CPO vs New: No Brainer? Not Always
It’s a message I’ve preached to friends and family as long as I can remember: When buying a car, don’t buy new, buy certified pre-owned.
In most cases, it really does make sense. Buy a low-mileage one- or two-year-old car, and you’ll not only enjoy substantial savings off a new vehicle, you’ll also in many cases walk out of the dealership with a longer warranty.
In 2010, my wife and I got what we considered a great deal on her certified pre-owned 2008 S80. The car had been a loaner at our local dealership and had approximately 18,000 miles on the odometer. It had stickered for about $48,000 new, when it carried a standard four-year, 50,000-mile Volvo warranty. We paid $28,000, and got a seven-year, 100,000-mile Volvo CPO warranty (calculated from the date the car had been put into service). In our case, the car had only been put into service a year earlier so we effectively had a six-year, 66,000-mile warranty—much better than a new warranty. It came in handy, too, when a rear axle failed at about 70,000 miles and was replaced under warranty, allowing us to avoid an estimated $7,000 bill.
The interior of Patti’s 2008 S80 AWD
But CPOs aren’t always the best buy. It may be that the pre-owned model you’re interested in buying is in high demand, keeping dealer prices high. Or, if you’re financing your purchase, the manufacturer may be offering such attractive financing on new cars that buying new results in a more favorable monthly payment.
That’s what happened with me 16 years ago when I brought a new 2003 GMC Yukon XL Denali. I’d originally been looking at a low-mileage 2002 model, but GMC was offering 0% financing on new vehicles at the time. The result was that there was no substantial difference in the monthly cost of the new truck versus the year-old one. It was an easy decision to go new.
More recently, I was surprised to find myself placing an order for a new 2019 XC90 from my local Volvo dealership after having every intention of buying a one- or two-year old CPO. My search had been challenging because I was determined that my SUV would have Volvo’s four-corner adaptive air suspension, and a very small minority of XC90s are delivered with that option. But finally, my dealer called to tell me he had a 2018 with just over 12,000 miles on it, in the exterior color black that I preferred. Success!
Or not. The dealer was asking $59,600 for the vehicle. I was certain the dealer would have plenty of room to come down from that advertised price, but was surprised when our long-time salesman gave us his bottom-line number: $58,475. Not interested. But there weren’t any other used models properly equipped nearby. I was willing to fly somewhere else to bring one home, but most of the pricing I was seeing elsewhere wasn’t that much better than what my dealer was offering.
My salesman quipped that he could always price out a new one for me, and without too much thinking about it, I said go ahead.
As it turned out, a 2019 model equipped virtually identically to the 2018 would have a sticker price of $67,790. (The differences: I would not being ordering the upgraded 21” wheels that I didn’t want, which were an $800 upcharge, but I would get the newly standard leather-wrapped dash, which was roughly a $1,000 option in prior years. Plus I ticked the box on the Advanced package, which included the graphical head-up display, which alone was also worth about $1,000 and which I really did want.) More importantly, the invoice price was $63,688. Now, back out the $1,750 manufacturer’s discount that was being offered that month, the $1,000 Volvo customer loyalty discount that was also available to us, AND the $750 discount offered to members of the Volvo Club of America via Volvo’s so-called A Plan*, and the “invoice” price came down to $60,188. Which my dealer was willing to offer. That represented just $1,713 over the cost of the year-older vehicle with 12,000 miles on it. That wasn’t enough of a gap, for me, to justify taking the older vehicle—even though it would have come with a longer warranty.
I’ll concede that others may have found the used vehicle a better value owing to the longer warranty. Reasonable people can disagree. But the larger point is that if you’re counting on saving 20% off the cost of a new vehicle by buying a one-year-old certified pre-owned (or the 40% my wife and I saved on her S80), it’s not always going to happen. And the narrower the gap, the harder the decision becomes. In my case, looking at CPO prices all over the country, it looked like going to even a two- or three-year old XC90 would not have saved me 20% off the cost of a new vehicle from my dealer.
For Volvo enthusiasts, the new vs. CPO decision became even harder in November 2018 when Volvo revamped its CPO warranty program. Now, the standard CPO warranty isn’t 84-months (seven years) from in-service date, or 100,000 miles, but five years from the in-service date with unlimited miles. (Area dealers advertise that you can pay up to extend the warranty out as far as eight years.)
My general advice, for Volvos and many other brands, is that yes, you should always consider going the CPO route. But you should also always compare not with the sticker price on a new vehicle, but what you would actually pay for a new one after negotiating hard to find your dealer’s bottom-line price. Sometimes, you may be surprised.
* A-Plan by Volvo offers a way for qualified customers to buy or lease a new Volvo at the same pre-negotiated price available to Volvo employees (typically invoice price, less some –Plan discount that can vary by model and time of offer, plus any other manufacturer’s offers available at that time). A-Plan by Volvo is available to members of the Volvo Club of America after they have been members of the club for at least one year. It also is open to members of various affiliate organizations that have partnered with Volvo.