Certified Pre-Owned vs. Extended Warranty
Manufacturer vs. third-party coverage
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When purchasing a used car, buyers often face a decision between opting for a certified pre-owned (CPO) vehicle or purchasing an extended warranty. CPO vehicles and extended warranties both offer repair protection for used cars, but they work very differently.
CPO vehicles come with manufacturer-backed warranties and must pass strict inspections, while extended warranties are optional service contracts typically sold by dealers or third-party providers.
CPO vehicles come with a manufacturer-backed warranty and must pass an inspection.
Jump to insightExtended warranties are optional service contracts that cover repairs after the factory warranty expires.
Jump to insightCPO vehicles are inspected and factory-backed, but typically cost more than regular used cars.
Jump to insightExtended warranties offer flexible protection, but they often include exclusions and have the potential to go unused.
Jump to insightTo guard against scammers, don’t answer robocalls — contact the warranty company directly.
Jump to insightWhat is a certified pre-owned vehicle?
A certified pre-owned vehicle (CPO) is one that’s undergone a rigorous inspection process by the manufacturer or an authorized dealer. Any parts of the vehicle that don’t meet the standards of the manufacturer are repaired or replaced to ensure that the car delivers a certain level of quality.
CPO certification guarantees that the car meets a certain level of quality and performance. These vehicles usually come with a limited bumper-to-bumper warranty. Compared to “regular” used cars, this can be a good way to ensure that there are no issues with the vehicle you’re buying.
CPO cars are a good middle ground between a used car and a new car. In general, CPO vehicles need to be under six years old and have fewer than 80,000 miles. That said, there are no universal standards for CPO vehicles; the process and criteria vary from one manufacturer or dealer to another. For that reason, it’s important to look at what criteria your dealer uses to ensure you’re getting the quality you expect.
Many CPO cars also come with additional benefits, such as roadside assistance, rental car reimbursement or other perks. Some even qualify for lower interest rates when financing.
What is an extended warranty?
An extended warranty is a service contract that covers repair costs on a vehicle after the original manufacturer’s warranty expires. Extended warranties are offered by manufacturers, dealers and third-party providers.
Manufacturer warranties often have a smoother claims process and may be more reliable. Third-party warranties are usually more affordable and give you more flexibility in choosing a repair shop.
Extended warranty coverage usually includes the powertrain and certain additional systems, such as air conditioning or electrical systems. They also cover labor costs in most cases. The specific systems covered vary between warranty providers, and there are almost always exclusions (sometimes a lot of them).
What does an extended warranty cost?
The average cost of an extended warranty is between $600 and $1,000 per year. This can be a good way to ensure you can afford particularly expensive repairs, like a transmission breakdown. “If a $2k to $4k transmission or electronics failure would be financially destabilizing, an extended service contract can substitute for an emergency fund — provided the contract actually covers those components,” said Mauricio Delgado, chief strategy officer at Tricolor Holdings, whose brands include the used car dealer Tricolor Auto.
Pros and cons of certified pre-owned vehicles
Certified pre-owned vehicles strike a middle ground between new and used cars by offering more assurance than standard used cars but without the price tag of a brand-new model. While they’re generally more expensive than regular used cars, they often include a factory-backed warranty and added benefits like inspections and reconditioning. To qualify, most CPO vehicles must typically be under six years old with fewer than 80,000 miles and pass a manufacturer-backed inspection.
It’s common for CPO vehicles to come with a limited bumper-to-bumper warranty, often around 12 months or 12,000 miles. However, coverage varies by brand, so it’s important to read the fine print before buying. CPO programs may also include useful extras like roadside assistance or rental reimbursement, and some vehicles qualify for promotional interest rates when financing.
Keep in mind that only select vehicles meet CPO standards, which can limit your options. You may also be required to use specific dealerships or service centers for warranty-covered repairs.
Certified pre-owned vehicle pros and cons at a glance
Here’s what to keep in mind about CPO vehicles:
Pros
- Cheaper than new cars
- Inspected and reconditioned
- Backed by a manufacturer warranty
- May qualify for lower interest rate
Cons
- More expensive than regular used cars
- Smaller shopping selection
- Warranty terms vary by manufacturer
- May require dealer service for warranty
Pros and cons of extended warranties
Extended warranties can be a smart option if you want to protect your vehicle after the manufacturer’s warranty runs out, especially if you’re not ready to buy a newer car.
Unlike CPO programs, extended warranties are available for a wider range of vehicles and give you more flexibility to choose the provider, coverage level and even your preferred repair shop, in some cases.
Coverage typically includes major components like the powertrain, electrical systems and air conditioning, and many plans also offer extras like roadside assistance or rental reimbursement. These benefits can mirror some of the perks you’d get with a CPO vehicle, but with more customizable terms.
To ensure legitimacy, consumers should purchase extended warranties only through reputable dealerships or established warranty providers and not in response to unsolicited phone calls. ”
Still, extended warranties come with some downsides. Coverage exclusions are common, and if you don’t end up needing repairs, some drivers may feel the plan wasn’t worth the cost.
There’s also a high risk of scams in this space. “Extended warranty robocalls are a well-known source of scams,” said Steven Cegelka, chief operating officer at Ignition Dealer Services, which advises car dealers. “To ensure legitimacy, consumers should purchase extended warranties only through reputable dealerships or established warranty providers and not in response to unsolicited phone calls.”
Extended warranty pros and cons at a glance
Here’s what to keep in mind about extended warranties:
Pros
- Flexible coverage options
- Choice of provider and repair shop
- More customizable perks
Cons
- Most have exclusions
- May never need it
- Lots of illegitimate sellers
Making the right choice: CPO vs. extended warranty
Choosing between a CPO vehicle and a used car with an extended warranty depends on your budget, the condition of the car you're considering and the type of protection you want.
If you're looking for something newer and more reliable, a CPO vehicle is likely the better fit. CPO cars are inspected, reconditioned and backed by the manufacturer, and they come with a limited warranty included. They usually cost more than regular used cars, but the upfront price includes peace-of-mind features like warranty coverage and optional perks such as roadside assistance or rental reimbursement.
If you're shopping for an older used car, an extended warranty can help cover future repairs, especially if you're concerned about big-ticket issues like engine or transmission failure. These plans add flexibility and can be tailored to your needs, but coverage and reliability vary widely by provider. Just make sure to review the contract carefully. Some older or high-mileage vehicles may not qualify at all.
FAQ
Is it better to get a certified pre-owned vehicle?
Yes, certified pre-owned vehicles have several advantages over other used cars: They’ve been inspected and reconditioned; they’re typically newer with lower mileage; they’re backed by a CPO warranty; and they often come with added perks such as roadside assistance.
What is the difference between MaxCare and CPO?
MaxCare is an extended service plan sold by CarMax. It can be added to any car bought from CarMax, whether it’s certified pre-owned or not. MaxCare covers major components, such as the engine, transmission and electronics.
On the other hand, a CPO car is any used vehicle that’s undergone inspection and has been certified to meet a certain standard by the manufacturer. CPO cars usually come with a limited manufacturer-backed warranty, which is separate from MaxCare and can sometimes overlap in coverage.
How long do certified pre-owned warranties last?
The length of certified pre-owned warranties can vary slightly depending on the manufacturer, but for the most part, you can expect 12 months or 12,000 miles of bumper-to-bumper coverage from the date the CPO vehicle was purchased.
What does a certified pre-owned warranty cover?
Coverage varies slightly from one manufacturer to another, but generally, a certified pre-owned warranty includes powertrain coverage and limited bumper-to-bumper coverage. The powertrain includes the engine, transmission and drive axles, while the bumper-to-bumper coverage usually includes steering, suspension, brakes, climate control, electrical systems and more.
Are extended warranties worth the cost?
Extended warranties can be worth the cost, but it really depends on the vehicle, your budget and financial situation. It also depends on how much risk you’re willing to shoulder.
If you’re keeping the car for a while and want to avoid expensive surprise repairs, such as an engine rebuild, the warranty may be worthwhile. However, if you don’t plan to have the car for long and don’t expect major repairs, it may be better to hold off on the extended warranty.
Can you combine a certified pre-owned vehicle with an extended warranty?
Absolutely. If you’re buying a vehicle, you can get the best of both worlds by purchasing a certified pre-owned vehicle and adding an extended warranty to it. This gives you a quality vehicle that’s been thoroughly inspected, along with added protection for key components over the long term.
