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.

One reason used car prices and profit margins have been strong over the last five years is the tight supply of pre-owned vehicles. Because automakers built far fewer vehicles in 2010 due to the recession and record-low demand for new vehicles, it's harder to find late-model used vehicles.

Some call it the three-year pinch in the used car market. But that's finally starting to change as models sold or leased in late 2011 and 2012 are being traded in or are coming off lease.

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