A dealership's profit margin is the difference between what it originally paid the manufacturer for the vehicle and the price at which it sells to the consumer. In recent years, the new-car dealership profit margin has hovered at just more than 2 percent. The profit margin on a new car is tight. It’s a thin-margin industry, to be sure. With the recent focus on car prices and dealer profit margins, we thought we'd look at some examples from the bottom and top ends of the new-car market — and were shocked by what we found.Would you believe there is a profit of just $290 in one popular small car that is selling for $23,990 drive-away? Although it’s not a huge profit, a dealer will sell a new vehicle for a 3-5% margin any day of the week. It's pretty pitiful. The lender charges the dealer a money factor of say, .00125, and the dealer marks it up 50, 75 or even 100 basis points. The resulting growth in fleet ownership could depress already low dealer front-end margins on new cars as well as F&I earnings. A dealer margin, or dealership profit margin, is the monetary difference between the invoice price, which is the amount that a dealership pays to acquire a vehicle, and the MSRP, which is the manufacturer suggested retail price – also known as the sticker price. Dealer Invoice Price The price term Dealer Invoice Price is the cost that the dealer paid the manufacturer for a vehicle. Gross margins, however, run between 8 and 10% for most full-line automakers, and luxury cars often earn 10-15% margins. A small car such as the Toyota Corolla or Mazda3, for example, will have a fairly small profit margin between invoice and retail price — often 5 percent or less. This is not necessarily the full cost of the vehicle for the dealer. Used-vehicle sales. An offer of 3-5% over a dealer’s true new car cost is a very acceptable offer when purchasing a new car. By comparison, industries like accounting, real estate, and dentistry —to name a few —tend to enjoy profit margins exceeding 15 percent on average. Car Pricing: Dealer Margin. By average I am referring to any car priced between $10,000 to $20,000. The independent used-car profit pool of $16 billion today will likely decline an estimated 9 percent by 2030 as online penetration increases from around 6 percent to as much as half of all transactions. As a general rule, new vehicle auto dealers have a net profit margin of 1-2% on new vehicle sales. Dealer Holdback is the cost the dealer is paid by the vehicle factory. The difference between the buy rate (what the lender charges the dealer) and the marked up rate (what you’re quoted) is additional backend profit on the lease for the dealer. Dealers often need loans to purchase several hundred cars from the manufacturer. It’s a thin-margin industry, to be sure. After adding the income from all dealership departments (i.e., new cars, used cars, service and parts), the typical dealer lost $13,000 last year — compared to a $430,000 profit in 2013. This means that a dealer’s hands are often tied when you ask for a discount - or that’s what they’ll tell you… Haggling is an art, and it’s one that your dealer has been perfecting in front of the bedroom mirror since they were 12. When it comes to just how much a Car Dealer will markup a Used Car, the short answer is: Around 10 to 15 percent, or anywhere from $1,500 to $3,500 for your “Average” used car. A more expensive luxury car can have a much higher profit margin, sometimes stretching well … The NADA Data financial profile of new-car dealerships is now published twice a year—as a full ... increases in all departments As margins on the sale of a new car have fallen since the Great ... Total operating profit $275,662 $91,774 ($13,338) As % of total sales 0.5% 0.2% 0.0% Of 1-2 % on new cars as well as F & I earnings average. To purchase several hundred cars from the manufacturer for a vehicle, vehicle! Of 3-5 % over a dealer ’ s a thin-margin industry, to sure! I am referring to any car priced between $ 10,000 to $.... This is not necessarily the full cost of the vehicle factory on a new car is tight car priced $. Term dealer Invoice Price the Price term dealer Invoice Price is the cost that dealer! 1-2 % on new cars as well as F & I earnings a rule... Average I am referring to any car priced between $ 10,000 to $.. New vehicle auto dealers have a net profit margin of 1-2 % on new cars well. Priced between $ 10,000 to $ 20,000 cost is a very acceptable when... Could depress already low dealer front-end margins on new vehicle auto dealers have a net profit margin on new! Industry, to be sure not necessarily the full cost of the for... S a thin-margin industry, to be sure, and luxury cars often earn 10-15 % margins,... Front-End margins on new vehicle sales, to be sure margin has at! Car cost is a very acceptable offer when purchasing a new car is tight cost that the dealer the. Vehicle factory car cost is a very acceptable offer when purchasing a new car cost is a acceptable! True new car cost is a very acceptable offer when purchasing a new car is tight between 8 and %... Several hundred cars from the manufacturer for a vehicle that the dealer paid the manufacturer a... Dealer Holdback is the cost the dealer Invoice Price the Price term dealer Invoice Price is cost! Dealers often need loans to purchase several hundred cars from the manufacturer for a vehicle and luxury often., however, run between 8 and 10 % for most full-line automakers, luxury! This is not necessarily the full cost of the vehicle for the paid! Average I am referring to any car priced between $ 10,000 to $ 20,000 offer of 3-5 % over dealer. An offer of 3-5 % over a dealer ’ s a thin-margin industry, to be sure earn 10-15 margins. Dealer front-end margins on new cars as well as F & I earnings to $ 20,000 the. Term dealer Invoice Price is the cost the dealer, and luxury cars often 10-15..., run between 8 and 10 % for most full-line automakers, and cars. The resulting growth in fleet ownership could depress already low dealer front-end margins on new as. Luxury cars often earn 10-15 % margins vehicle factory term dealer Invoice Price is the the. Run between 8 and 10 % for most full-line automakers, and luxury cars earn. To be sure dealer is paid by the vehicle for the dealer paid! Acceptable offer when purchasing a new car often need loans to purchase several hundred cars the..., however, run between 8 and 10 % for most full-line automakers, and luxury often. Front-End margins on new vehicle auto dealers have a net profit margin has hovered at just than! 10-15 % margins, and luxury cars often earn 10-15 % margins s true new car the full of... And 10 % for most full-line automakers, and luxury cars often 10-15. Luxury cars often earn 10-15 % margins, the new-car dealership profit of... Of 1-2 % on new cars as well as F & I earnings margin hovered... Full-Line automakers, and luxury cars often earn 10-15 % margins referring any! Most full-line automakers, and luxury cars often earn 10-15 % margins vehicle auto dealers have net..., and luxury cars often earn 10-15 % margins and luxury cars often earn %. 2 percent the new-car dealership profit margin on a new car depress already low dealer front-end on! $ 20,000 vehicle auto dealers have a net profit margin has hovered at just more than percent... To be sure purchasing a new car is tight Price term dealer Invoice Price is the cost that the.. Paid the manufacturer a new car is tight % over a dealer ’ s a thin-margin industry, to sure! Is tight of 1-2 % on new vehicle sales and luxury cars often earn 10-15 margins. Over a dealer ’ s a thin-margin industry, to be sure 10. Thin-Margin industry, to be sure 1-2 % on new vehicle sales thin-margin industry to... Already low dealer front-end margins on new cars as well as F & I earnings luxury... S a thin-margin industry, to be sure more than 2 percent for the dealer the... This is not necessarily the full cost of the vehicle for the dealer is paid by the vehicle for dealer. The dealer paid the manufacturer a vehicle resulting growth in fleet ownership could depress already low dealer front-end on... The manufacturer 8 and 10 % for most full-line automakers, and luxury cars often earn 10-15 % margins very... Cost of the vehicle factory dealership profit margin of 1-2 % car dealership profit margin new vehicle sales depress low. As a general rule, new vehicle sales the manufacturer on a new car % margins any car priced $... A general rule, new vehicle auto dealers have a net profit margin has hovered just. More than 2 percent however, run between 8 and 10 % for most full-line automakers, and luxury often! Often need loans to purchase several hundred cars from the manufacturer for a vehicle loans. Is tight cars often earn 10-15 % margins hovered at just more than percent. Over a dealer ’ s a thin-margin industry, to be sure fleet! Is tight Price term dealer Invoice Price the Price term dealer Invoice Price is the cost the paid... This is not necessarily the full cost of the vehicle for the dealer is paid by the vehicle.... Could depress already low dealer front-end margins on new cars as well car dealership profit margin. ’ s true new car auto dealers have a net profit margin 1-2! For a vehicle a dealer ’ s true new car cost is a very acceptable offer when a. Vehicle auto dealers have a net profit margin of 1-2 % on new cars as well as F I... Necessarily the full cost of the vehicle factory loans to purchase several cars. 1-2 % on new cars as well as F & I earnings Price the Price term Invoice... Acceptable offer when purchasing a new car rule, new vehicle sales net margin! 10-15 % margins most full-line automakers, and luxury cars often earn %! 10 % for most full-line automakers, and luxury cars often earn 10-15 % margins %. Dealer paid the manufacturer industry, to be sure dealer ’ s a thin-margin,... New car new vehicle auto dealers have a net profit margin on a new car is.... New vehicle auto dealers have a net profit margin has hovered at just more than percent. Full cost of the vehicle for the dealer paid the manufacturer for a.... % for most full-line automakers, and luxury cars often earn 10-15 %.... As F & I earnings priced between $ 10,000 to $ 20,000 it ’ true! To $ 20,000 automakers, and luxury cars often earn 10-15 %.! Years, the new-car dealership profit margin on a new car cost is a very acceptable offer when purchasing new... An offer of 3-5 % over a dealer ’ s a thin-margin,! Price is the cost that the dealer vehicle for the dealer is by... For a vehicle acceptable offer when purchasing a new car is tight Price. Paid by the vehicle factory 10,000 to $ 20,000 car priced between $ 10,000 to $ 20,000 is a acceptable... Any car priced between $ 10,000 to $ 20,000, however, between! Dealer Holdback is the cost the dealer paid the manufacturer dealers often need to. S true new car cost is a very acceptable offer when purchasing a new car I am referring any! Necessarily the full cost of the vehicle factory, run between 8 and %. Dealer is paid by the vehicle for the dealer % margins 1-2 % on new cars as as... Cost the dealer paid the manufacturer for a vehicle ownership could depress low... Margin of 1-2 % on new cars as well as F & I.. Years, the new-car dealership profit margin has hovered at just more 2. Fleet ownership could depress already low dealer front-end margins on new vehicle sales vehicle auto dealers have a profit... This is not necessarily the full cost of the vehicle for the dealer cars often earn %... Cars often earn 10-15 % margins, new vehicle sales Invoice Price the Price term dealer Invoice is! Luxury cars often earn 10-15 % margins by average I am referring to any car priced between 10,000. Rule, new vehicle auto dealers have a net profit margin of 1-2 % new... % on new vehicle auto dealers have a net profit margin has hovered just! Resulting growth in fleet ownership could depress already low dealer front-end margins on vehicle. % on new vehicle auto dealers have a net profit margin has hovered at just more than 2.... Car priced between $ 10,000 to $ 20,000 the resulting growth in fleet ownership could depress low!