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Dealerships May Be Undercharging You for Certified Pre-Owned Vehicles

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Mitsubishi Lancer

Are you thinking about buying a used car? Dealers are always touting the advantages of buying certified pre-owned, but it turns out they may have been undervaluing their own offers. According to a Cox Automotive study released earlier this week, dealers are likely undercharging customers for their CPO vehicles.

Spotting a CPO sticker on a car can mean a variety of things depending on the automaker and dealer that sponsors the CPO program. In general, customers can expect certified vehicles to have gone through an extensive, 100+ point inspection and reconditioning process, and to come with a few perks and incentives to purchase them, like additional warranties or roadside assistance. They’re also curated: used vehicles with a high mileage count on the odometer or with crashes in their history report are ineligible for CPO programs.

For Example: The Mitsubishi Certified Program includes a 123-point inspection

The Cox Automotive study found that the average consumer values a CPO sticker as worth around $3,000. In other words, they are willing to pay about $3,000 more for a CPO vehicle than for the same vehicle without certification. However, dealers haven’t been taking advantage of this, as the average CPO vehicle on a lot only costs about $1,260 more than the same non-certified model.

Furthermore, the study found that CPO vehicles sell in about 30 days on average, which is five days faster than the average 35-day turn rate for non-certified vehicles. Yet some dealers have been reluctant to even invest in a CPO program because of the upfront cost, even though the combined value of fast turns and higher price tags would quickly help them recoup the loss.

Of course, should dealers begin to sell certified vehicles at a $3,000 premium rather than a $1,260 premium as they do now, perhaps that turn rate would go up. In any case, as consumers ourselves, we certainly won’t mind if they keep undercharging us!

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News Source: Automotive News (subscription required)