Economic slump drives used car sales, prices up

— -- Used car salesmen are becoming the kings of the lot as demand for such vehicles is starting to rise.

While new car sales continue to fall, many dealers are finding buyers are willing to spring for a good used car instead.

The volume of used cars sold through dealers rose 3.1% in February compared with last year, the first year-over-year increase in 12 months, reports CNW Marketing Research. By contrast, new car sales slid 41.4% in February from a year ago.

Wholesale used car prices have risen steadily since October, including a 1.1% rise in February compared with January, says Tom Kontos, chief economist for Adesa Analytical Services, though they remain lower than in February 2008.

"People are trying to be a bit more responsible in their major purchases," Kontos says, making used cars more attractive. It's "another sign of prudence."

AutoTrader.com, an online listing site for used vehicles, says it's seeing the same price trend at retail, especially for larger vehicles. The average price of all Ford F-150 pickups listed on the site is up 2.9% from October, spokesman Brian Gluckman reports.

Driving the increases:

• Necessity. A used car is a more economical alternative if the current car dies.

"There are people who need vehicles," says Mike Maroone, president of AutoNation, the country's largest dealer chain.

•Scarcity. Rental car agencies, a top source for late-model used cars, are clinging to their fleets longer to save cash. And poor new car sales also cut supply. "Dealers aren't getting any trade-ins," says Tom Webb, chief economist for Manheim Consulting. As a consequence, "they are bidding up prices at auction" to have used cars to sell.

•Desirability. Dealers can buy just the used cars that they think will sell rapidly. With new cars, they often have to take an automakers' slow sellers if they want more of the hottest models. Plus, used cars can carry good profit margins.

AutoNation is seeing gains in sales of "certified" used cars, the newest pre-owned models that are checked out and come with a warranty. Sales were up 15% last year and "single digits" this year, Maroone says. The program is being spurred, as well, by 2.9% loan rates offered by General Motors on certified used vehicles, including to buyers with imperfect credit.