Auto dealers discover some oomph in sales

Greg Heinrich surveys the business district around his Fairway Chevrolet and Fairway Buick GMC dealerships on East Sahara Avenue, near Boulder Highway, and sees marked improvement.

Fletcher Jones Toyota, Chapman Chrysler Dodge and United Nissan have all remodeled and modernized their stores, and the Sahara beautification project is sprucing up the scenery in the aging eastside corridor.

Heinrich invested more than $1 million to bring his 41-year-old facility up to and beyond General Motors Co. standards, adding elements such as an air-conditioned delivery room where sales agents spend as long as an hour explaining new-car technology to each new-car owner.

Business is getting better, the second-generation Las Vegas auto dealer said.

GM reported that new-car sales at four Chevrolet dealers in Las Vegas increased 54 percent in June from a year ago, the largest increase in the Western region. Year to date, Las Vegas sales have jumped 47 percent, compared with 19 percent in Los Angeles, 15 percent in Phoenix and 14 percent in San Francisco.

Heinrich's store in Pahrump, meanwhile, had its best month in three years, selling 38 vehicles in July.

Statewide, dealers sold 129,000 new and used vehicles in 2011, a 13 percent increase from 2010, said Wayne Frediani, executive director of the Nevada Franchise Auto Dealers in Reno. Sales are on track to grow 12 percent this year, he said.

Still, car dealers are less than optimistic.

"To have improvement is wonderful, but the bottom line is, we're way below where we want to be," Heinrich said.

Despite the gains, Nevada dealers are 40 percent off the 2007 peak of 227,000 sales, and several Las Vegas dealerships that closed during the Great Recession remain empty. A few are deteriorating, creating neighborhood eyesores.

"Why are we still crawling out? Because we have housing volatility and high unemployment," Frediani said. "The average age of a car is 11.3 years, so there's a lot of pent-up demand, but people are still skeptical. They're holding off. The only thing holding us back is jobs. Unemployed people can't buy new vehicles."

Statewide, there were 116 members of the Nevada Franchise Auto Dealers in 2007, including 66 in Clark County, when the recession hit. Eighteen franchises closed, including six brand eliminations. Frediani said dealers have come and gone, but membership since 2009 has remained steady at about 100. Las Vegas, Henderson and Pahrump now have 64 dealers.

Since October, three Fiat dealerships - two in Las Vegas and one in Reno - have opened, resulting in the first overall growth in dealer numbers in three years. All went into existing buildings, part of a Fiat expansion that added 135 new dealerships nationwide.

STRONG USED-CAR MARKET

While new-car dealerships struggled with the decrease in sales, the used-car market gained strength. Used-car prices have increased by about 9 percent in the last year, largely a result of the nationwide cash-for-clunkers program that took an estimated 780,000 vehicles off the street.

"Those cars ended up in junkyards with concrete in the engines," said Kirk Jacobson, partner in Johnson Jacobson Wilcox accounting firm whose clients include local dealerships. "What it did is put price pressure on used cars and who got buried was the lowest-income people who depend on those. Supply dries up and the price goes up. The low-end supply - $500 to $1,000 - just went away."

Used-car dealers saw opportunities to expand into Las Vegas, especially with bottom pricing available on the empty lots. J.D. Byrider signed a lease in January to occupy the former Kia dealership at 5650 W. Sahara Ave. for $15,000 a month. Drive Time spent nearly $1 million remodeling the former Lincoln showroom at 3030 E. Sahara Ave., which sold last year for $1.9 million. CarMax opened its second Las Vegas store in September at 1000 W. Warm Springs Road.

Utah-based Low Book Sales bought the closed United Jeep Chrysler dealership at 3250 E. Sahara Ave. last year from Bank of America for $1.95 million. The property was leased to Fairway Chevrolet during its renovation.

Low Book Sales Chairman and Chief Executive Officer Dave Nielson said an appraisal of the 4.2-acre property came back substantially higher than the purchase price. Boyd Martin Construction is gutting the 29,000-square-foot showroom and doing an extensive $2.5 million remodel, with completion expected in late January. The dealership will employ about 50 people.

"We're excited about coming to Las Vegas. My personal opinion is it's bottomed out and starting to come back," Nielson said.

Planet Hyundai co-owner Ron Coury said he and his business partners have been looking to expand since they bought the dealership at 7150 W. Sahara Ave. in 2010. In July, they opened a used-car superstore on a formerly vacant 5-acre lot next to their new car store.

Planet Hyundai's used-car sales increased to 120 in July, compared with about 70 a month during the first six months of the year.

"I just think the market was underserved because people are suffering from loss of income," Coury said. "If you need transportation and currently can't afford a new car, you're a used-car buyer."

DEALS ABOUND

Quite a few of Las Vegas' shuttered dealerships have been sold or leased, said Grant Traub, a broker for Colliers International who specializes in dealership transactions.

The former Chaisson BMW lot at 5050 W. Sahara Ave. is in escrow with a Chrysler dealer for $4.5 million. Gaudin Ford is moving from East Sahara to the former Chrysler store, which was purchased for $18.5 million, on the Las Vegas Beltway near Rainbow Boulevard. Norm Baker Motors' vacant building at 6175 W. Sahara Ave. is pending short-sale approval for
$3 million. The former Pat Clark Pontiac at 2575 E. Sahara Ave. is being leased to a local used-car dealer and auto body shop for $15,000 a month.

But not all of the closed dealerships are in demand.

Bill Heard Chevrolet at Decatur Boulevard and Alta Drive, formerly Fletcher Jones Chevrolet, remains boarded up and will likely be razed, Traub said. It will take several million dollars to mitigate environmental issues on the 30-acre site, he said.

The dealership was one of 13 closed by Columbus, Ga.-based Bill Heard Enterprises in 2008, and the property is tied up in Chapter 11 bankruptcy.

It's unlikely to open as another Chevy dealership, Fairway's Heinrich said. The primary market area is served by Bozarth Chevrolet to the north and Findlay Chevrolet to the south.

Nor is it likely to ever be used as a car lot - the market area already has 15 dealer brands, and the size of the property - 30 acres with a service bay and auto body shop - isn't cost-effective for a used-car lot.

The vacant Dodge dealership at 5750 Sky Pointe Drive in northwest Las Vegas was purchased from Bank of America for $2.4 million in January 2011. The owner is leasing the 7-acre property to the National Guard armory for an undisclosed amount, Traub said.

One note of optimism for dealers is the loosening of credit standards for car loans. In the first quarter, lenders increased auto loans by about $2 billion, to $228.4 billion, the Federal Reserve reported.

Planet Hyundai's Coury said financing is as important to selling cars as location and inventory, he said.

"From a standpoint of the overall economy, we're headed in the right direction," Frediani said. "Lending institutions have softened. Some of the subprime lenders are back in the market. So you've got some positive things happening. We're a very resilient industry."

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.