Certified Used Cars – A Primer

Team VADA eViews

The Digital Newsletter of Your Virginia Automobile Dealers Association

July 2008

 

 

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Certified used car programs were developed by a few manufacturers in the era of heavy consumer leasing of vehicles. The programs were a way for dealers to highlight the availability of newer, lower mileage vehicles that were generally lease turn-ins. 

 

Consumers view certification as an indication of a “special” used car, and they responded well to certified programs. Because of this success, other vehicle manufacturers entered the certified used car arena, then some extended service agreement companies started programs to “certify” used cars as a means of helping dealers sell vehicles covered by warranties underwritten by those companies, and then some dealers started their own programs to take advantage of the popular label.

 

Unfortunately, because a “certified” used car is seen by consumers as something more than just a run of the mill used vehicle available for sale, customers who have been disappointed by their certified used cars have often sought legal counsel. And plaintiff attorneys have developed lawsuits based upon the theory that a used car “certification” is, in itself, a representation of special beneficial characteristics that, if not true, justifies a recovery for the plaintiff. Because the term “certified” has become such a popular subject for plaintiff attorneys, dealers should be careful how they apply the label to the vehicles they sell.

 

Certified? 
The term “certified” can have different meanings from dealer to dealer. To consumers, it clearly means that the certified vehicle meets exacting standards and is more reliable than a run of the mill used car. If the vehicle is certified pursuant to a manufacturer’s program, that will probably meet the expectations of the customer because of the standards required to certify cars under such programs. But if a vehicle is not certified pursuant to a manufacturer’s program, what does it really mean? If it is certified to the standards of an extended service contract company that is providing the warranty with a vehicle that meets reasonable standards, it is probably also an appropriate use of the term. However, if a dealer does its own “certification” program, it must be sure that that the term means something. Has the dealer developed standards that a certified vehicle must meet? Do those standards provide significant benefits to the customer by ensuring that the vehicle is in good mechanical condition, is free from serious body damage or flood damage, and has been used under appropriate circumstances?  

 

Has the certified used car been inspected? 
Because certified used cars should meet a list of standards, a dealer should be sure that each certified used car in the dealership’s inventory has met those standards. A dealer must be sure that its used car department is utilizing the certification program properly. Management should spot check the internal records of the used car department to ensure that vehicles certified have in fact been inspected. Records of used car mechanics or service department technicians should be spot checked to be sure sufficient time has been spent to do the certification. There is a lot of room for error when a trade in, for example, travels from the new car department to the used car department to the service department back to the used car department. A dealership should carefully protect the valuable label, “certified”.

 

Are problems repaired? 
Customers presume that certified used cars are free of mechanical problems. In addition to being sure that vehicles are inspected, a dealer should ensure that problems are remedied when used cars are labeled “certified”.

 

Is a solid warranty provided with the certified used car? 
Under manufacturer programs there are often warranties provided with coverage up to 100,000 miles. If a certified used car is not part of a manufacturer’s certified program, does it have a meaningful warranty?

 

Has the car sustained serious body damage or flood damage? 
We are not talking here about dents and dings or a fender that’s been crumpled. We’re talking about a serious accident. We’re talking about real flood damage. Customers assume that cars that have been certified do not have these types of problems. Pull a vehicle history report on each vehicle before certifying it. Put it on a rack to see if there is any evidence of this kind of damage in the undercarriage. If the vehicle sustained this kind of damage, do not certify it.

 

Has the certification “run out”? 
This is a problem in dealerships where used cars are used as demonstrators. A vehicle may well pass a certification, but after 5,000 miles going back and forth to the beach all summer that popular convertible may have problems that were not apparent when the certification inspection took place. After the passage of time or accumulation of miles, vehicles should be recertified. 

 

Team VADA eViews

The Digital Newsletter of Your Virginia Automobile Dealers Association

July 2008

 

 

---

---

 

Certified used car programs were developed by a few manufacturers in the era of heavy consumer leasing of vehicles. The programs were a way for dealers to highlight the availability of newer, lower mileage vehicles that were generally lease turn-ins. 

 

Consumers view certification as an indication of a “special” used car, and they responded well to certified programs. Because of this success, other vehicle manufacturers entered the certified used car arena, then some extended service agreement companies started programs to “certify” used cars as a means of helping dealers sell vehicles covered by warranties underwritten by those companies, and then some dealers started their own programs to take advantage of the popular label.

 

Unfortunately, because a “certified” used car is seen by consumers as something more than just a run of the mill used vehicle available for sale, customers who have been disappointed by their certified used cars have often sought legal counsel. And plaintiff attorneys have developed lawsuits based upon the theory that a used car “certification” is, in itself, a representation of special beneficial characteristics that, if not true, justifies a recovery for the plaintiff. Because the term “certified” has become such a popular subject for plaintiff attorneys, dealers should be careful how they apply the label to the vehicles they sell.

 

Certified? 
The term “certified” can have different meanings from dealer to dealer. To consumers, it clearly means that the certified vehicle meets exacting standards and is more reliable than a run of the mill used car. If the vehicle is certified pursuant to a manufacturer’s program, that will probably meet the expectations of the customer because of the standards required to certify cars under such programs. But if a vehicle is not certified pursuant to a manufacturer’s program, what does it really mean? If it is certified to the standards of an extended service contract company that is providing the warranty with a vehicle that meets reasonable standards, it is probably also an appropriate use of the term. However, if a dealer does its own “certification” program, it must be sure that that the term means something. Has the dealer developed standards that a certified vehicle must meet? Do those standards provide significant benefits to the customer by ensuring that the vehicle is in good mechanical condition, is free from serious body damage or flood damage, and has been used under appropriate circumstances?  

 

Has the certified used car been inspected? 
Because certified used cars should meet a list of standards, a dealer should be sure that each certified used car in the dealership’s inventory has met those standards. A dealer must be sure that its used car department is utilizing the certification program properly. Management should spot check the internal records of the used car department to ensure that vehicles certified have in fact been inspected. Records of used car mechanics or service department technicians should be spot checked to be sure sufficient time has been spent to do the certification. There is a lot of room for error when a trade in, for example, travels from the new car department to the used car department to the service department back to the used car department. A dealership should carefully protect the valuable label, “certified”.

 

Are problems repaired? 
Customers presume that certified used cars are free of mechanical problems. In addition to being sure that vehicles are inspected, a dealer should ensure that problems are remedied when used cars are labeled “certified”.

 

Is a solid warranty provided with the certified used car? 
Under manufacturer programs there are often warranties provided with coverage up to 100,000 miles. If a certified used car is not part of a manufacturer’s certified program, does it have a meaningful warranty?

 

Has the car sustained serious body damage or flood damage? 
We are not talking here about dents and dings or a fender that’s been crumpled. We’re talking about a serious accident. We’re talking about real flood damage. Customers assume that cars that have been certified do not have these types of problems. Pull a vehicle history report on each vehicle before certifying it. Put it on a rack to see if there is any evidence of this kind of damage in the undercarriage. If the vehicle sustained this kind of damage, do not certify it.

 

Has the certification “run out”? 
This is a problem in dealerships where used cars are used as demonstrators. A vehicle may well pass a certification, but after 5,000 miles going back and forth to the beach all summer that popular convertible may have problems that were not apparent when the certification inspection took place. After the passage of time or accumulation of miles, vehicles should be recertified.