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Used car sales may be good sign for U.S. automakers

Economic uncertainty, tighter credit standards and stronger warranties on nearly new vehicles are luring price-conscious, credit-squeezed consumers away from new cars and trucks to used ones.

Last year, more than 13 percent of new car shoppers left dealerships with a certified used vehicle instead, up from 8.3 percent in 2003, according to CNW Marketing Research in Bandon, Ore.

While new car sales are expected to decline to as low as 10.1 million this year, from dismal sales of 13.2 million in 2008, CNW is forecasting used vehicle sales will grow through 2012. This year, the firm forecasts used car sales of 40 million, up 9.5 percent from 2008's weak volume of 36.5 million.

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Strength in the used car market is a good sign for the battered new vehicle market, which has forced Detroit's automakers to close plants, lay off workers and seek federal assistance.

Historically, strong used vehicle sales eventually translate into improved new car sales.

There are several reasons.

Higher used car prices mean better trade-in values for consumers. They also can make new models a better relative value.

What's more, higher resale values for used cars also mean improved lease rates for the future. Lease rates are based on the estimated future value of a vehicle. So, the higher the expected future value, the lower the lease rate.

Dealers who've been struggling with plummeting new vehicle sales are increasingly turning to used cars to help support their businesses. Dealers know they will make a bigger profit on selling a 2- or 3-year-old car than on selling or leasing customers a new one.

Edmunds.com market analyst Joe Spina attributes this to "imperfect information" in the used vehicle market.

"Any consumer can go to our Web site and see what the dealer paid for a new car," Spina said. "There's no easy way to know what they paid for a used car at auction."

Tips for buying used

• Certified preowned vehicles usually have a warranty, but might be priced higher than a generic used vehicle.

• Order a vehicle history report.

• Have an independent mechanic evaluate the vehicle.

• Shop online to explore the best financing options in the market. Also explore credit unions for a better financing deal. Know that dealers have many attractive financing options for customers with a credit score of 700 or higher.

Used car values

Kelley Blue Book: www.kbb.com

Edmunds.com: www.edmunds.com

National Auto Dealers Association: www.nadaguides.com

Check car history

Carfax: www.carfax.com

Auto Lemon Used Car History Check: www.is-it-a-lemon.com

Car Detective: www. cardetective.com

Used car sales may be good sign for U.S. automakers 04/22/09 [Last modified: Wednesday, April 22, 2009 5:30pm]

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