If you have your heart set on a luxury car but can't afford the price tag, then buying a manufacturer-certified pre-owned car may be your best option.
While a car can be "certified" by an automaker, a dealer or an independent third party, automakers' CPO programs are generally considered the best. Manufacturer CPO cars have undergone a thorough inspection by a factory-trained technician, and they come with an extended warranty that provides increased protection similar to the car's original manufacturer warranty. They also often include free maintenance plans and special car loan rates when using manufacturer financing, and sometimes the CPO plans offer other benefits, such as a free loaner car when the car is being serviced and free roadside assistance.
Some programs offer greater benefits than others, so it's wise to research your options thoroughly and see which one offers the most complete coverage, said Edmunds.com senior analyst Joe Spina. "Both the warranty the CPO program offers as well as the requirements it has for mileage and condition of cars it will certify are key considerations," he added.
IntelliChoice analyzes manufacturer CPO programs annually, and Volvo was the luxury brand that took top honors in the 2014 Certified Pre-Owned Programs awards. It was the seventh consecutive year for Volvo, which offers a seven-year/100,000-mile CPO warranty with no deductible that is similar to its new-car bumper-to-bumper warranty and includes all major systems — engine, transmission, electrical and more. The program also includes free roadside assistance and emergency service, a free introductory satellite radio period and a buy-back guarantee should the car's title be found to have a problem, such as flood damage.
Prices for competing models of CPO cars within the same car segment can vary, partially because of the cost associated with the manufacturer's certification program. But prices are also directly related to how well the car holds its value over time. Mercedes-Benz had the best residual value among luxury brands in ALG's Residual Value Awards, which were announced last month — good news for Mercedes owners who will eventually want to sell their cars.
In addition to brands that hold their value in general, sometimes individual models also have solid residual values primarily because they are low-volume cars in high demand. Current examples include the Lexus IS F, BMW M3 and Porsche Boxster, said analyst Joe Spina.
Just because a car has been certified by the manufacturer doesn't mean buyers shouldn't do their due diligence. Make sure you get the actual inspection report and review it carefully, and thoroughly test-drive the car to make sure you'll be happy with it. "When it's time to negotiate the price, remember that you will pay more for a CPO vehicle," Spina said, "but it is a small price to pay for peace of mind."