When buying a used car, a certified pre-owned vehicle can give buyers peace of mind. Such vehicles have been factory-certified by the dealership and usually have low miles and a clean history. Forbes says this is the year for buying a CPO car, but what’s the reasoning behind this?
Certified pre-owned cars are the cream of the crop for used cars
2021 was a challenging year for the automotive industry, especially following 2020. Now that the industry is trying to move past the semiconductor chip shortage, Forbes says 2022 is the year to buy a certified pre-owned (CPO) vehicle. While there are plenty of used cars on the market, the certified pre-owned options have the best of both worlds. These vehicles have already gone through the initial depreciation after being purchased from new, but still, probably have enough warranty left.
“All things being equal, this is the best year to buy a CPO unit, because it’s going to be more expensive and more difficult going forward, in terms of payment, and in terms of getting the vehicle.”Jonathan Smoke | Cox Automotive
Forbes says these “nearly new” used cars have to go through a thorough inspection before being labeled as such. In addition, essential repairs have been done to get the vehicles road-ready. The certified pre-owned vehicle also receives a factory-backed warranty to give people peace of mind when buying a used car.
The price of certified pre-owned vehicles is expected to go up next year
The supply of off-lease vehicles is expected to decline in 2023. Since off-lease vehicles are a significant supplier of used vehicles that are eventually sold off as certified pre-owned, that means this year is an excellent year to buy. Forbes says that the average lease runs for three years. A significant amount of the leased cars behind returned in 2022 are from leases written pre-pandemic. In the future, leases written in 2023 and beyond will consider all of the changes the pandemic brought.
In addition to this, Experian Automotive says that leasing vehicles has gone out of style in the last three years. During quarter three of 2019, 30.5% of cars were leased. That number fell to 24% in the last quarter of 2021. One of the significant things that impacted this was lease incentives. These were all but cut out once the pandemic started impacting the industry. “Interest rates are low overall, analysts said, and that makes it cheaper to offer cut-rate loans instead of discount leases,” Forbes noted. While buyers still have the upper hand, it is the year to buy a certified pre-owned car.
The revolution of the three-year-old vehicle starts in 2022
With all of the pandemic-related issues factored in, Cox Automotive suggests that 15% fewer leases will expire next year. That’s 3.9 million in 2022 and 3.3 million in 2023, making it harder to come across a good deal on a certified pre-owned vehicle. Pat Ryan, CEO of CoPilot, said that 2022 is the year for off-lease. “Off-lease cars tend to drive the heart of the three-year-old used-car market,” Ryan said to Forbes in another interview.
If you are in the market for a certified pre-owned vehicle, Ryan says the prices could drop later in the year. By that time, new cars have been able to ramp up production, and that means more used and CPO vehicles will be available. Once the new car inventory levels out, people can look at getting into a new car and out of the current car. Then other people can jump into a certified pre-owned car.
If you plan on looking for a certified pre-owned vehicle sometime this year, keep an eye out for good deals. Before 2023 hits, try to get into a reasonably priced and safe vehicle prior to prices go up.