Certified Pre-Owned Cars: A True Gem? Or Buyer Beware!
By Steven A. Simons and Robert C. Bichler

Sidebar Newletter Vol1 Issue2

Have you ever wondered about the so-called “Certified Pre-Owned Vehicle Programs” that are being touted so frequently on television, radio and in the newspapers? You’ve probable heard about these certified vehicles and the rigorous selection and inspection processes they undergo. Maybe you’ve thought you’d enjoy the convenience and security of owning such a vehicle.

Before you decide, the Sidebar would like to take you on two separate journeys. First we will briskly explore the mythical “Land of Make Believe” and then let you have a close-up view of the “Real World”. Then it will be up to you to decide.

In the Land of Make Believe the “Certified Pre-Owned” program is offered by most manufactures and dealers. Ads abound extolling the high standards required for a vehicle to be selected as “Certified.” Teams of highly-trained technicians “pour over” every inch of these pre-owned beauties.

According to the ads you, the buyer, will be approaching Nirvana in purchasing the closest thing there is to a brand new car. All of the amenities, quality and reliability (not to mention snob-appeal) that the world-wide name of the manufacturer conveys will be yours. After all - not every pre-owned vehicle is eligible for certification! Good heavens, no. The manufacturers carefully select the crème-de-la-crème, late-model, low-mileage vehicles that are to die for. Yes, indeed, only the “Best of the Best” make the final cut!

Gone are the headaches, worries and hassles involved in buying someone else’s problems. When you drive off in your certified pre-owned vehicle you can expect an “outstanding ownership experience”. After all, that is why you buy a certified pre-owned vehicle - - - right? And isn’t that what you truly deserve?

Further, if somehow something slips by the manufacturer’s painstakingly thorough inspection process (in which a hundred or more components have been scrutinized by a “team of experts”), the manufacturer will back the warranty with its worldwide reputation. Even if, by some fluke, a malfunction later appears in your certified pre-owned precious, the manufacturer claims, “We’ve got you covered!” with their Certified Pre-Owned Warranty. In most cases this free warranty is for at least 12 additional months or 12,000 additional miles, whichever comes first.

So go ahead, sit back, sign on the dotted line, and enjoy….

The Sidebar has met some swashbuckling souls who traveled to the Land of Make Believe and, although scathed, lived to tell about it; they returned sadder, poorer and wiser. What they discovered was that the “Certified Pre-Owned” program was only the latest marketing gimmick of the automotive industry, designed to trap the unwary car buyer into buying some of their “pre-owned” disasters.

Where do these pre-owned vehicles that are too good to be true actually come from? Sometimes they come from auto auctions (for example, as repossessions or lease turn-in vehicles) that sell the scariest buckets of bolts in the business; they are sold to dealers only, as-is and without any inspection or trustworthy disclosures. Or they may come from a customer trade-in - the customer may be getting rid of his “headache” vehicle, with its endless repairs, which soon becomes your certified pre-owned dream car. So much for the manufacturer’s “rigorous selection process”. The manufacturer has nothing whatever to do with the selection of these cars; they are chosen by the dealers.

And the cars that don’t make it through the certification process are really scary. The rejects are often wholesaled or dispatched back to the dreaded auction from whence they came.

While it is true that in most manufacturers’ “Certified Pre-Owned” programs a car must pass certain “requirements” to be eligible as a certified vehicle, these so-called requirements are extraordinarily lenient. They include such things as: the car can’t be a flood vehicle (for example, can’t have been fished out of the ocean); can’t have frame damage; can’t be adjudicated by an insurance company to be a total loss; and can’t be a “lemon law return” (car that was repurchased by the manufacturer from a customer under the Lemon Law because it was proven to be defective).

Moreover, even some of the requirements that are mentioned are not rigorously enforced. For example, the customer may later find out to his horror that his certified car had pre-existing, undisclosed frame and/or body damage. But in litigation, the manufacturer’s and dealer’s attorneys will argue that it wasn’t really frame damage even it there was $15,000 of front-end collision damage - they will say that it was primarily “cosmetic” damage and not a real cause of concern. Yes, there are a lot of after-market parts in there, but who is going to really notice if you don’t look too closely and don’t bother to open the hood? Or they’ll say, “You think the vehicle is unsafe? Then why are you still driving it?” Or they will claim, with all sincerity, “We didn’t see it” or “It wasn’t there when it left the showroom.” The implication is that you, the naïve customer, caused the damage and are lying about it. These erstwhile customer service representatives, who are ostensibly employed to help you, now assert that you are attempting to defraud the dealer.

Another area of possible exclusion, which proves more nebulous, involves the prior warranty repair history of the vehicle. The manufacturer may state that the vehicle must have a clean prior history. What does this mean, exactly? Does the manufacturer or dealer check all of the prior warranty repair orders before certification? Sidebar believes, not likely. But they should. Otherwise, you could be purchasing a vehicle that had approximately thirty repair orders for malfunctioning brakes, engine stalling, transmission or other power train failure, suspension defects, or a host of other serious problems; in other words, a de facto (or real) Lemon.

As to the certification inspections, is the manufacturer conducting them? Or is the manufacturer even overseeing the inspections? Don’t kid yourself; the manufacturers are nowhere around.

How about the painstakingly thorough inspection process by a “team of experts”? Who are these experts? The inspections are typically performed by a self-taught dealer technician who is often paid a flat fee for each inspection, no matter how cursory. In other words, the certified inspector has no incentive to do a thorough job as he is paid a set fee whether he spends 15 minutes or a full two hours. When the vehicle is looked over, does it really get a thorough inspection? Or does it get a quick once over? In one case that Sidebar is aware of the certified inspector clearly missed extensive collision damage in a used Infiniti and certified the vehicle, even though he was given two hours pay to perform a thorough inspection. (By the way, this was a car that the dealer purchased from the auction.) After the customer complained and returned the vehicle to the dealer, the inspector looked at the car again and this time admitted to seeing the collision damage. What was his explanation for this discrepancy? He had none.

In a recent deposition in a case involving a pre-owned certified BMW, the dealer’s technician who performed the certification inspection was asked, “What happens when it (the vehicle) doesn’t conform to the guidelines?” His response, though refreshingly honest, was nevertheless shocking to hear: “…If they want CPO (certified, pre-owned) and the car - the repairs they’re requesting are not complete enough to fulfill the guidelines, at that point there tends to be some static and friction within the company and haggling and so forth, and it’s actually created quite a bit of animosity between departments because in general used car departments like to have cars very cheap put on the front line where they can make a big prof - you know, moneys, and in the service department, you know, we like them to buy everything under the sun, make the car brand new. And so there is always some bickering back and forth.”

Finally, what happens when your 12-month or 12,000 miles, whichever comes first, warranty expires and you are still forced to return your certified vehicle to the dealer for the same malfunction that occurs over and over again, like a bad dream? Will the dealer say you are out of warranty? You might get a good-will extension of the warranty and you might not. In either case, you are still stuck with a lemon.

Indeed, the so-called pre-owned certification programs being so heavily promoted by various manufacturers and dealers in California have resulted in so many complaints that the state legislature is considering a new law to define what a “certified” vehicle actually is, per a recent (March 17, 2004) Los Angeles Times article entitled, “Mint? No, it may be lemon”.

So, after these two journeys, the choice is yours. However, if you already happened to take the wrong turn and were damaged, there still may be hope. Call Brennan, Wiener & Simons. Perhaps they can help.