What Is the Dealer's Profit on Selling a Car?

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Cars sold at a dealership differ in profit. Used cars are bought from a person or source for different amounts, and sale prices are often inconsistent. For this reason, it is impossible to determine the amount a dealer makes on a used-car sale unless he tells you. Some cars do not make a profit at all. New-car profits are easier to gauge, as invoice prices are available online.

New Cars

You can find new-car invoice prices online by using the "True Market Value" tool provided by Edmunds.com. The invoice price is the amount a dealership owns a car for; the invoice price subtracted from the MSRP (manufacturer's suggested retail price) is the intended profit amount. When manufacturer's offer rebates or incentives, or an immediate discount from the vehicle's price, the amount is provided by the manufacturer, not the dealer. Dealerships receive the discount amount back from the manufacturer, meaning the vehicle was sold at sticker price if there were no further negotiations.

New-Car Considerations

Some dealerships modify vehicles or add different costs to the vehicle's MSRP. The amount is stated on an addendum sticker, which is usually located right next to the window sticker. Any item you see listed on the addendum sticker is more profit for the dealer. For example, some dealers may add a "Dealer and Marketing Fee" for $1,498. This is pure profit. More creative dealers add paint protection, appearance packages or aftermarket items, such as remote starters or DVD players. While the dealer incurred cost for these added items, the pricing is marked up for profit.

Trade-in Vehicles

Used vehicles on a dealer's lot can come from a variety of sources. Many are trade-ins, meaning a customer traded his used vehicle for another on the dealer's lot. You can gauge trade-in amounts for dealerships by visiting the Kelley Blue Book website, Edmunds.com or NADAGuides.com to check "Trade-In" values. Even with an idea of how much the dealer paid for the car, the amount is not definite. Some dealers may purchase for the correct value but end up paying for repair work before resale. Once the work is done, they may own the car for more than it sells for.

Other Vehicles

Auction cars are purchased at wholesale value, an amount consistent with trade-in value. However, the market is always changing. If customers aren't trading in cars during rough economic times, prices for auction vehicles increase. A dealership may end up paying hundreds less than retail price to add vehicles to his lot. Rental vehicles are purchased from rental car lots and marked up for resale. Check a vehicle history report to see if a dealer's vehicle is a previous rental. If so, find the true cost by checking rental lots and subtracting the price you found from the dealer's asking price.

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