Former Washington real estate developer Stephen H. Blake paid $5 million yesterday to buy Avanti Motor Corp., the South Bend, Ind., company that still manufactures the 1962 Studebaker Avanti luxury car.

Blake, 38, will become chairman and chief executive of Avanti, the nation's smallest automaker with an output of about 200 cars this year. He still owns a home in this area, but expects to spend most of his time in South Bend.

"I've been a car buff and collector for years," said Blake, bubbling with the glee of a kid who just bought a candy store. "I bought my first Avanti in 1972, and I fell in love with it. I used to bug them to sell me the company, and finally they said yes."

Blake, who was active in the Washington real estate business until the late '70s, bought the firm with financing from a South Bend bank and help from the Indiana Economic Development Authority, which guaranteed a $1.875 million loan in order to preserve the jobs of the company's 120 workers.

Avanti Motor Corp. went into business shortly after Studebaker-Packard Corp. stopped producing cars in late 1964. Three South Bend businessmen purchased the Avanti name, the design and all the leftover parts from Studebaker.

They set up shop in a 90-year-old factory where the Studebaker brothers once made buggies, and they assembled just one Avanti II in 1965.

Since then, production has increased steadily, and the company has earned a profit every year, Blake said. Avanti sales totaled about $5 million in the fiscal year ended Oct. 1, and Blake said he hopes to boost production by between 25 and 30 percent next year.

Sticker prices of the hand-built four-seater start around $22,000, but most roll out the door loaded with options that bring the price closer to $28,000. Each car is made to the specifications of the buyer, who must wait three to six months for delivery.

Blake said negotiations to purchase Avanti Motors and arrange financing took two years. "You can imagine what it's like trying to get a loan to buy an automobile company in this economy," he commented. "Bankers said I was insulting their intelligence."

Besides the loan guarantee from the state development agency, the new owner has arranged a $3.5 million industrial revenue bond issue from the City of South Bend to finance expanding and upgrading the plant.

Blake purchased Avanti from the estates of two of the original owners. The third founder, Arnold Altman, remains president of the company

Avanti II "is the only car in America that's completely hand-built from the ground up," Blake said. About 1,000 hours of labor goes into each car, he added. "Nobody is pushed. If it takes a week to complete the body, it takes a week."

Inside its fiberglass-reinforced plastic body, the Avanti II has a Chevrolet V-8 engine and transmission similar to the one used in the high-performance Z-28 Camaro.

Styled by noted industrial designer Raymond Lowey, the two-door Avanti was considered a radical design when it was introduced in 1962, Blake noted. "They said then it was 20 years ahead of its time. Now the rest of the world is catching up to us," added Blake, who said he expects to keep making Avantis indefinitely. "It's still the most beautiful car in America."