Volkswagen suggested Cox as a potential buyer when previous owner, Ken Parker, announced he wanted to sell up to go into retirement.
David Cox, Cox Motor Group managing director, said: “Volkswagen were impressed with the way we handle our operations and asked if we would consider taking this step.
“While we will be building on the hard work that Ken and his team have put in, we will also be increasing the choice of new and used cars offered at the site.”
The acquisition takes Cox’s employee count to more than 240 and turnover is expected to exceed £65 million this year.
The dealership will be renamed Lancaster Volks-wagen. Jardine Motors also trades under the Lancaster brand, but Stephen Upton, Cox’s group marketing director, said it would not be a problem.
He said: “It’s never come up as a problem with our Lancaster Honda site.
“Manufacturers like dealers to use locality in trading titles so that’s why we’re changing the name to Lancaster Volkswagen.”
When asked about further growth opportunities, Upton said the group would always “consider the right acquisitions” but would not say if more purchases were in the pipeline this year.
The acquisition is the fourth in the eight-year history of the group, formed when Cox took over John Wild Group. Its other sites are Kendal Motor Village (Honda, Citroën, Seat and Renault franchises), Blackpool Honda and Lancaster Honda.
Cox has kept the workforce at Lancaster Volkswagen, and recruited four new employees. Its dealer management system has been replaced with Cox’s Kerridge’s ADP system.
Cox will open a new bodyshop near its Blackpool site this year and will be launching a standalone used car operation in Blackpool at the end of the summer.