The white 1976 Trans Am shipped down here from West Virginia looked worn and ragged. The nose needed paint. The upholstery was ripped. The big gold eagle on the hood was almost faded from sight. The wheels appeared to have been stained brown.

It took only six days in the hands of G. L. Laughter for the car to undergo a minor transformation.

Laughter, one of an estimated 2,000 people who make their living in the car business in this small town near the South Carolina border, had the nose painted at Ayers Used Cars and Body Shop. He unbolted the seat with the torn upholstery and carried it to a nearby trim shop for repair. He removed the wheels, painted them and put on four new tires. He had the engine steam-cleaned and the interior shampooed at the cleanup shop. Finally, he had a sign painter named "Wild Bill" Lowery paint a new gold eagle on the car hood.

The result: a car guaranteed to bring in the customers at some used-car lot up north.

With hard times creating a sellers market for used cars, Forest City, or "Little Detroit" as it's known hereabouts, is thriving on a steady diet of bashed fenders, peeling paint and torn upholstery. Over the years, thousands of "dogs" and numerous "creampuffs", as used cars of poor and exceptional quality are known, have been brought here from the Washington area to be "reconditioned" and then sold in towns throughout the South. These days an increasing number of the cars are ending up back in Washington, earning their sellers some tidy profits for their efforts.

It used to be that used-car dealers in the Washington area did not have to go far to satisfy the demand for cars. Now, however, they come down here on buying trips or bid at auctions in Fredericksburg, Va., or Laurel, Md., where many of the cars from North Carolina are sold after being reconditioned.

Every week about 3,000 automobiles, roughly half of them obtained from Washington area dealers, are reconditioned in Forest City. Like Laughter's Trans Am, the cars receive some quick cosmetic surgery at one of the town's 300 garages, cleaners and body shops before being sold at auction to dealers who take them back north.

All this is done, explains William Moore, a local car dealer, for the same reason that bakers decorate cookies. "The decorating may not change the quality of the cookie," he says, "but you are more likely to buy the decorated cookie."

In some cases, however, the decorating goes a little too far.

Since last October, 32 North Carolina dealers, eight of them from Rutherford County, where Forest City is located, have had their licenses revoked by the state for periods of up to 18 months for turning back the odometer of an automobile to show a lower mileage figure.

"The problem in North Carolina was bad, and I'm not sure it's cleaned up yet," said Richard Morse, a criminal investigator for the National Highway Traffic Safety Administration (NHTSA) who worked with North Carolina officials on the odometer tampering probe.

Forest City officials say odometer tampering is not representative of their community or their used-car industry. "A lot of people here were shocked--a lot of people here didn't know that was going on," said Martha K. Roach, executive secretary of the local Chamber of Commerce. She said that none of the area's larger dealers was involved, "only a few smaller dealers," and that there was some feeling that the odometers had been rolled back before the cars were acquired by the Forest City dealers.

While law enforcement officials and Forest City repair shop owners say that more reconditioned cars are making their way back to Washington, dealers in the capital area generally refuse to discuss where they get their cars.

Their reluctance is based partly on competitive pressures. "I don't want other dealers to know where I get my cars," said Leon Riddle, used-car manager at Sheehy Ford in Marlow Heights. Dealers also do not want to admit any connection to used-car auctions because of the reputation the auctions have for selling used cars that have been wrecked and rebuilt.

"If you go to an auction and don't know what you're doing, you can get killed lose money --you can get cars that have been sawed in two and made into one single-car unit and you can get cars with 30 pounds of Bondo a plastic filler used to patch damaged car bodies ," said Robert Cheff, general sales manager for JKJ Chevrolet in Tysons Corner.

Dealers also must look out for cars on which the odometers have been rolled back, Cheff said. "You can tell if you know what to look for," he said. For instance, a car that shows 14,000 miles but does not come equipped with the original tires or other original equipment probably has had its odometer rolled back, he said.

The interstate transporting of used cars creates an ideal environment for odometer rollbacks and makes law enforcement more difficult, officials said. It is not unusual for a used car to be trucked through several states and change hands several times in only a few days. A car may be trucked from Virginia to North Carolina for reconditioning, then trucked back to Virginia to be sold at auction to a dealer in Maryland.

Typically, Washington dealers buy reconditioned cars at auctions in Fredericksburg and Laurel and Carolinas cities such as High Point and Statesville, N.C., and Darlington, S.C.

Last month at an auction in Fredericksburg, Va., for example, Frank Perrin, used-car manager for Jim McKay Chevrolet in Fairfax County, bought a 1977 Cadillac Seville from Joe Beam Motor Co., a wholesale and reconditioning firm in Rutherford County.

"It was a light metallic blue, and parts of it had been repainted but it was hard to tell because they had done such a good job," said Perrin. "You just can't get work like that up here."

Rutherford County, where there are 50,000 people and 234 licensed car dealers of one sort or another, developed as a reconditioning center after World War II when the demand rose for used cars. Sales of used cars were especially good in the South, where individual income generally was lower than in the unionized, industrialized North.

The closest major source of quality used cars for dealers in the county traditionally has been Washington, where residents had well-paying, stable jobs and routinely traded in cars after driving them one or two years.

Terry Watkins, now one of the largest car dealers in Forest City, has vivid memories of the buying trips he made to Washington as a young man in the early 1960s. "I would drive all night to get there, rent a motel and buy a newspaper. Then I'd get on the telephone and start trying to buy a car. When I made a deal, I would towbar home drive one car while pulling a second car attached by means of a towbar ."

Today Watkins has his Washington purchases shipped to Forest City on a car carrier that can hold seven used cars. He has a full-time buyer who lives in Washington and buys used cars from such dealerships as Aero Chevrolet in Alexandria and Lustine Chevrolet in Hyattsville, Md.

But fewer cars go south to Watkins now because consumers in Washington, like consumers elsewhere, are keeping their cars longer and buying new cars less often. The quality of available cars also has declined, according to Watkins.

There was a time, for instance, when he accepted only top of the line used cars. But now "Terrible Terry," as some local residents call Watkins, has had to lower his standards. One shipment he received the other day, for example, which had arrived the previous night after a 10-hour drive from Washington, included three "dogs," three cars in normal used-car condition and only one "creampuff" in ready-to-sell condition.

Watkins, who is fond of plaid pants and gold rings and has a reputation as a man who can sell you a motorcycle helmet even if you don't have a motorcycle, promised the "creampuff," a sleek-looking 1979 Peugot with 19,000 miles, to an eager buyer before the car even arrived in Forest City. The buyer took it sight unseen.

Four other buyers then were invited to bid on the remaining six cars on the morning they arrived in Forest City. Rick Humphries, 24, who operates H&H Motors down the street from Watkins' lot, won the drawing and a chance to bid first. He selected one quality car, the shiny yellow 1978 Chrysler Le Baron, and one "dog," the navy 1976 Mercury Comet. Later, after more negotiating and a coin toss, Humphries agreed to take a second "dog," the dull-looking 1978 blue Impala.

A second buyer, Bob Hodge, who operates Hodge Auto Sales in Forest City, bought the other two quality cars--the 1980 Citation and the 1979 Malibu, both dark burgundy.

That left the faded, ragged 1973 Audi, the worst of the three "dogs." Despite the hot coffee and sweet deals that Watkins offered the dealers, none wanted the worn-out car. Undeterred, Watkins telephoned Don Horn, a dealer in nearby Marion, and offered him the Audi. Horn drove over immediately and after closed-door negotiations bought the car.

Two weeks after leaving Washington, the Audi reached Horn's Used Car Lot in Marion, N.C., where the price was set at $1,095. Horn said that will net him $100 to $200 after paying for the reconditioning, which included having the upholstery fixed, the rust damage repaired, the motor serviced and the car cleaned.

No mechanical work was done. "It doesn't need anything," Horn said. "I tried the engine and it hums."

In this out-of-the-way corner of the automotive industry, specialization is practiced to a high degree. Three of the local shops, for example, do only trim and upholstery work. Three others handle only auto glass jobs. There are two chrome and bumper shops and two top shops that work on vinyl roofs and sunroofs. Then, there is the Jim Burns Tire Customizing, a two-man business that converts blackwall tires into whitewalls.

On a good day, Burns, 33, can paint rings around 100 tires.

"Basically, what I do for dealers is apply whitewalls to blackwalls, repair curb damage, narrow whitewalls, widen whitewalls--we match them up, clean them up and make them look good," said Burns, who uses a tire customizing machine and a special roller brush to do the work.

Burns started painting whitewalls onto tires four years ago and business has been so successful that he hired a man to help him. Dealers who want Burns to whitewall tires leave their requests on his telephone answering machine. He typically drives his truck, loaded with the 85-pound tire customizing machine in the rear, to the shop where there are several used cars waiting for whitewalls. Burns charges $3.50 to paint a blackwall tire, substantially less than a dealer would pay for a factory whitewall.

"We don't like to say it is permanent," Burns said. "Under certain conditions, it will crack or peel. But normally the paint will last the life of the tire . . . I know of some that have been in service in excess of two years."

In some cases, the used cars brought here for reconditioning also undergo mechanical work, such as transmission, brake or exhaust system repair.

The thrust of the reconditioning is to improve the appearance of the car by repairing body damage and upholstery, restoring vinyl, cleaning the interior and the engine, painting and polishing.

"People won't buy used cars that don't look good," said Moore,, "and reconditioning makes them look good."