you get what you pay for. Second, you risk the risk of buying another's used car.

While you will most likely be at the helm of something that is completely reliable, a used car is generally not as reliable as a new car. So you save money, but at the cost of a slightly lower longevity and the lack of euphoric new car smell.

But CPO multipoint controls and the associated extended warranties reduce the risk of being ashamed of a car. It turns out to be a nightmare of reliability. In addition, car dealerships working in collaboration with car dealerships will often finance CPO vehicles at a lower interest rate than they would for a normal used vehicle, so that part of the extra money you spend in advance can be saved at a lower cost Financing

But CPO is not for everyone. It's best for people who want to save money on luxury cars from brands that stand for high repair costs and less than stellar reliability. On the other hand, CPO programs are unlikely to make any financial sense to shoppers who want to save money.

But for those looking for something more conspicuous, the benefits may outweigh the disadvantages. A CPO vehicle can offer almost anything a new car offers, but for a lot less. With the inherent savings you will enjoy compared to a brand new car, in many cases the numbers only make sense.

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