PAA was formed in early 1919, just after the end of World War I and at the start of Prohibition. It was almost two years after the establishment of the National Automobile Dealers Association (NADA), when thirty dealers from around the country traveled to Washington, D.C. to oppose a luxury tax on automobiles. 

 
Led by George G. McFarland, a Harrisburg area Oldsmobile and Reo dealer, fourteen Pennsylvania businessmen recognized that the state’s estimated 4,500 dealerships needed representation in Harrisburg and uniform laws across the Commonwealth.
   
By 1919, many dealers belonged to already established regional associations across Pennsylvania, which organized car shows and worked with local law enforcement and mayors’ offices. At the time, traffic rules were the purview of each town, but PAA’s founders anticipated the need for state-wide laws.
   
The main legislative issue for the fourteen member Board of Directors was the repeal of a $100 charge in state law on the sale of used vehicles. Some dealers outright refused to pay this as there was no enforcement, creating turmoil in the industry. PAA was able to repeal the law. There was also a repeal of the vendor affidavit fee that dealers paid to the state. In its place became a title fee that dealers were able to pass on to the customer.
   
These were great legislative victories that, when communicated to the dealer body, illustrated PAA’s strength and led to increased membership.

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In 1925, Claude Klugh was hired to manage the growing association. He would continue to serve as its executive for thirty-six years. The “Roaring Twenties” fostered an automotive culture, but the good times ended with the stock market crash on October 29, 1929. 

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