Motor Mile trending toward pre-owned cars

The Scottsdale Motor Mile has lost some big names in recent months - Toyota, Nissan and Audi are all gone.

BMW has announced a future move to Chandler.

And now a new trend seems to be emerging along McDowell Road to fill these vacancies - used cars.

Motor Mile losing dealerships, sales tax revenue

Penske Automotive, which operates some of the highest-end dealerships in the Motor Mile such as Lexus, Aston Martin, Ferrari and Rolls Royce, is starting a new venture called Scottsdale Wholesale Outlet that will feature moderate to high-end used cars at no-haggle wholesale prices.

Across the street, on the former sites of Scott Toyota and Nissan of Scottsdale, a used car operation is expected to take shape.

The fear for years of dealerships vacating Motor Mile locations for new sites with freeway frontage and sales tax incentives is, in at least a few instances, becoming realized. For Scottsdale, that means a drop in sales tax collections for the area, coupled with the national decline in car sales. And observers say at least in this economic climate, expect used-car operations rather than new dealerships to fill the vacancies along the Motor Mile.

But on the flip side, lots are not sitting vacant for extended periods of time. Many of the high-end dealerships are still on the strip in the McDowell and Scottsdale roads area, and major companies such as Penske are experimenting with new ways to sell cars that could drive more traffic to the area - and collect more sales tax for Scottsdale.

Scottsdale Area Chamber of Commerce president Rick Kidder said the new operations such as Scottsdale Wholesale Outlet will sell upscale brands, avoiding what he said would be the two worst-case scenarios for the area.

"A worst-case scenario on the Motor Mile is a dark store, and the second-worst scenario is a low-end used car lot," Kidder said. "The economic conditions are such that having a good quality pre-owned operation is a real asset and infinitely better than a dark store."

Harold Stewart, Scottsdale's acting economic vitality general manager, said he expects car sale operations to continue to occupy the street in the next few years, but without an increase in new dealerships at least in the short-term.

"I think you are going to see some used-car operations looking at that street because of the existing dealership locations, and manufacturers are not looking for new locations unless there's a specific reason to move someone," Stewart said.

The Motor Mile includes dealerships along McDowell Road, primarily between 64th Street and Scottsdale Road but as far east as Pima Road, as well as south of McDowell Road along Scottsdale Road. The large concentration of dealerships and makes include some of the most high-end on the market.

Motor Mile's changes became most prevalent in the past couple of months with the relocation of Scott Toyota and the former Nissan of Scottsdale, now Riverview Nissan, to the Mesa Riverview shopping center at the Loop 202 Red Mountain Freeway and Dobson Road. Chapman BMW is planning a move to Chandler in the coming months, but a date has not been announced. And the Audi dealership where the Scotts-dale Wholesale Outlet is setting up shop moved to Chandler late last year.

Ted Marek, whose real estate company has the listing on the former Toyota and Nissan dealerships on the north side of McDowell, between 68th and 70th streets, said the plan is for a car dealer to lease the former Nissan site while rebuilding the former Toyota site. Marek said the deals are not finalized and he could not release names.

Kidder said his understanding is it will be for a pre-owned car operation.

At the Scottsdale Wholesale Outlet, general manager Michael Famileti said potential customers will have three weeks to purchase a car at the store at the listed wholesale price, which Famileti said will be discounted from the Kelley Blue Book figure. If the car isn't sold in three weeks, it will go to a bid sale.

The vehicles will be grouped into three price areas - less than $10,000, $10,000 to $20,000 and more than $20,000. Wholesalers can first see the cars Monday and Tuesday, then the store will be open to the public Wednesdays through Sundays, starting this weekend. Financing will be offered.

"We collaborated a couple of months ago in a Penske management meeting, and the timing couldn't be better," Famileti said.

The types of vehicles listed on the store's Web site range from Honda and Acura to BMW and Land Rover.

Scottsdale Wholesale Outlet, at 6855 E. McDowell Road, allows Penske to find a use for what was a vacant lot while helping sell the roughly 250 trade-ins the company gets each week.

The new store will open as the Motor Mile is experiencing a 20 percent decline in auto sales tax collections year-over-year, according to figures provided by Scottsdale through the May reporting period.

That percentage is similar to the most recent national sales figures. It's also a reversal from the huge sales growth the Motor Mile had seen in recent years.

In 2003-04, the area brought in $8 million in sales tax receipts for the city. A sales tax increase pushed that number to $9.7 million the next year, then peaking at $10.7 million in 2005-06 before dropping to $10.3 million last year. Final numbers are not available for 2007-08, but the area is on pace for about $8 million in sales tax collections.