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Lokey doesn't fear fight among used-car superstores

Paul Lokey figures he's in the driver's seat when it comes to selling used cars in Tampa Bay.

That's because the chief executive of Lokey Automotive Group has accelerated the race to hook up with national used-car superstores.

His company has become a franchise of Driver's Mart Worldwide Inc., a chain that's similar to CarMax and AutoNation USA. All three chains use the one-price, no-haggling policy made popular by Saturn.

Lokey plans to open his first Driver's Mart store in January in Clearwater, home to six of his new-car dealerships. He also plans to add stores in St. Petersburg and Port Richey.

"The used-car industry recorded $300-billion in sales last year," Lokey said Wednesday. "New-car dealers sold only 31 percent of the used cars. The rest were sold privately or through independent used-car dealers. There's a huge market out there."

Lokey Automotive Group's size made it an attractive dealer to add to the Driver's Mart franchise, said Thomas W. Eggleston, president and CEO. Driver's Mart also added new franchises in Orlando and Jacksonville and plans to add up to two more in Florida, including one in Hillsborough County, Eggleston said.

The fixed-price sales approach is also familiar to many Driver's Mart franchisees because they already own Saturn dealerships. Driver's Mart stores will carry about 500 used cars and trucks, about half the inventory at an AutoNation USA or CarMax lot. AutoNation USA plans to open a store in Largo this year. CarMax opened in Tampa last month.

Driver's Mart plans to use the Internet as a vehicle to sell cars. Once Driver's Mart adds more franchises, the company will list its national inventory on its Web site.

Beyond using the Internet, the superstores promise to shake up the traditional used-car business. A customer can return the vehicle after three days if he doesn't like it. Driver's Mart also will offer a free one-year extended warranty on all vehicles.

"There's a rapidly growing acceptance of superstore, one-price, no haggling on all models, especially for vehicles 1 to 5 years old," Eggleston said.

What's fueling this market is the exploding number of vehicles coming off leases every year. Leasing now accounts for about 32 percent of all new-car transactions. That's expected to grow to 40 percent by the end of the decade, Eggleston said, citing data from the the National Automobile Dealers Association.

Driver's Mart has set up a network for its franchises to tap into these off-lease vehicles. Franchisees don't have to pay brokers' fees to obtain these cars. Driver's Mart is also supplying training and advertising for its franchises.

In return, the franchisees invest about $10-million in the land and construction of each store and pay a royalty of $200 on each car sold to Driver's Mart. Eggleston expects each franchise to sell about 4,000 vehicles a year.

But the dealers who own the franchises are essentially paying the royalties to themselves because they are also the owners of Driver's Mart. It's a unique ownership arrangement where the franchisees are the owners of the franchisor, Eggleston said.

"We own the company," Lokey said. "So we are very committed to its success."

Lokey figures his family already knows how to sell cars. The family has been doing that for more than four decades. Paul's father, Earl B. Lokey, opened his first dealership in 1952 selling Oldsmobiles.

When Earl died in 1986, Paul took the helm of Lokey Automotive Group, which now consists of 10 dealerships, including Kia, Volkswagen and Isuzu franchises. Paul's two brothers also have their own new-car franchises not affiliated with the Lokey Automotive Group _ Tom runs Lokey Honda/Isuzu and Phil operates Lokey Mercedes/Infiniti, both in Clearwater.