Dealer Certified Pre-Owened Cars

A leading industry publication recently published an article lauding the success of “certified pre-owned” programs of some large dealer groups. While some dealers may have great success with CPO programs, there are dangers inherent in any dealer-sponsored CPO plan. 

Consumers view a “certified” pre-owned vehicle as something more than just a run of the mill used car. Customers disappointed by their certified used cars are apt to seek the advice of legal counsel. And plaintiffs’ attorneys have developed lawsuits based upon the theory that a used car certification is, in itself, a representation of quality that, if not true, justifies not only a recovery for compensatory damages but punitive damages for the fraudulent misrepresentation inherent in the certification claim. Because the term “certified” has become such a popular subject for plaintiffs’ attorneys, dealers should be careful whenever they set up their own programs.

What’s it mean? A dealer’s program should be clear what the term “certified” means. 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 meets some objective standards of quality?

Has the certified used car been inspected? A dealer should be sure that each certified used car in the dealership’s inventory meets the established standards. 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’s certification program will quickly lose its meaning if the standards are not carefully and continuously applied.

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 in certified used cars.

Is a solid warranty provided with the certified used car? Any consumer expects the dealer to stand behind its certified used cars. A certified car must 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 driven as demonstrators. A vehicle may well pass a certification, but after 3,000 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.