5 things to know about certified used cars

@Money June 1, 2012: 6:21 AM ET
Sales of certified used cars have jumped as car buyers look for quality pre-owned autos.

Sales of certified used cars have jumped as car buyers look for quality pre-owned autos.

(MONEY Magazine) -- Shopping for a used car? Buying a certified pre-owned car can certainly give you some peace of mind. But just because it's "certified" doesn't mean it's problem-free.

Here are five things you need to know before walking onto the used car lot.

1. Certification can offer peace of mind

Sales of certified pre-owned (CPO) autos have risen 35% since 2002, while used car sales overall fell 10%, per Edmunds.com.

Quality assurance is a big selling point: CPOs are one- to five-year-old cars that have been inspected, fixed up, and newly warrantied. They're priced $750 to $3,000 above noncertified models.

"But if you don't want the hassle of dealing with repairs, it's worth the added cost," says Edmunds analyst Jessica Caldwell.

2. But not all programs offer the same protection

CPOs that are "factory-certified" are backed by the manufacturer and undergo a 100-plus point inspection.

"Dealer-certified" cars usually aren't inspected as rigorously, says Alec Gutierrez of Kelley Blue Book. "And if the vehicle needs repairs, it has to be taken to that dealership." While it may cost you several hundred more, factory-certified is a better deal, he says.

3. Doing some of your own homework can pay off

Even factory-certified vehicles aren't necessarily problem-free, says consumer protection lawyer Daniel Blinn, who reports seeing an increase in CPO complaints. He suggests reviewing service records carefully.

And since accident repairs paid for without insurance don't always show up on Carfax reports, get an independent inspection (about $100).

4. The savings over a new car may not be as large as you expect

Owing to high demand in the last year, used autos are retaining more value than ever. And to push sales, dealers are saving the best financing for new cars.

The result? A 2009 certified Nissan Versa purchased with a five-year loan is only $26 a month cheaper than a 2012 model, Edmunds found.

Before choosing a CPO, use an online calculator to see how the payments stack up against today's version.

5. Dealers won't start with their best rate

"An outside source of financing will usually offer you a better rate," says Edmunds analyst Joe Spina.

Recently, for example, Nissan dealers in L.A. advertised 3.94% on five-year CPO loans, while Pentagon Federal Credit Union offered 1.99% for all cars.

Get pre-approved for the best APR you can, then see if the dealer -- who makes money on financing -- will beat it.

Dealer won't budge? Press for money off the car price if you take their loan.

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