Steven Lang, Yahoo Autos August 6, 2015

As an auto auctioneer I used to tell a winning bidder, “Congratulations! You now own that car! Including whatever just fell off!”

Everyone would laugh except those who heard me say that joke for the 200th time. But when you’re buying a used car that’s really the truth of it. Every year over 40 million used vehicles are bought and sold in the United States — from recent models with only a few thousand miles on them, to rolling deathtraps that are worth more dead than alive.

The vast majority of used cars and trucks are sold “as-is” — you buy it like you see it. But retail used-car dealerships now typically offer some kind of warranty, ranging from the basic 30-day guarantee with many exceptions to those that mimic new car deals running for several years and thousands of miles. 

Here’s how they compare to one another.

New vehicle dealerships: A traditional dealership that sells a specific brand of car (Toyota, Honda, Chevrolet) will offer a "Certified Pre-Owned (CPO)” warranty exclusively for that brand alone.

A Ford dealership, for example, can offer Ford’s 7-year/100,000 mile powertrain warranty on a certified pre-owned Ford car or truck along with a comprehensive 1-year/12,000 mile warranty.

The powertrain warranty covers the engine and transmission while the comprehensive warranty applies to a laundry list of items, from radios and interior components to wear items such as brake pads and halogen bulbs.

The length of the powertrain warranty is based on the first day that used car was sold new. For example, if the original owner bought a Ford brand new Ford in August 2013, your powertrain warranty with Ford will last until August 2020 or 100,000 miles – whichever comes first.

The comprehensive warranty begins on the day you bought the vehicle. So if you do buy a certified pre-owned Ford, you have either 1 year or 12,000 miles on the comprehensive coverage from the date of purchase. Every manufacturer offers their own unique version of a certified pre-owned warranty and you can find those details by clicking here.

So Why Buy A CPO Warranty? A certified pre-owned warranty usually results in a higher selling price — sometimes thousands more than a similar used vehicle if you’re looking at the high end of the market — which is why manufacturers have embraced them.

But there’s one distinct advantage related to these CPO warranties besides the extended coverage. New-car dealers always have the first opportunity to buy vehicles directly from the manufacturer, and can cherry pick those specific off-lease vehicles that are the most popular or have the most thorough maintenance histories. 

Carmax: America’s largest used car retailer now offers a free 30-day limited warranty that primarily covers what they call “mechanical breakdown coverage.” This encompasses a laundry list of componentsyou can find here. In more litigious areas of the country, Carmax will offer either a 60-day warranty (Connecticut, Minnesota and Rhode Island) or a 90-day warranty (New York, New Jersey and Massachusetts).

Like many other used-car retailers, Carmax also offers an extended warranty through a third-party company that markets this offering under MaxCare. This warranty sounds like it comes directly from Carmax, but it’s actually from another company that specializes in extended warranties. According to a recent study from Consumer Reports, these third-party warranties offered a buyer satisfaction rating of only 41 percent, which was due in great part to the consumer’s limited access to repair facilities.

So Is The Carmax Warranty Worse? Based on the numbers, absolutely. But based on the level of inspection and reconditioning costs Carmax typically invests in their cars, it’s highly debatable. My advice as someone who liquidated over 10,000 vehicles a year for an auto finance company is to compare the Carmax price to the one for a CPO car, then see whether that CPO warranty is really worth the price difference. Also, in certain states where Carmax sells new cars, Carmax can also offer a certified pre-owned warranty that comes directly from the manufacturer.

Fortunately, traditional dealerships are no longer the only games in town when it comes to a used-car warranty.

Ebay: You would never expect Ebay to be a place to go for a warranty on a used car. But if you decide to buy a car on Ebay, especially a vehicle that is younger than 10 years old, you can get a surprisingly strong basic warranty.

The catch? This is not a wear-and-tear warranty like the ones offered by the manufacturers or Carmax. Ebay’s warranty primarily covers major issues, from engines and transmissions that are damaged and cost over $1,000 to repair to fraud and title issues that may make registering your vehicle difficult to impossible. Ebay will cover up to $50,000 in damages according to their Vehicle Purchase Protection program which you can find here. Be warned, this is quite a list.

When Is The Ebay Warranty Worth It? Ebay does a solid job of covering older and higher mileage cars that other manufacturers and car dealerships won’t warranty. Also, several Ebay sellers who specialize in selling used cars have received outstanding feedback on thousands of their own vehicles for well over a decade now. In certain unique cases, you may find a similar model sold on Ebay that is much cheaper than the traditional retail competition while also offering a basic warranty for major issues. Keep in mind: Ebay’s warranty is more akin to catastrophic coverage than a traditional guarantee, so weigh your risk accordingly.

The ‘Peer-to-Peer’ Marketplace:  Warranties for these emerging companies, such as Beepi and Shift, have more to do with how they actually try to sell used cars. Instead of just having a seller simply post a car online, these companies will have the car inspected by a mechanic, recommend repairs, give it a detail and then put it on their site.

For those wanting to buy a used car from an individual, Beepi and Shift will disclose the results of that inspection and offer an unconditional money-back guarantee (7 days or 250 miles for Shift and 10 days or 1,000 miles for Beepi).

The Warranty: Beepi is now including a free three-month, 3,000 mile warranty on their vehicles. Shift is also in the process of offering third-party warranties for the used cars featured on their web site.

Remember that a used car warranty is only as good as the company that stands behind it. So if you do decide to get that warranty, make extra sure it’s one that fits your needs and your risk tolerance.

 

Steven Lang, Yahoo Autos August 6, 2015

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