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Used car market expected to roll in 2014

The combination of greater availability of credit, relatively low interest rates, and an improving economy are expected to lift the used car market in 2014, according to a new industry forecast.

Manheim Consulting, which specializes in tracking the used car market, says the latest data from auto dealers shows demand for pre-owned vehicles remains strong.

"From a dealer standpoint, the environment right now is very good," said Tom Webb, Chief Economist with Manheim Consulting.

Customers shop for used vehicles at a CarMax Inc. dealership in Lexington, Kentucky.
Luke Sharrett | Bloomberg | Getty Images
Customers shop for used vehicles at a CarMax Inc. dealership in Lexington, Kentucky.

Webb's optimism is driven by the fact used vehicle prices are expected to edge slightly higher this year while demand for pre-owned vehicles is robust.

Franchised dealers are selling used vehicles for an average of $14,000-$15,000, according to Webb.

(Read more: Money worries keep Gen Y from buying, leasing cars)

Strongest sales since 2005

With the U.S. economy improving while dealers and banks are writing auto loans to a wider array of buyers, used vehicle sales from franchised dealers will reach their highest level since 2005.

"Last year, franchised dealers sold 15.6 million used vehicles," said Webb. "I think it's reasonable to expect 16 million in sales this year."

Not only is credit more available, the rates on used vehicle loans is expected to stay at a reasonable level.

Webb says the average used vehicle loan interest rate is between 7-8 percent with subprime borrowers paying between 12-19 percent and certified pre-owned vehicle buyers seeing the best rates between 4-5 percent.

(Read more: Congestion expected to dent auto sales)

Certified pre-owned demand growing

Last year, auto dealers sold 2.1 Certified Pre-Owned vehicles, a testament to the popularity of programs designed to assure customers that the used cars and trucks they are buying have been given a thorough check-up and are backed by dealers.

This year, certified pre-owned vehicle sales are projected to reach 4 million according to Manheim.

"Certified pre-owned has really taken off. Consumers flock to these models," said Webb.

"People are comfortable with the guarantee. In fact, some people who used to be new car buyers are now certified pre-owned buyers," he said.

With more vehicles coming off of leases, the supply of used cars and trucks, including those in CPO programs, will grow this year.

That means will have slightly wider selection of vehicles to choose from in 2014.

(Read more: Fewer city dwellers own cars)

—By CNBC's Phil LeBeau. Follow him on Twitter @LeBeauCarNews.

Questions? Comments? BehindTheWheel@cnbc.com.

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