An opportunity may arise where you find a good deal on a loaner car at auction or on a dealer’s lot, but is it a good idea? Let’s get into it.
Loaner-to-Owner and CPO Programs
Loaner cars are typically used by dealerships for test drives, or for customers to drive while their own car is in the shop. Often, they’re brand new when they arrive. After it tacks on some miles, dealerships can prep it for sale as a gently used vehicle for their loaner-to-owner programs or sold as certified pre-owned (CPO) cars.
Some dealerships advertise their loaner-to-owner programs as retired "courtesy vehicles," and typically undergo inspections and are refurbished before the sale. Many loaner-to-owner cars are from the current model year, too. Loaner cars usually have very low mileage as well, since they’re designed to be driven by customers or dealers for a short period of time.
Loaner-to-owner programs are typically offered by auto manufacturers themselves, including luxury brands such as Lexus and Mercedes. These programs may come with special incentives and the vehicle is likely to still be covered under some warranty due to its low mileage.
Because the mileage tends to be so low on these loaner cars, they may even be eligible for a manufacturer’s CPO program – often called the cream of the crop of used cars. All CPO vehicles must satisfy a hefty list of requirements to be deemed as such. Franchised dealerships are the only ones that can offer true CPO vehicles or true loaner-to-owner programs, so an independent dealer wouldn’t be able to help you in your search for an actual, retired loaner.
Loaner Cars May Be Branded
A loaner car may be classified as a fleet vehicle. If you see a vehicle title branded with “fleet,” it either means it was previously used by a rental or loaner company, used as a government vehicle, or a car used for commercial work purposes.
A vehicle with a branded title means it’s anything other than “clean.” However, just because a car is branded doesn’t always mean that it’s a bad thing. A brand on a title is simply there to give future buyers more information about the vehicle’s history and past use.
Cars with clean titles are the most desirable since it typically means that it was never totaled, flooded with water, rebuilt, deemed a lemon and that it was never used for work purposes like a rental vehicle. You can never remove a brand from a title, either.
Loaner cars may be branded as fleet vehicles to let you know what their primary purpose was before you purchase them. You can attempt to get more information on a fleet car by requesting a vehicle history report or requesting its service records.
Keep in mind that most franchised dealerships don’t sell vehicles with branded titles. You’re more likely to find a rental car branded as a fleet vehicle over a true loaner vehicle.
Are Loaner Cars in Good Condition?
No matter which type of fleet vehicle you choose to check out – demo, rental, loaner – it may have been very well-maintained, especially a loaner. To top it off, loaner cars are technically “used” so their price is likely to be lower than a brand new counterpart.
It’s common to see a retired loaner vehicle under 10,000 miles with only one previous owner, and usually, the only previous owner is the dealership. In some cases, demo vehicles are put up for sale after 3,000 miles.
Can Bad Credit Borrowers Qualify?
Bad credit borrowers can struggle to meet the requirements of auto lenders, but if you work with the right lender, you may be able to get your hands on a retired loaner car or a CPO.
Subprime lenders are signed up with special finance dealerships that assist borrowers with less than perfect credit. However, most special finance dealerships are franchised, and if you find one that’s signed up with subprime lenders and you qualify, a true CPO or loaner car could be within your reach.
You could also check out public auctions and pay cash or try to get financing through a direct lender. Public auctions often feature fleet vehicles, such as rental cars from rental companies. These cars tend to have comprehensive history reports and are required to have regular maintenance, which may yield you a good deal on a used, reliable vehicle.
Is it Worth it?
Bottom line is that any used vehicle is going to come with some risk. Heck – even brand new cars carry risk! Sometimes a car is just a lemon that rings your wallet out.
One of the better things you can do to protect yourself (and your wallet) is by having your next potential vehicle inspected by a third-party mechanic, take it for a long and thorough test drive, and leaf through its vehicle history report. It may also be a good idea to purchase an extended warranty for some peace of mind. Remember that CPO vehicles come with a manufacturer warranty for some time as well.
Let’s Get Car Shopping
If you’re ready to get the ball rolling on your next auto loan, then look no further than CarsDirect. We’ve created a nationwide network of special finance dealerships that specialize in tough credit situations. Fill out our free auto loan request form and we’ll look for a dealer in your local area that assists bad credit borrowers in finding the vehicle they need.
