While buying a brand-new current-year vehicle can be exciting, recent studies indicate more and more people are opting for certified pre-owned cars. According to a white paper produced by a division of the market research company J.D. Power, approximately one-third of people who traded in a vehicle that was less than 10 years old decided to purchase a used vehicle instead of a new one, and another study found 59 percent of respondents were considering buying pre-owned vehicles. There are a number of benefits of purchasing a pre-owned car or truck, and here are a few of them to help you decide if this option is right for you.
It's an unfortunate but true fact that new vehicles lose value the minute you drive them off the lot. The amount of depreciation a vehicle will suffer varies depending on the make and model, but the average new car loses 11 percent of its value when you leave the dealership and anywhere from 15 to 25 percent each year afterwards. If the vehicle is not very popular, the rate of depreciation can be much higher.
At first glance, it may not seem like that big of a deal, especially if you plan on owning your vehicle for several years. However, this can rapidly become a problem if you get into an accident and your new car or truck is totaled. The insurance company will only give you the market value of the vehicle. So even if you purchased your car a week prior for $25,000, you'll probably only get around $22,000 because of depreciation.
Pre-owned vehicles, on the other hand, have already gone through this phase. This means the value of your car or truck will remain fairly stable after you buy it. You'll also save money because you won't have to buy gap insurance to cover the difference between what the insurance company pays and what you still owe on the vehicle should you get into an accident.
Certified pre-owned (CPO) vehicles must undergo a rigorous selection, inspection, and reconditioning process to be classified as such. Typically, CPOs must have low mileage and a clean vehicle history to be considered for the program. Dealerships must then perform an extensive inspection on the vehicle and fix or recondition any areas that fail the inspection prior to putting the unit up for sale.
Although the process won't return the vehicle to "like-new" status, it does significantly reduce your risk of getting a lemon. However, while CPOs cost less than new vehicles, they can cost as much as 20 percent more than a non-certified used car or truck depending on the model. Many times, though, this extra money does include the cost of an extended warranty, which can provide some protection against future problems.
Depending on the dealership and certified pre-owned program, some vehicles come with extra perks such as roadside assistance and free basic maintenance such as oil changes for a limited period of time after purchase. These benefits can reduce the cost of ownership and save you time and money in the long run.
If you're looking to upgrade your vehicle, connect with a dealership in your area for more information about certified pre-owned cars or assistance with making a purchase.