I've just bought my '09 CPO X5 and before that I had a CPO car as well.

The way I look at it, dealerships get tons of lease returns (and I bought my car at one of the largest NY BMW dealerships). There are only so many of these returns they can sell - they keep whatever appears to be in better shape, has better options and is mechanically sound and CPO them; the rest of the cars are sold at the auction to smaller dealers. There must be something that goes into CPO labeling - if nothing else it would be a simple change of fluids, brake pad replacement and some diagnostics on major components.

And as for prices... I don't think I overpaid much, if at all. My purchase price is inline with CarMax prices, but car has lower mileage. It's also exactly what is being asked for similar cars (but again for cars with higher mileage) on Ebay and by local craigslist dealers... And on top of that, I was able to trade-in my older car at a price I would have problem getting anywhere else - whatever discount I could have gotten from smaller dealers is compensated by the higher trade-in price I got.