Repairing Market Failure in Used Cars
Tom Bozzo writes:
Marginal Utility: Some Notes On The Economics Of The Used Car Market: The biggest recent innovation in the used car market, manufacturer certification of used cars, can be seen as an effort to provide a credible (and valuable) signal of quality. The promise of the more rigorous certification programs is a more extensive inspection than the $30 checkup from one's favorite mechanic (plus, items flagged in the inspection are supposed to be corrected, or the car can't be certified), backed up with a sometimes substantial warranty extension from the manufacturer. Since certified used cars can bear a premium of a couple thousand dollars over an equivalent non-certified car -- which includes relatively useless dealer certifications, which are often little more informative than a "cream puff" sign in the windshield -- this also doesn't alter Oscar's conclusion that you get what you pay for....
