How much $$$ do car dealerships really make?

[PlatinumGold]

Originally posted by: tm37

Originally posted by: PlatinumGold
as a general rule.

car dealerships make more money on used cars than on new cars, exception, the more expensive the new car the more they make on it.

they also make money off the back end. when you go to their "financial" department and they sign you up for a loan, they get a piece of that.

on a 20k automobile, i bet they make $4k front end, 3k back end.

You would lose that bet

mb, i sold cars in the mid 80's and i know that's what we looked at for basing our commission. if i sold a 20k auto back then i would have gotten a percentage of the numbers i quoted earlier.

times have changed and it might be less now, i'd be surprised to hear it was a lot less.

 

[Lonyo]

Originally posted by: Vic

Originally posted by: PlatinumGold
on a 20k automobile, i bet they make $4k front end, 3k back end.

Man, one of my best friends is the sales manager for a large car dealership. Your number of $7k per deal is WAY past reality. He's an extremely talented sales closer and, when he used to make that kind of money per deal, the other salespeople nicknamed him "The Devil."
What I said was accurate, approx. $2,500 per deal gross. Back-end revenue from financing is slight with interest rates so low. Most car loans don't have $3k in interest over the entire term, you think the lender is going to kick-back to the dealer more than the gross interest?
You are right that more expensive cars tend to have better revenue, but then again, wealthier people who buy the more expensive cars tend to be more savvy. It's a dual-edged sword.
Now leasing is a different story than a straight purchase, but I have no pity for people who lease.

My Dad leases his car, and ends up with the cost being about the same as buying a new car every 6 years (he gets a new one every 3 years), and he doesn't have to worry about insurance or servicing etc, or selling on the car at the end.
Leasing isn't all that much worse than buying new.

Buying used is possibly the best idea though, much better deals very often.

 

[olds]

Originally posted by: abracadabra1
good question....hopefully not much

What a dope.

 

[mattgyver]

My dad used to sell big trucks (tractor-trailers) and said he didn't like to sell new trucks because he couldn't make any money off of them. But he said it was fairly common (well, several years back) to make $10k on a good used truck.

 

[batmang]

well, i just got a new car from a mitubishi dealership over hear in tucson az. a used
2002 Mazda Protege 5. its white, has 19k miles, loaded with everything cept cd changer, sun roof and leather. its basically mint condition, was owned by an old woman. before we started negotiating, the price of the car was $14,995. we got the dealership down to $11,200, with a 36k mile full warranty and a regular 100,000 mile warranty. after taxes and everything, we got the car out the door for $12,433, and we also got a 5 year 75k full platinum package extended warranty, covering pretty much everything. (same as 36k)
the car on kellys blue book is $12,840, so i actually got it cheaper then what it would at lowest sell as from a dealership. They lost money on the sale but will get money off the interest of course. But after the interest and when its all over after a 72month payment plan, the full out cost is only about $13,500. So in all reality, they only made about $1,200 off me, but lost money on the sale. So if i overpaid every month (which im doing), they'd get no interest off me and id pretty much get the car exactly for whats its worth, and nothing more.

*EDIT* - Forgot to mention, cars do go down in value yearly, and the sale price stays until your done with payments, so yeah someone makes money, but its not the dealership from the sale, its the bank you got your load from.

 

[Vic]

If the interest is only $1,200 total over 72 months, then the dealer will see none of that money. And low book on that car is approx. $9,700 -- so the equation for what they made on your sale is:

(sales price - taxes,fees,warranties,etc.) - what they paid the "old woman" (granny who only took it out on Sundays I'm sure ) for it but that was probably low book or less = gross revenue

 

[olds]

Originally posted by: batmang
They lost money on the sale...

I highly doubt that.

 

[Vic]

Originally posted by: oldsmoboat

Originally posted by: batmang
They lost money on the sale...

I highly doubt that.

As do I.

People never seem to realize that no self-respecting big-ticket item salesperson sells for a loss. That he can profit and make you think that he sold it at a loss.... well, that's true skill

 

[batmang]

well, lemme put it this way, they prolly made money, but not near as much as they could have. to start off at 14,995, and then sell it at 11,200. you lost some money. they make tons of money on different things, not just sales of cars, their always going to make money somehow: selling warranties, parts, misc add ons, etc etc. but on my particular buy, i know i didnt get raped, i got a damn good deal.

 

[dxkj]

Originally posted by: oldsmoboat

Originally posted by: batmang
They lost money on the sale...

I highly doubt that.

They arent in business to lose money. I highly doubt they lost money.

 

[batmang]

Originally posted by: batmang
well, lemme put it this way, they prolly made money, but not near as much as they could have. to start off at 14,995, and then sell it at 11,200. you lost some money. they make tons of money on different things, not just sales of cars, their always going to make money somehow: selling warranties, parts, misc add ons, etc etc. but on my particular buy, i know i didnt get raped, i got a damn good deal.

 

[Vic]

Originally posted by: batmang
well, lemme put it this way, they prolly made money, but not near as much as they could have. to start off at 14,995, and then sell it at 11,200. you lost some money. they make tons of money on different things, not just sales of cars, their always going to make money somehow: selling warranties, parts, misc add ons, etc etc. but on my particular buy, i know i didnt get raped, i got a damn good deal.

Anyone who sells big-ticket items for a living (like a car salesperson) has 2 diametrically-opposed duties to his job. He must make profit for the company and he must make customers happy. If making you think that you got a great deal (and I'm not saying that you didn't, it looks like you did) on your car makes you happy, and he still made an adequate level of profit for his company, then he did his job perfectly.

Don't let your emotions crowd out your ability to think logically.


edit: I'm sorry (where the hell are my manners?) Congrats on the new car!

 

[olds]

Originally posted by: batmang

Originally posted by: batmang
well, lemme put it this way, they prolly made money, but not near as much as they could have. to start off at 14,995, and then sell it at 11,200. you lost some money. they make tons of money on different things, not just sales of cars, their always going to make money somehow: selling warranties, parts, misc add ons, etc etc. but on my particular buy, i know i didnt get raped, i got a damn good deal.

I beleive the flaw in your logic is assuming they paid blue book for the car. They paid wholesale or less.

 

[Tom]

"how much money do they make on a MSRP of $30,000"

about $12000-18000.

 

[conjur]

Originally posted by: Dead Parrot Sketch
"how much money do they make on a MSRP of $30,000"

about $12000-18000.

WHAT?!?!

The *manufacturer* might...but not the dealership!

Esp. not a foreign car dealership like Honda or Toyota. They have less margin to work with.

 

[Tom]

I'm talking everything they make per vehicle sold, including add-ons, warranty repairs, service,financing, etc, over time.

 

[conjur]

Originally posted by: Dead Parrot Sketch
I'm talking everything they make per vehicle sold, including add-ons, warranty repairs, service,financing, etc, over time.

Still way over. They're lucky to make a few thousand on the sale, then a kickback from the financing (with interest rates so low that's not much). Most cars don't need much servicing.

 

[Tom]

Do you really believe a sales manager is going to tell sales people the TRUE amount the dealership makes ?

And whatever the sales manager thinks he knows he also does not know the real numbers.

I could be way off, that's true, but anyone who isn't the dealer or his accountant doesn't know the whole story, and they sure as hell aren't telling anyone.

 

[PlatinumGold]

one more time, do you guys have ANY idea what the cost of JUST staying open is for a Car Dealership?

how many cars do you think a dealership sells a month? do the math, they have to be making some money to stay in business.

 

[draggoon01]

Originally posted by: Lonyo

Originally posted by: Vic

Originally posted by: PlatinumGold
on a 20k automobile, i bet they make $4k front end, 3k back end.

Man, one of my best friends is the sales manager for a large car dealership. Your number of $7k per deal is WAY past reality. He's an extremely talented sales closer and, when he used to make that kind of money per deal, the other salespeople nicknamed him "The Devil."
What I said was accurate, approx. $2,500 per deal gross. Back-end revenue from financing is slight with interest rates so low. Most car loans don't have $3k in interest over the entire term, you think the lender is going to kick-back to the dealer more than the gross interest?
You are right that more expensive cars tend to have better revenue, but then again, wealthier people who buy the more expensive cars tend to be more savvy. It's a dual-edged sword.
Now leasing is a different story than a straight purchase, but I have no pity for people who lease.

My Dad leases his car, and ends up with the cost being about the same as buying a new car every 6 years (he gets a new one every 3 years), and he doesn't have to worry about insurance or servicing etc, or selling on the car at the end.
Leasing isn't all that much worse than buying new.

Buying used is possibly the best idea though, much better deals very often.

why doesn't he worry about insurance or servicing?

insurance usually higher on new cars.

servicing, i guess because it's always under warranty since kept for 3 years

 

[Cooljt1]

some dude in my area who owns a lexus and bmw dealership raked in 50 million last year....damn

 

[jagr10]

Originally posted by: Cooljt1
some dude in my area who owns a lexus and bmw dealership raked in 50 million last year....damn

Ya, but that's gross. If you look at net it's probably only hovering around 3 mil at most. That's still alot though.

Some dealerships make alot of money selling to companies so they'll sell like 10 cars at once. Not much money is made on cheap brand new cars. Used cars and interest rates on leases is where they make their big money.

 

[DrPizza]

Originally posted by: Cooljt1
some dude in my area who owns a lexus and bmw dealership raked in 50 million last year....damn

Certainly, you don't mean 50 million in profit...
If they're open 365 days a year, that's $137,000 profit per day! That's an awfully high volume of sales... how do they keep from running out of cars? (especially since to calculate profit, you have to subtract the commission of the salespeople)


If a dealer can develop customer loyalty, then they make bunches more money off each car that you guys aren't thinking of...
They sell the car for 20k, making a 3k profit... 3 years later, they get the car back, give 5k as a trade in value when the customer buys a new car, and then they sell the used car for 10k. Thus, they make 8k off a 20k car. (or use whatever numbers you want... trade = 10k, resell 15k, etc.) Regardless, they get to sell the car twice. The 3rd time, it goes to the auction, where they hope to break even on the trade value. (but, they'll often give a higher trade value in lieu of not lowering the price from the msrp as much)

 

[alkemyst]

Originally posted by: Lonyo
My Dad leases his car, and ends up with the cost being about the same as buying a new car every 6 years (he gets a new one every 3 years), and he doesn't have to worry about insurance or servicing etc, or selling on the car at the end.
Leasing isn't all that much worse than buying new.

Buying used is possibly the best idea though, much better deals very often.

hmmm yeah it is...if you are looking for equity at all vs just paying to drive. Depending on mileage also you can screw yourself, not to mention forget customization etc.....

Insurance is more for a leased car (for most people unless you already have 100/300/100 coverage and $500 deductables, although some companies allow $1k deductables).

 

[Vic]

Originally posted by: Dead Parrot Sketch
"how much money do they make on a MSRP of $30,000"

about $12000-18000.

Yer on crack.