Buying a used car instead of new is a fabulous idea, and buying a certified preowned car can allay concerns about the reliability of a used car.
But the dirty little secret of the used-car business is that not all certified preowned cars are created equal. You could be paying extra for certification that provides good value or virtually none at all. That is because there is no standard for what "certified" means.
Buying a used car is a good idea because you don't take the huge depreciation hit of a new car the moment it leaves the dealership's lot. And cars are so much more reliable nowadays that a two- or three-year-old vehicle is likely to be quite dependable.
For those who are willing to pay for added assurance and often an added warranty, buying a certified preowned vehicle can be worthwhile.
How much extra will you pay?
Certified vehicles on average cost $1,680 more than other used cars, said Tom Gauer, director of a 2006 J.D. Power & Associates research study on used vehicles. That is a steep price, but some buyers will find value in paying the premium, he said.
Buyers seem happy with their certified vehicles, which often are cars coming off expired leases. Consumer Reports in December reported that nearly 90 percent of certified-vehicle buyers in its survey said they were either "very" or "completely" satisfied with their purchases.
"No matter how you cut it, there's more value in a preowned car," said Bill Bates, manager of preowned sales for BMW. "But the consumer should definitely do his or her homework."
Here are some issues to watch for:
Learn what "certified" means.
Anybody can slap a certified label on a car. In general, vehicles certified and backed by a manufacturer are superior to those certified by an independent dealer.
Look for a warranty.
An extended warranty is the most valuable of the certified benefits. Ask how much more of a warranty you get, above the new-car warranty. Equally important, what does the warranty cover?
Ignore the points.
A detailed inspection of the car is the other main advantage of buying a certified car. You are supposed to get the cream of the used-car crop - low miles and great condition.
But automakers often push the number of inspection "points" that their certified cars must pass. That means little. It is more important to know what the inspection involved, such as simply checking the coolant level versus testing a sample of the coolant, Bates said.
Ignore roadside assistance.
This throw-in benefit in certified programs duplicates what many people have from their auto insurance or AAA, and if not, it is cheap to obtain. Don't make it a deciding factor.
Consider a la carte.
You may be able to spend less on a detailed inspection and extended warranty separate from a certification program, if that is all you want from a certified used car.
Bring your haggle hat.
Just because it is a certified vehicle doesn't mean you negotiate the price less vigorously.
Know the vehicle's history.
A vehicle history report can reassure you the car has not been in a serious accident or damaged by the floods after last year's Gulf Coast hurricanes.
Can you finance the whole thing?
Some finance companies will balk at lending you money to cover the added cost of certification, so you might have to come up with that money yourself. On the other hand, many certified preowned programs offer favorable financing terms.
Ultimately, the decision comes down to your risk tolerance. You might get a better price if you buy a regular used car, especially from a private party. But if the warranty and inspection let you sleep better at night, a legitimately certified preowned vehicle can be an excellent alternative to buying new.
Gregory Karp is a personal finance writer for the Morning Call in Allentown, Pa.