The Best Used Cars

JULY 5, 2006

Autos

By Matt Vella

Certified pre-owned programs offer as-good-as-new cars for less. No wonder they now account for 41% of all used-car sales

Used car salesmen may have a bad reputation, but that sure doesn't seem to keep U.S. consumers from buying used cars. In 2004, we bought 13.6 million new cars and light trucks and leased 3.3 million new cars and light trucks—but went home with 42.5 million used cars and light trucks, an increase of just under 12% from 1990, according to the Bureau of Transportation Statistics.

But these days, used cars are better than ever, thanks to certified preowned, or CPO, programs, which were created by auto makers to resell cars coming off lease. The manufacturer cleans and inspects each car, slaps on a warranty comparable to one found on a new car, and sells it at a premium—although still for much less than the cost of a new car.

Best of all, for the manufacturer and dealer at least, these CPO cars can only be sold, not leased, so they put no drag on inventory.

Introduced in the 1980s, CPO programs have proved so popular that a study by J.D. Power & Associates stated that, by 2005, they accounted for 41% of all used-car dealership sales, an increase of 4% over the previous year.

WEAK ECONOMY HELPS. To get an idea of the numbers: As of last month, year-to-date CPO sales were up 2% at General Motors (GM), where slowdowns at Saturn and Saab were offset by growth at Cadillac and Hummer. Sales also rose 7.8% at Mercedes-Benz, 14% at Chrysler Group, 23% at BMW, and 105.6% at Toyota (TM), exclusive of Lexus.

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