Overhaulin'

How much are dealers making on a new and used car sale?

I am trying to figure out the lowest price that any dealer can sell a car for. Every time I want to buy a car a dealer goes below sticker price saying that they are loosing money on a sale but are willing to sell anyways. What kind of bullshit is this? I am preety sure they buy it from factory for something around 30% of a price on window. I just need someone that maybe worked for a dealership knows what is going on by answering this question.

Public Comments

1. The average mark up on a used Chevy is $4000. The average target profit is around $1200. We will try to sell you the add ons to juice you for the entire $4000 if we can't get you to pay the entire $4000 spread with out the add ons. New cars profits used to be $250, but it has been a while and I sold Used Chevy's in Dallas off I-635. New cARS sales employ a lot of tricks to get you to think that you are only paying invoice.The invoice might be real, but there are several "reserves" or "commissions" that are guaranteed to the dealer by the factory to get to this. Only a few people are ever able to negotiate or to "dig" into this profit centre in an effort to get a good deal. Do not buy the extended warranty. Dump the car in four years. Good luck!
2. loosing ? New car dealers get incentives & kickbacks such that they can sell cars below invoice and it still end up being profitable. That said, there is generally FAR more profit in used cars than new. The new car department is makes less money than Used cars, parts or service. But the others wouldnt exist without new cars. I was at a dealer once years ago and they were selling a new honda prelude for $75 over invoice. I couldnt grasp it and the sales manager said if I dont sell it to them, they will buy it from the other honda dealer for $100 over invoice and often dealer incentives & future allocations are dependent on how many cars are sold. On used cars, nowdays, i doubt many dealers would accept less than a $1500 gross profit on a car sold at retail.
3. LOL- The average profit on a new car is less than 3%. Then you have to pay a salesman's, advertising, building, insurance and it goes on and on. That's right the average profit margin is 3%. And Wal-Mart is over 76%. The difference in window sticker price and cost depending on the car and the manufacture is 4%-12%. It is very rare to have 10% plus in the cost to window sticker price. As you can see below a 2010 Toyota Prius has a profit margain of 7.4%. 30% still laughing at this one. Also keep in mind a dealer has to pay interest on this car every month at rate of $166 a month and on average it takes about 3 months to sell. So there is another $500 racked up in cost. http://www.edmunds.com/new/2010/toyota/prius/101161781/prices.html
4. Very hard to say what the profit is on new cars since the dealer does have incentive deals with the factory, both volume and financing. Unless you are very high up in the dealership, you don't know the exact details. As far as a consumer and pricing, I would use a website like Edmunds.com to do research. They keep up to date on all rebates and factory incentive programs. Also they show both MSRP and Invoice pricing as well as pricing for your region. Good luck.
5. Everyone else has given some great suggestions, all of them I agree with; one other thing I'd toss into the mix is to make sure on whatever vehicle you buy, especially if it's used, that you get a vehicle history report just to be sure of what work has already been done on the car in case the dealer doesn't mention it. I've been using this free promotion from a company called InstaVIN, it's kind of like Carfax, that's sending out free vehicle history reports to anyone all this month. All you need to do is text the 17 digit vehicle VIN # to “INSTA” or 46782. I've been looking for a new used car myself these past couple of weeks and this has helped me avoid buying a couple closet clunkers. Best of luck to you in your search