Used-Auto Center Couldn’t Jump-Start Sales : Cars: Pete Ellis’ dealership, based on non-negotiable prices, lasted less than seven months. Some blame the economy.

The Pete Ellis Auto Center debuted last summer as a bold and unusual used-car lot. Prices were non-negotiable, sales people were paid a set salary instead of commissions, and none of the models were older than five years.

But less than seven months after its arrival on Costa Mesa’s automobile row, the dealership shut its doors. The last of the cars were cleared off the now-vacant lot this week. Asked why Pete Ellis Auto Center went out of business, an employee who answered the telephone Thursday bluntly responded, “Because we didn’t get enough traffic.”

Ellis, a familiar name in Southern California’s auto marketplace, did not return calls this week, so colleagues could only speculate about why his latest endeavor failed.

Frank D’Agostino, general manager of Campbell Mazda--a few blocks up Harbor Boulevard from the Pete Ellis Auto Center--wondered if the newcomer had been too inflexible in the kind of cars it offered. Ellis insisted on selling only late-model used cars with good reviews from consumer magazines.

“That limits your market,” D’Agostino said. “You want to have a broad base of used cars. What about the customer looking for a $2,000 car? Chances are you’re not going to have one if all your cars are less than 5 years old.”

But one of the biggest obstacles hindering Ellis’ success was, most likely, the lukewarm economy, D’Agostino said. “He was the new kid on the block with a new theory, a new idea, competing with a dozen established dealerships. That’s a tough row to hoe.”

Ellis already had owned--and closed--new car dealerships in South Gate and Bellflower. Those businesses were killed by the recession several years ago.

Bob Tuttle, managing partner of Tuttle-Click Automotive Group, said that when one dealership goes out of business, it hurts all the dealerships on the street. Tuttle-Click owns 18 dealerships, including a Nissan lot on Harbor Boulevard in Costa Mesa.

“We’re disappointed,” Tuttle said. “They did a good job of renovating the facility they were in. It’s not good for the industry when anybody closes. Pete Ellis probably brought more business to everyone on the street--dealers create a synergy among one another.”

Ellis’ attempt at non-negotiable pricing is not new. About 9% of car dealerships feature fixed prices, according to J.D. Power & Associates in Agoura Hills. “It’s a very competitive market, and a lot of dealers are trying innovative selling techniques,” said Doris Ehlers, an account director for the marketing research firm.

In another study by J.D. Power, about 40% of consumers interviewed said they would feel more comfortable with fixed prices--about the same percentage who preferred negotiable prices.

Campbell Automotive Group, which has seven dealerships in Orange County, has practiced non-negotiable pricing for two years. “You have to study the marketplace on a regular basis to insure that customers would have a difficult time beating your prices,” D’Agostino said.

But Lew Webb, president of Webb Automotive Group, said that Pete Ellis Auto Center could have been taking a risk with its non-negotiable prices. “People like to bargain,” said Webb, who owns eight dealerships in Orange County. “That’s why people love to shop in Tijuana. They don’t even want that strand of beads--they just enjoy negotiating for it. Then they go home and put it in the jewelry box and never look at it again.”

Webb said that dealerships with fixed prices make themselves vulnerable to competitors open to negotiation: “The customer can go next door and say, ‘Pete Ellis is selling this car for this amount--can you make me a better deal?”