Depreciation in the First Year
Importantly, a new car depreciates by about 10 percent of total value the moment it’s driven off the lot. After the first year, it will have depreciated an average of 20 percent , though that figure is variable and subject to many factors such as: miles driven, brand perception, and supply vs. demand.
What Defines a CPO Car?
Because of car depreciation, many savvy consumers prefer to purchase late-model cars that are not brand-new, but ideally have a couple years of minimal use. Although in recent years it’s become easier to look up a car’s title and history report online, there’s still a measure of uncertainty in buying a used car. Certified pre-owned cars are touted as the crème-de-la-crème of trade-ins and lease returns: They must be late model (usually no older than five to seven years), low mileage, clean title, and in excellent condition just to qualify for CPO certification. Once they do, they must go through a multipoint inspection and reconditioning. The guidelines for certification, including each inspection point, are delineated by the manufacturer, who verifies the top-quality condition of each vehicle that has gone through the process.
What Does CPO Get You?
CPO programs not only guarantee product quality, they also protect the consumer via extended manufacturer warranties that usually include roadside service.
Certified pre-owned vehicles are more expensive than regular used cars, but many people find that the factory-backed inspection and repairs, along with extended warranty, are worth the higher sticker price over un-certified used, which may have any number of hidden issues. Also, manufacturers often offer incentive financing for CPO cars the same way they do for new cars – and this can make up for the slightly higher sticker price.
When to Get a New Car
There are only a few sets of circumstances when a new car might make more sense than a CPO. The most common is for people who love a brand-new, fully covered ride and don’t have any intentions of owning the vehicle. Those people tend to prefer leasing, where they just pay for the first portion of a car's lifecycle, and then turn it in after the first couple years and lease a new one. The other reason to buy a new car is if one’s credit is shiny enough to warrant a really great incentive offer from the manufacturer—i.e., super-low interest rate or a generous rebate.