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Certification Eases Used-Car Buying

Automakers push the benefits of the previously owned

The number of certified "pre-owned" vehicles continues to grow as a market force, tempting shoppers who worry about potential problems with their used-car purchase. Used cars are a gamble. Certification programs, operated by automakers and their dealers, can provide a welcome—if somewhat costly—"safety net" to reduce that risk.

Viability

Certification programs have been around for years, led by premium brands. Mercedes-Benz began in 1989, followed by Porsche and Lexus. In 2003, 38 percent of late-model used cars were certified, according to J.D. Power, up from 28 percent in 2000. "The good news is, the volume is growing," said Tom Kontos, vice-president of industry relations and analytical services at ADESA, an auction chain. Total volume could even approach two million in 2004, versus last year's 1.3 million.

The industry "has been in and out" of certification, said Marv Ingram, national certified pre-owned/fleet manager for Lexus. "Consumers were very confused about certification." Now, "everybody's in it to stay."

Certified "sales are up across the board this year," said Jeffrey Heichel, GM's director of used vehicle activities, prompted by "our customers' desire for a worry-free used-vehicle purchase." At DaimlerChrysler, sales are "chasing" 100,000 for the year, said Ray Fisher, vice-president for fleet and remarketing. "The certified industry is pretty strong." Ups and downs are "based on the aggressiveness of the new-car deals."

"Awareness of it continues to increase," said Art Spinella, president of CNW Marketing. Of those who know about certified, half will look at a certified vehicle when it's time to shop. Only 20 percent know they can get one. Three years ago, the figure was 11 percent. J.D. Power surveys suggest that about half of used-car shoppers were aware of certification, according to senior director Scott Weitzman. But "there's still a lot of confusion from the consumer about who is doing the certifying," Weitzman said at the National Remarketing Conference held by "Auto Remarketing" magazine.

GM's Heichel notes that more customers "are now specifically looking for certified used vehicles, especially on the Web." J.D. Power's 2004 Autoshopper.com study shows "a growing percentage of used vehicle buyers are now using the Internet."

What Qualifies?

Certification programs vary, but they follow a similar pattern. Eligible vehicles must be no more than a few years old, with a specific maximum number of miles on the odometer. Each gets an inspection that covers a specified number of points. Warranties range from three months to several years, but there may be a limit to total mileage. Saturn is one of the few automakers that certifies other brands as well as its own.

Lexus, for instance, certifies cars that are up to five model-years old, with no more than 60,000 miles. Infiniti revamped its program in May 2004. Dealers "wanted the coverage simplified," said Greg Ramsey, senior manager for Infiniti sales and operations, to clarify which vehicles qualified. Now, the car must be no more than five model-years away from new, with less than 70,000 miles. Inspection has grown from 128 points to 142. To qualify for the GM Certified Used Vehicle program, a vehicle may be up to five years old (plus the current model year), with less than 60,000 miles. It goes through a 110-plus-point inspection/reconditioning process.

Chrysler is in a "little bit different situation than the other manufacturers," Fisher said, because only five-star dealers participate. Customers are "more likely to be treated" as new-car buyers at a five-star store. Certified vehicles must have 65,000 miles or less, pass a 125-point inspection, and be no more than five model-years removed from the current year.

Just about any kind of vehicle might qualify. "Mostly, luxury brands cluster at the top," said J.D. Power's Weitzman. Lexus is the leader, followed by Jaguar and Mercedes-Benz. Among mainstream models, "standard sedans tend to be the mainstay," Spinella said, including the Camry, Accord, Taurus, and Impala. They tend to attract "an older audience—55 plus." These buyers want a new-car warranty without a new-car price.

Top Sellers

"Generally, our strongest certified used brands are also our strongest new vehicle sales brands," GM's Heichel said, "with Chevrolet setting the pace," led by the Silverado.

The "most popular by a long shot is the Jeep Grand Cherokee," said Keith Helfridge, Chrysler's director of vehicle remarketing. Upper-end minivans and the Dodge Intrepid sedan also are popular as certified vehicles.

Peace of mind doesn't come cheaply. Those who bought a certified luxury car had said they would be willing to pay $1,594 extra for a certified model, according to J.D. Power, while non-luxury buyers would pay $1,029. What the luxury buyers actually paid was a $2,838 premium. Non-luxury buyers paid $1,007 extra. For many late-model vehicles (especially year-olds)—notably import-brand luxury models known to hold their value well—the price of a certified used model may come surprisingly close to the price of a new one. So, before accepting any price for a late-model used vehicle, it would be prudent to check the price of a comparable new model. If the difference is substantial, take the used one, but if not, consider the new model.

Naturally, dealers and automakers benefit from certification. "Economists have been very upfront and vocal about stressing the value of certified vehicles," Kontos said at the National Remarketing Conference. It's "helping generate demand for used cars [and] it's a win-win situation all around."