Is there a Sweet Spot for age of CPOs?
07-09-18, 08:57 PM
#1
Intermediate
Thread Starter
Is there a Sweet Spot for age of CPOs?
After owning cars for a minimum of 10 years I’m considering a “new” every two plan. Buy a CPO, sell it in 2 years, and get another CPO. I’ll try to find numbers and build a spreadsheet but I can’t be the first to ask this question. Without analysis my gut says buy one that’s 2 years old, keep it for 2 years, rinse and repeat. The depreciation curve is probably flatter between 3 and 5 though it won’t feel quite as New-ish.
Another thought - if I want to own cars that don’t go beyond 4 years, perhaps I don’t need them to be certified.
Thoughts?
Another thought - if I want to own cars that don’t go beyond 4 years, perhaps I don’t need them to be certified.
Thoughts?
07-10-18, 04:30 AM
#2
You'll probably get more responses if this was moved to the "Car Chat" forum.
07-10-18, 04:49 AM
#3
Lead Lap
One and two year old CPO vehicles are among the worst buys available. There is high demand for those cars because many buyers perceive that they are buying a car that is "almost new" at a significantly discounted price. At the same time, supply of 1 and 2 year old CPO vehicles is low because not that many have yet come back to dealerships as trade-ins or lease returns. The result of the high demand and low supply is highly inflated prices.
And, when you add about $2500 to the price for the CPO warranty and when you consider the high level of discounting available on brand new vehicles, the result is that a brand new car can be bought for a price that is not that much more than the price of the 1 or 2 year old CPO vehicle. A year and a half ago, I was monitoring the CPO market at a couple of dealerships, and I found that, at those dealers, the asking prices for 1 and 2 year old CPO vehicles were actually at the same level or, in a few cases, higher than the prices for which a brand new and similarly equipped vehicle could have been bought. And, because many potential buyers are not aware of just how much discounting is available on brand new cars, the dealers know that, eventually, someone will come along and pay an inflated price for the 1 and 2 year old CPO vehicles. Thus, they are not willing to do significant discounting on those CPO vehicles.
Further, since the CPO warranty is not transferable, if you buy a CPO vehicle, its re-sale value will not be any higher than that of a similarly equipped non-CPO vehicle. So, the premium paid for the CPO vehicle is completely lost.
For buyers who are interested in a CPO vehicle, buying a 3 or 4 year old CPO vehicle makes more financial sense than buying a 1 or 2 year old CPO vehicle. The supply of 3 and 4 year old CPO vehicles is much greater and, thus, the pricing is significantly lower than for 1 and 2 year old CPO vehicles. Also, since the there is less left of the factory warranty for the 3 and 4 year old CPO vehicles, the premium paid for the CPO warranty on a 3 or 4 year old CPO vehicle comes with more potential benefit than it does for a 1 or 2 year old CPO vehicle.
And, when you add about $2500 to the price for the CPO warranty and when you consider the high level of discounting available on brand new vehicles, the result is that a brand new car can be bought for a price that is not that much more than the price of the 1 or 2 year old CPO vehicle. A year and a half ago, I was monitoring the CPO market at a couple of dealerships, and I found that, at those dealers, the asking prices for 1 and 2 year old CPO vehicles were actually at the same level or, in a few cases, higher than the prices for which a brand new and similarly equipped vehicle could have been bought. And, because many potential buyers are not aware of just how much discounting is available on brand new cars, the dealers know that, eventually, someone will come along and pay an inflated price for the 1 and 2 year old CPO vehicles. Thus, they are not willing to do significant discounting on those CPO vehicles.
Further, since the CPO warranty is not transferable, if you buy a CPO vehicle, its re-sale value will not be any higher than that of a similarly equipped non-CPO vehicle. So, the premium paid for the CPO vehicle is completely lost.
For buyers who are interested in a CPO vehicle, buying a 3 or 4 year old CPO vehicle makes more financial sense than buying a 1 or 2 year old CPO vehicle. The supply of 3 and 4 year old CPO vehicles is much greater and, thus, the pricing is significantly lower than for 1 and 2 year old CPO vehicles. Also, since the there is less left of the factory warranty for the 3 and 4 year old CPO vehicles, the premium paid for the CPO warranty on a 3 or 4 year old CPO vehicle comes with more potential benefit than it does for a 1 or 2 year old CPO vehicle.
07-10-18, 07:11 AM
#4
Intermediate
Thread Starter
07-10-18, 07:16 AM
#5
Intermediate
Thread Starter
One and two year old CPO vehicles are among the worst buys available. There is high demand for those cars because many buyers perceive that they are buying a car that is "almost new" at a significantly discounted price. At the same time, supply of 1 and 2 year old CPO vehicles is low because not that many have yet come back to dealerships as trade-ins or lease returns. The result of the high demand and low supply is highly inflated prices.
And, when you add about $2500 to the price for the CPO warranty and when you consider the high level of discounting available on brand new vehicles, the result is that a brand new car can be bought for a price that is not that much more than the price of the 1 or 2 year old CPO vehicle. A year and a half ago, I was monitoring the CPO market at a couple of dealerships, and I found that, at those dealers, the asking prices for 1 and 2 year old CPO vehicles were actually at the same level or, in a few cases, higher than the prices for which a brand new and similarly equipped vehicle could have been bought. And, because many potential buyers are not aware of just how much discounting is available on brand new cars, the dealers know that, eventually, someone will come along and pay an inflated price for the 1 and 2 year old CPO vehicles. Thus, they are not willing to do significant discounting on those CPO vehicles.
Further, since the CPO warranty is not transferable, if you buy a CPO vehicle, its re-sale value will not be any higher than that of a similarly equipped non-CPO vehicle. So, the premium paid for the CPO vehicle is completely lost.
For buyers who are interested in a CPO vehicle, buying a 3 or 4 year old CPO vehicle makes more financial sense than buying a 1 or 2 year old CPO vehicle. The supply of 3 and 4 year old CPO vehicles is much greater and, thus, the pricing is significantly lower than for 1 and 2 year old CPO vehicles. Also, since the there is less left of the factory warranty for the 3 and 4 year old CPO vehicles, the premium paid for the CPO warranty on a 3 or 4 year old CPO vehicle comes with more potential benefit than it does for a 1 or 2 year old CPO vehicle.
And, when you add about $2500 to the price for the CPO warranty and when you consider the high level of discounting available on brand new vehicles, the result is that a brand new car can be bought for a price that is not that much more than the price of the 1 or 2 year old CPO vehicle. A year and a half ago, I was monitoring the CPO market at a couple of dealerships, and I found that, at those dealers, the asking prices for 1 and 2 year old CPO vehicles were actually at the same level or, in a few cases, higher than the prices for which a brand new and similarly equipped vehicle could have been bought. And, because many potential buyers are not aware of just how much discounting is available on brand new cars, the dealers know that, eventually, someone will come along and pay an inflated price for the 1 and 2 year old CPO vehicles. Thus, they are not willing to do significant discounting on those CPO vehicles.
Further, since the CPO warranty is not transferable, if you buy a CPO vehicle, its re-sale value will not be any higher than that of a similarly equipped non-CPO vehicle. So, the premium paid for the CPO vehicle is completely lost.
For buyers who are interested in a CPO vehicle, buying a 3 or 4 year old CPO vehicle makes more financial sense than buying a 1 or 2 year old CPO vehicle. The supply of 3 and 4 year old CPO vehicles is much greater and, thus, the pricing is significantly lower than for 1 and 2 year old CPO vehicles. Also, since the there is less left of the factory warranty for the 3 and 4 year old CPO vehicles, the premium paid for the CPO warranty on a 3 or 4 year old CPO vehicle comes with more potential benefit than it does for a 1 or 2 year old CPO vehicle.
With the $4,000 deal on a new ES I’ll price out a 2018 and compare to prior years’ CPOs.
Thanks again.
07-10-18, 07:56 AM
#6
Lead Lap
https://www.woodfieldlexus.com/inven...bk1gg0gu008800
That car is a 2016 ES with the Ultra Luxury package with a bit over 20,000 miles on the odometer. It would have had an original MSRP of around $50,000. With the current $4000 Lexus factory rebate available on the ES and with other unadvertised incentives that Lexus is currently offering to dealers, I'm confident that I could buy a brand new 2018 Ultra Luxury Package ES for right around $40,000.
I'm sure that the dealer offering that 2016 CPO ES is confident that it will be able to sell that car for very close to the $36,795 asking price and that their willingness to discount the car will be limited. Even if they are willing to discount the price, say, to $35,000 (which probably isn't likely), the $5000 price difference between a brand new 2018 ES and that 2 (almost 3) year old ES with 20,000 miles on the odometer is somewhat less than will be the difference in re-sale or trade-in value of the two cars for the next several years.
Further, if you are financing the purchase, you should be able to get a lower interest rate on a new 2018 than what you would be able to get for the 2016 CPO, and that will further reduce the cost difference between the new 2018 and the used 2016. And, if the CPO was a 2017, not a 2016, the cost difference between a new 2018 and a 2017 CPO would be even much smaller. With those numbers, I would have a difficult time justifying choosing to buy a 2016 or 2017 CPO vehicle over a brand new 2018.
Last edited by lesz; 07-10-18 at 09:55 AM.
07-10-18, 02:08 PM
#7
I think a lot of it depends on the area, how many dealers are there and market value of your area. Example, I picked up a 17 ES with 18k miles for $29,500, my trade in was a wash so no negative balance to carry or positive. In my area, Orlando FL, the average price currently for a 16 ES with equal features is $31k. Granted in my case I had a max payment in mind and interest rate, which dictated price. My car fell right into that, 3.59% and my final OTD financed monthly payment is $492. The way I purchased mine, is I simply watched the local market of CPOs, found a pattern of price drops by the dealer and when they were at their lowest went in and purchased.
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07-10-18, 04:43 PM
#8
Intermediate
Thread Starter
I think a lot of it depends on the area, how many dealers are there and market value of your area. Example, I picked up a 17 ES with 18k miles for $29,500, my trade in was a wash so no negative balance to carry or positive. In my area, Orlando FL, the average price currently for a 16 ES with equal features is $31k. Granted in my case I had a max payment in mind and interest rate, which dictated price. My car fell right into that, 3.59% and my final OTD financed monthly payment is $492. The way I purchased mine, is I simply watched the local market of CPOs, found a pattern of price drops by the dealer and when they were at their lowest went in and purchased.
07-10-18, 05:03 PM
#9
My whole point wasn't about you shopping outside your driving area, my point was that you cannot judge the CPO market in your area based on what happens in MY area. Each location is different, and while you can cross shop via online, getting a local dealer to deal based on that is a stretch but worth a try IF your local dealers are higher priced on a comparable car. So no one can post in this topic about specific values as the values change based on area or demand unless they are in that specific area.
07-10-18, 08:29 PM
#10
Bought my '13 CPO ES300h fully loaded w/ full warranty until 2019 for 25.4k ($27.6k OTD) in 2016. Almost a 50% savings, but the vehicle had 60k miles. Still running strong at nearly 88k miles 2 years later!
If you could, I'd forgo the CPO to save the 2.5k. Haven't had a single problem yet.
If you could, I'd forgo the CPO to save the 2.5k. Haven't had a single problem yet.
Last edited by satek; 07-10-18 at 08:34 PM.
07-10-18, 09:11 PM
#11
I considered buying a 2 yr. old CPO, but could not justify the price compared to what I got a new one for!
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Dmaxdmax (07-10-18)
07-10-18, 09:13 PM
#12
Here is an example of what I am talking about.
https://www.woodfieldlexus.com/inven...bk1gg0gu008800
That car is a 2016 ES with the Ultra Luxury package with a bit over 20,000 miles on the odometer. It would have had an original MSRP of around $50,000. With the current $4000 Lexus factory rebate available on the ES and with other unadvertised incentives that Lexus is currently offering to dealers, I'm confident that I could buy a brand new 2018 Ultra Luxury Package ES for right around $40,000.
I'm sure that the dealer offering that 2016 CPO ES is confident that it will be able to sell that car for very close to the $36,795 asking price and that their willingness to discount the car will be limited. Even if they are willing to discount the price, say, to $35,000 (which probably isn't likely), the $5000 price difference between a brand new 2018 ES and that 2 (almost 3) year old ES with 20,000 miles on the odometer is somewhat less than will be the difference in re-sale or trade-in value of the two cars for the next several years.
Further, if you are financing the purchase, you should be able to get a lower interest rate on a new 2018 than what you would be able to get for the 2016 CPO, and that will further reduce the cost difference between the new 2018 and the used 2016. And, if the CPO was a 2017, not a 2016, the cost difference between a new 2018 and a 2017 CPO would be even much smaller. With those numbers, I would have a difficult time justifying choosing to buy a 2016 or 2017 CPO vehicle over a brand new 2018.
https://www.woodfieldlexus.com/inven...bk1gg0gu008800
That car is a 2016 ES with the Ultra Luxury package with a bit over 20,000 miles on the odometer. It would have had an original MSRP of around $50,000. With the current $4000 Lexus factory rebate available on the ES and with other unadvertised incentives that Lexus is currently offering to dealers, I'm confident that I could buy a brand new 2018 Ultra Luxury Package ES for right around $40,000.
I'm sure that the dealer offering that 2016 CPO ES is confident that it will be able to sell that car for very close to the $36,795 asking price and that their willingness to discount the car will be limited. Even if they are willing to discount the price, say, to $35,000 (which probably isn't likely), the $5000 price difference between a brand new 2018 ES and that 2 (almost 3) year old ES with 20,000 miles on the odometer is somewhat less than will be the difference in re-sale or trade-in value of the two cars for the next several years.
Further, if you are financing the purchase, you should be able to get a lower interest rate on a new 2018 than what you would be able to get for the 2016 CPO, and that will further reduce the cost difference between the new 2018 and the used 2016. And, if the CPO was a 2017, not a 2016, the cost difference between a new 2018 and a 2017 CPO would be even much smaller. With those numbers, I would have a difficult time justifying choosing to buy a 2016 or 2017 CPO vehicle over a brand new 2018.
07-11-18, 04:54 AM
#13
Lead Lap
You need to shop the Atlanta market. I live in NC and have never been able to buy a car in this state at a good deal. I bought a new 2017 ES 350 UL, MSRP at $50,000 for $39,800 at Nalley Lexus in Roswell, GA last July. I did all the neg. by email.
I considered buying a 2 yr. old CPO, but could not justify the price compared to what I got a new one for!
07-12-18, 10:19 AM
#14
Georgia has a tax bill on registration. I don't know the full details of it, but it comes down to if you move there and register a car from another state you are taxed 7% of the value of the car, new or used. I have heard many people moving in state find it cheaper to get rid of their cars and buy new than pay extra taxes. Because of the tax rules, they may have a glut of used cars in that market.
07-12-18, 10:38 AM
#15
Lexus Champion
After owning cars for a minimum of 10 years I’m considering a “new” every two plan. Buy a CPO, sell it in 2 years, and get another CPO. I’ll try to find numbers and build a spreadsheet but I can’t be the first to ask this question. Without analysis my gut says buy one that’s 2 years old, keep it for 2 years, rinse and repeat. The depreciation curve is probably flatter between 3 and 5 though it won’t feel quite as New-ish.
Another thought - if I want to own cars that don’t go beyond 4 years, perhaps I don’t need them to be certified.
Thoughts?
Another thought - if I want to own cars that don’t go beyond 4 years, perhaps I don’t need them to be certified.
Thoughts?
rush when I hunt for a vehicle. And I always make cash deal unless there is 0% financing(which they often don't advertise: special promo., loyalty program, etc.)