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Car sales headed for fast lane

Monday - 4/8/2013, 2:00am  ET

car sales (Frederick News Post/Adam Fried)
Sales representative Frank Shockley, right, goes over key controls with Chris Mitcham and his 2013 Ford Fusion recently at Century Ford in Mount Airy. Mitcham traded in his 2010 Mercury Mariner, citing fuel costs and a desire to have a car instead of a truck. (Frederick News-Post/Adam Fried)

Car dealers in Frederick County are seeing it in their sales.

People are back in the market for cars, either new or used, as the nation bounces back from a recession.

"There's a lot of people entering back into the market," Joe DeGiorgi, managing partner at Century Mount Airy, said during a recent interview at one of his two dealerships. "You've got people coming out of the recession era with pent-up demand."

Paul Adams, general manager of The Frederick Motor Co., sees it when customers walk in the door.

"Four years ago, the only people we sold cars to were people who had to have a car," Adams said. "Now, I've got people buying new cars, just wanting to move up and change."

A great sign, according to DeGiorgi, is that commercial vehicles are leaving his Century Drive lots.

"That's a tell-tale sign ... when businesses are buying," DeGiorgi said. "When they're buying, that's a sign that things are starting to turn the corner."

Potential buyers have specific goals in mind when buying a car these days. Fuel efficiency is key, local car dealers said. Better products from manufacturers is also making it easier, they said.

"Our hybrids are selling well for us," Adams said. "The smaller SUVs also seem very popular."

Not everybody is ready to buy new. Used-car sales are popular, according to DeGiorgi.

"It's a good alternative to a new vehicle purchase," he said.

Adams said he's seen monthly used-car sales double from a year ago.

What helps is that the products are better, according to Adams. Since consumers are trading in drivable cars, those can now be re-sold.

With the opening of a CarMax on Urbana Pike in Frederick expected by early 2014, there will soon be a nationally recognized alternative for consumers.

Land has been cleared on Urbana Pike, and construction is slated to begin this summer, according to a company spokeswoman. The 40,000-square-foot dealership is expected to create more than 50 jobs.

Local businesses are not worried about the competition.

"I think it helps you more than it hurts you," DeGiorgi said. "Competition is good because it drums up more activity. If it's going to bring more used-car buyers onto the market, it's more of an opportunity for everybody."

CarMax, which originated in Virginia, now has 119 used-car dealerships, including one 25 miles from the Frederick location in Gaithersburg.

Why Frederick?

"We are opening stores in new markets ... in areas where there is existing and ongoing retail growth," CarMax spokeswoman Michelle Topping Ellwood wrote in an email. "We look forward to serving the Frederick area customers."

As for DeGiorgi, he said there are no immediate plans to change what they're doing in Mount Airy, but that could change slightly once CarMax opens.

"We may increase our inventory if they create more used-car traffic in the area," DeGiorgi said. "That's how I would prepare for that."

There's a clear explanation for why there's a light at the end of the tunnel for car dealerships, according to Tianning Li, an assistant professor of finance at Hood College. Generally speaking, the economy is better than it has been the last few years, he said. Unemployment rates are down, and interest rates favor buyers.

That translates to spending.

"Consumers are more optimistic than they were," Li said. "It means they are more likely to spend money on things they want to buy."

Groceries, clothes and other necessities have to be bought no matter the state of the economy, according to Li.

"With cars, when the economy is in a recession, people are risk-averse," Li said. "People tend to hold off, but when the economy recovers from a recession, they will start spending money on things like cars."