How much $$$ do car dealerships really make?
- Thread starter Turkish
- Start date
Schadenfroh
Elite Member
- Mar 8, 2003
- 38,416
- 4
- 0
Like maybe the kind of car they're selling, the interest rate they sell it at, the person's down payment? 
kranky
Elite Member
- Oct 9, 1999
- 21,019
- 156
- 106
The average buyer may be an idiot, but on a used car the dealer potentially has an idiot buyer and an idiot seller. It would not be unheard of to make a $3K profit on a $10K used car. On new cars, it's possible to find out what the dealer paid (or very close) and there's a MSRP. If that difference is only $2K on a new car, it's pretty hard to increase profits by adding on to the MSRP. Even the idiot buyers can catch that.
CPA
Elite Member
- Nov 19, 2001
- 30,322
- 4
- 0
It depends.
How much is the manufacturer kicking back?
Is there still a holdback on the car?
What is the cost of financing the car on the lot? (Dealerships don't buy the cars from manufacturers, they finance them, just like most of us)
What is the invoice price of the car?
What's the commission rate on the car? (it varies, that's why some salepersons will try to steer you to certain cars)
How much is the manufacturer kicking back?
Is there still a holdback on the car?
What is the cost of financing the car on the lot? (Dealerships don't buy the cars from manufacturers, they finance them, just like most of us)
What is the invoice price of the car?
What's the commission rate on the car? (it varies, that's why some salepersons will try to steer you to certain cars)
I think they make more off of used cars, wife and me got rid of a sable and it sold at a auction for like 3k to a dealer
saw that somebody bought it and asked them how much they paid for it and was told they got it for 12k.
saw that somebody bought it and asked them how much they paid for it and was told they got it for 12k.
Vic
Elite Member
- Jun 12, 2001
- 50,422
- 14,337
- 136
Done that many times, Reg. A few years back, a used car salesman told me they were selling an old beat-up '79 Toy 4x4 for $12,000 and (he said this with a straight face) that was half off!! I laughed in his face so hard I think I spit on him.
How much do they make on a new car deal? I shouldn't tell you all because I know many of you are socialists who would deny a man any kind of living at all if you could, but the formula is simple.
(Sales price - Invoice) + (Sales price * 0.03) + (trade-in low book - what they gave as trade-in value) = dealer gross
Just FYI, the industry average gross revenue (edit: for a new car sale) is about $2,500 per deal.
edit: most new car dealers will not sale a used car taken in as a trade that is 5 or more years old on their lot, it goes straight to auction.
How much do they make on a new car deal? I shouldn't tell you all because I know many of you are socialists who would deny a man any kind of living at all if you could, but the formula is simple.
(Sales price - Invoice) + (Sales price * 0.03) + (trade-in low book - what they gave as trade-in value) = dealer gross
Just FYI, the industry average gross revenue (edit: for a new car sale) is about $2,500 per deal.
edit: most new car dealers will not sale a used car taken in as a trade that is 5 or more years old on their lot, it goes straight to auction.
I KNOW they make more off of used cars. We were told this in weekly sales meetings. Heck, when a person trades a car in, they get wholesale value for their trade (they go online to mannheim and check the local auctions for that year/model and in similar condition and get an auction price...that's your trade-in price...fvck Edmunds or KBB...those are pipe dream trade-in amounts!!)
Then, they'll take that '98 Civic with 68,000 miles that they just gave someone $2000 for and resell it at about $8000-9000. All profit. And, most used cars have a cryptic sticker on the window, not a full-display sticker like a new car, so you can't really tell what the price is. Many times I was told to bump the selling price up a few hundred to a $1000 over the asking price and then the customer would negotiate down a grand and think he got a great deal!
Then, they'll take that '98 Civic with 68,000 miles that they just gave someone $2000 for and resell it at about $8000-9000. All profit. And, most used cars have a cryptic sticker on the window, not a full-display sticker like a new car, so you can't really tell what the price is. Many times I was told to bump the selling price up a few hundred to a $1000 over the asking price and then the customer would negotiate down a grand and think he got a great deal!
I had a dealer once tell me that they were having a gigantic sale and that they would sell me virtually any car on their lot for whatever price I wanted (I knew this was a lie, but whatever). I then told him that I (at the time) was looking for a used Dodge Intrepid but didn't want to spend more than $11,000.
He comes back with a 2002 Intrepid with only 19,000 miles and a sticker price of $13,998. After driving it around, I told him I would take it if he could get it down to $11,000 including tax. He talks to his boss and their "financial advisor" and tells me that that's not possible.
I proceeded to tell him about how I had said all along that the car had to be 11 grand or under and that he had told me they could give me any car at any price. They (the manager and financial advisor were involved by now) started BSing about how I'd be better off looking at the monthly payment instead of the final price. I told them I had $11,000 cash to plunk down right and didn't need their rediculously expensive loan.
After an hour and a half of going back and forth, I told them I was fed up and going to leave. The salesman looked like he was going to cry but didn't say anything, so I left.
I ended up going somewhere else, but the best part was when the saleman called me back to say he found a car for me. I told him that I'd happily gone to their biggest competitor and gotten a much better already. Greatest feeling ever.
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.
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.
alkemyst
No Lifer
- Feb 13, 2001
- 83,769
- 19
- 81
as a unit selling a used car will yield more profit from the immediate sale. Usually they get the seller on the trade in and the buyer on the sale (two profits really).
on a new unit the dealer is usually dealing with someone that thinks 'sticker' is a good deal, even with that $600 'stain protection' package and $250 pinstripe....so on a deal like that he is making almost 100% on the add on sticker, the difference from MSRP to invoice, the 1-3% holdback he gets based on the MSRP (sometimes invoice and sometimes no holdback, but that is rare)....
Plus if he is a big dealership and sells a lot of cars, there are bonuses awarded and discount tiers to buy more cars at. A small dealershp buying 1 or 2 cars at a time pays invoice, a large shop buying 1000's to stock at their 50 dealerships gets a volume discount....again not all manufacturers offer this.
Moran of Southeast Toyota makes quite a bit more than the average dealership owner...he negotiated with Toyota in the 70's when no one wanted to carry them, he demanded and got an exclusive on the whole SouthEast USA. He is able to relabel Toyota's options and call them a Moran option and up the price. He isn't extremely greedy which is good, but pricing out a Toyota on the 'net is going to be about 1%-2% cheaper than what you will have to pay.
And as mentioned above...once you enter 'their' finance department you are also paying them profit. My last financing of a car they told me with 'my credit' (which was actually good)...I only qualified for a rate 2% above the advertised rate (which was a good rate in a way, but not the best).....they said with rates changing quick I better do it now....I waited and saved 5% APR going with a local bank....
on a new unit the dealer is usually dealing with someone that thinks 'sticker' is a good deal, even with that $600 'stain protection' package and $250 pinstripe
....so on a deal like that he is making almost 100% on the add on sticker, the difference from MSRP to invoice, the 1-3% holdback he gets based on the MSRP (sometimes invoice and sometimes no holdback, but that is rare)....Plus if he is a big dealership and sells a lot of cars, there are bonuses awarded and discount tiers to buy more cars at. A small dealershp buying 1 or 2 cars at a time pays invoice, a large shop buying 1000's to stock at their 50 dealerships gets a volume discount....again not all manufacturers offer this.
Moran of Southeast Toyota makes quite a bit more than the average dealership owner...he negotiated with Toyota in the 70's when no one wanted to carry them, he demanded and got an exclusive on the whole SouthEast USA. He is able to relabel Toyota's options and call them a Moran option and up the price. He isn't extremely greedy which is good, but pricing out a Toyota on the 'net is going to be about 1%-2% cheaper than what you will have to pay.
And as mentioned above...once you enter 'their' finance department you are also paying them profit. My last financing of a car they told me with 'my credit' (which was actually good)...I only qualified for a rate 2% above the advertised rate (which was a good rate in a way, but not the best).....they said with rates changing quick I better do it now....I waited and saved 5% APR going with a local bank....
how do you define "not much"?? enough for them to pay their overhead, employees, maintenance, interest and a small profit?
or not enough to pay those things and end up going out of business, filing bankruptcy and stiffing all the banks that financed the endeavor.
do you guys have ANY idea how much it costs to set up a car dealership?
Vic
Elite Member
- Jun 12, 2001
- 50,422
- 14,337
- 136
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.
TRENDING THREADS
-
Discussion Zen 5 Speculation (EPYC Turin and Strix Point/Granite Ridge - Ryzen 9000)- Started by DisEnchantment
- Replies: 25K
-
Discussion Intel Meteor, Arrow, Lunar & Panther Lakes + WCL Discussion Threads
- Started by Tigerick
- Replies: 23K
-
Discussion Intel current and future Lakes & Rapids thread- Started by TheF34RChannel
- Replies: 23K
-
-
Facebook
Twitter