Retail Roundup: Roanoke Valley auto dealerships driven to rebuild or remodel

Magic City Ford moved into its new showroom in January.

First Team Auto Mall completed its new Subaru showroom in June.

Berglund has been in the process of remodeling showrooms since last year.

Crossroads Auto of Roanoke is building a new Infiniti showroom.

And Pinkerton Chevrolet recently spent more than half a million dollars renovating its showroom.

All around the Roanoke Valley, auto dealerships are spending millions of dollars to remodel showrooms or build new ones.

While some of the improvements have been strongly encouraged by manufacturers, which franchise the dealerships, the investments also reflect the automobile industry’s recovery from the recession.

“It is coming back significantly, unfortunately from a pretty low point,” said Mark Bower, sales manager at Crossroads Auto of Roanoke on U.S. 220.

New vehicle sales are expected to hit 15 million this year, up from 10.4 million in 2009, according to data from Edmunds.com, a car shopping website.

Several factors are driving sales.

One is low interest rates, and banks that are more willing to lend money for automobiles than for real estate, said Paul Taylor, chief economist for the National Automobile Dealers Association, an advocacy group for dealerships.

“Banks aren’t anxious to lend you money to buy a bigger house, but they are anxious to lend you money for a new car,” he said.

The average rate for a 48-month new car loan in the Roanoke area last week was 2.7 percent, according to Bankrate.com, an online aggregator of financial information.

Another factor in the increase of auto sales is the high demand for used cars, which in turn has increased trade-in values and narrowed the price gap between new and used cars.

During the recession many consumers bought used cars to save money. As a result, used cars are scarce on lots, and there are fewer in the pipeline since not many new cars were sold the past few years, Taylor said.

The scarcity of used cars has made cars on the road now more valuable, an incentive for drivers to trade in for a new car, Taylor said. Also enticing consumers is that in some cases, the price of a new car is only a few thousand dollars more than a used car’s, and more consumers are deciding to pay a little more for a new car, Taylor said.

The recovering housing market is also a factor in the growth of auto sales because it is boosting consumer confidence, Taylor said. The prices of homes that sold in Virginia rose by nearly 4.4 percent in the fourth quarter of 2012 compared to the same time period the year before, according to the Federal Housing Finance Agency.

And, of course, gas prices also have an effect on new car sales. With gas prices averaging $3.65 per gallon in February, many consumers are looking for more fuel-efficient vehicles, Taylor said.

Those factors have created a favorable climate for dealerships.

“Business is up and it is good for everybody,” said Cameron Johnson, president of Magic City Ford in Roanoke.

His dealership hired 15 new sales and service employees in the past 18 months to help meet the demand, Johnson said.

The $1.5 million new showroom that Magic City recently moved into has helped, he said.

“It generates conversation and attracts attention,” Johnson said. “The reaction from customers is, ‘Wow!’ ”

First Team Auto Mall off Peters Creek Road last year tore down its Subaru showroom to make room for a new building about twice its size, said David Dillon, general manager. The new showroom is 3,700 square feet.

First Team Auto Mall also remodeled its Hyundai and Volkswagen buildings.

And just a week ago the dealership completed a 6,000-square-foot addition to its collision and repair center.

The construction of the new showroom, remodels and expansion of the service center has cost the dealership about $750,000, Dillon said.

Crossroads Auto of Roanoke is in the midst of constructing a new showroom because it was using its old Porsche showroom to display Infiniti vehicles, Bower said. Construction on that building is expected to be complete by May.

Other dealerships have renovated or built new showrooms as part of manufacturer incentive programs.

General Motors, which includes Chevrolet, Buick, GMC, Cadillac and Isuzu, came out with a program that pays dealerships a bonus for bringing their showrooms up to current standards.

Virginia franchising laws prohibit manufacturers from requiring dealerships to make the improvements.

But many have done it, including Pinkerton Chevrolet in Salem and Berglund, with locations in Roanoke, Salem, Bedford and Lynchburg.

“When this program came out I jumped on it,” said Bill Pinkerton, owner of Pinkerton Chevrolet, which also has a dealership in Lynchburg.

His dealership spent $600,000 on the Salem location to replace flooring, wall coverings, the facade and even the sidewalks.

“The changes are huge,” he said.

Berglund has been in the process of making updates to its dealerships for at least the past year. Among its General Motors dealerships, the Chevrolet Buick showroom on Williamson Road was remodeled.

In addition, Berglund added 3,000 square feet to its Chrysler Jeep Dodge showroom on Franklin Road.

For most dealers, incentive or not, the investment will pay off for years to come.

“If we plan on being here another 50 years, we needed to do this,” Magic City Ford’s Johnson said. “It is tremendous just because of the reaction from our customers.”

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