Toyota Venza
In today's economic twilight zone, a used car could cost more than an equivalent new one.
Consider that a popularly equipped 2011 Toyota Venza has a retail list price that is $755 lower than an equivalent 2009 model in top condition, according to data from Black Book in Gainsville, Ga., which has been tracking and publishing vehicle valuations for 56 years. Likewise, a 2011 Audi Q5 has a list price $620 lower than that of a 2009 model.
The reason is simple: supply and demand. "The value of used cars is up quite a bit since 2008," says Eric Watson, group manager of remarketing for Mazda North America. "There is more demand for high-quality used cars, and the reduced supply has definitely caused prices to increase."
Industry experts forecast that reduced production in recent and coming years will squeeze late-model used-vehicle inventories at least through 2013. That will create some interesting dynamics for certified pre-owned programs, which have received intense focus from automakers lately. About 1.6 million CPO vehicles are sold each year, Watson says.
Bing: CPO Deals
CPO Versus Used
CPO programs vary by manufacturer in coverage and cost, but they all share some things in common: The vehicles sold under CPO programs undergo a comprehensive, hands-on inspection by a qualified technician; they are reconditioned to a predetermined set of standards; and they include a warranty or extended service contract that covers key components.
Mazda revamped its CPO program last July and has seen sales jump 300 percent, Watson says. The company's comprehensive CPO warranty now covers 12 months/12,000 miles, versus three months/3,000 miles previously. Powertrain-only coverage is seven years/100,000 miles.
The warranty is what drives the price difference between a CPO vehicle and a noncertified used car, experts say. CPO vehicles generally cost between $800 and $1,500 more than noncertified used equivalents. The premium for CPO luxury vehicles is even higher, up to $3,000 in some cases.
The added cost for CPO models, coupled with higher financing rates compared with new cars, can sometimes push their price close to that of an equivalent new model — or in some cases, even beyond.
"So when you look beyond the advertised price to what you can negotiate, and then factor in the financing, you often find there's not as big a difference between CPO and new as you originally might have thought," says Jeff Bartlett, Consumer Reports' online deputy autos editor.
That's particularly true in this environment of inflated used-car prices — even more so when incentives on new cars are factored in. A 2011 Toyota Tundra Double Cab with 2-wheel drive and a V8 engine could cost up to $3,141 less than a 2009 equivalent in top condition, thanks to a $3,000 cash incentive. And even without the incentive, the new Tundra would still be cheaper than the used one.
Read: Consumer Reports' 2011 Top Picks
Better Off Buying New
Automakers don't release CPO-specific data, nor are such data tracked by independent market-research firms. So to find out which CPO models represent the worst value relative to their equivalent new models, we had Black Book crunch some numbers.
The company compared retail prices of all 2011 models with those of equivalent 2009 models listed as "extra clean." The 10 vehicles with the smallest price difference between the 2011 and 2009 models made our list. As it turns out, four of the 2009 models cost more than their 2011 equivalent, which is a true testament to how topsy-turvy the car market is right now.
We also looked at cost of ownership as calculated by Vincentric, a research firm based in Bingham Farms, Mich. Vincentric combines Black Book pricing data with insurance, fuel, maintenance, repair, depreciation, interest and other projected costs to come up with a total cost of ownership over five years for both new and CPO vehicles. Once again, we compared 2009 with equivalent 2011 models.
All except one model on our list shows higher ownership costs over five years for the 2009 model than for the 2011 model. That's largely due to added depreciation, repairs and interest costs on the older cars. (Vincentric factors in warranty coverage — both new and CPO — when calculating repair and maintenance costs.)
A few things to keep in mind with this ranking: The models on the list reflect the most popular configurations for their particular trim levels, according to Black Book. We've listed incentives available for each model, as compiled by Consumer Reports, but did not factor them into the ranking calculation, because not everyone is eligible for them. Pricing data and incentives are current as of mid-February 2011. They represent a snapshot in time and will change.
The data do not reflect transaction prices; there is no readily available source for that information. So just because the 2009 Toyota Venza has a retail price listed as $755 higher than its 2011 equivalent, for example, doesn't mean that's what consumers are paying.
What the data do show is the possibility that, when purchased under CPO programs, some used vehicles in high demand might represent a poor value relative to comparable new ones. And especially with reliable cars, paying extra money for the extended warranty might not make sense, Bartlett says.
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