Used car market showing no signs of slowdown
Tariq Khan says he can feel it in his gut.
When he sees a used car or truck he knows he can sell for a healthy profit, the auto dealer from Villa Park, Illinois, jumps on it.
“I walk around it, check the record, but it’s ultimately a gut feeling,” Khan said. “You have to buy the right car at the right price.”
For Khan, the right price for a 2004 Lexus LS 430 was $7,500.
“I’ll probably sell it for nine or 10 grand,” he said.
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Khan is one of several hundred auto dealers who spent a rainy day at the Manheim auto auction in Matteson, Illinois, where thousands of used cars are bought and sold.
“Very few people realize used car sales are probably three times bigger than the new car industry sales. The used car industry really fuels what happens with auto sales,” said Sandy Schwartz, president of Cox Automotive, which, like Manheim, is a subsidiary of Cox Enterprises.
Dealers don’t need to be told. They’re riding a bull market that has steadily driven the number of used cars sold to an expected total of 41.5 million this year, an increase of 1.5 percent from 2013, according to IBISWorld.
Certified pre-owned in demand
While sales of used vehicles have long outpaced new vehicle sales, demand is increasingly being driven by people who want certified pre-owned models. These vehicles have been inspected by dealers, often have fewer miles and usually come with a warranty that extends for several years.
“The hottest thing we see today is certified pre-owned cars,” Schwartz said. “Remember years ago a car that was 3 years old was old. Today, a 3-year-old car with 36,000 miles in many ways is like a new car, especially if it has been certified.”
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The growth in certified models has helped dealers drive used vehicle profit margins to $2,361 in 2013, almost double what they were for new vehicles sold last year.
Whether certified pre-owned or an older model with a few issues, Manheim estimates more than 41 million used vehicles are expected to be sold this year. That could include the Mazda CX9 Khan bought at the Manheim auction for $10,360.
“I’ll probably wind up selling it for $12,000 or $12,500,” Khan said.