how much car dealers make

[VeraLynn]

Car dealer profitability isn't a single number but a combination of revenue streams. On average, a franchised new car dealership's net profit typically ranges from 2% to 4% of total sales revenue. This means on a $50,000 vehicle sale, the dealer's actual profit might be $1,000 to $2,000, but the real money is made elsewhere. The primary profit centers are the Finance & Insurance (F&I) department and the Service & Parts department.

While the new car department generates the most revenue, its profit margins are the slimmest, often due to intense online price competition. The used car department, however, frequently contributes more significantly to the bottom line with higher per-vehicle gross profits.

The F&I office is a major profit driver. This is where dealers earn commissions from selling extended warranties, service contracts, GAP insurance, and arranging financing. The service department provides a steady, high-margin income stream from maintenance, repairs, and parts sales long after the initial vehicle purchase.

Here’s a breakdown of average gross profit per unit by department, which illustrates where the money is made:

Department	Average Gross Profit Per Unit / Transaction	Key Profit Drivers
New Vehicle Sales	$300 - $1,500	Manufacturer incentives, volume bonuses, holdback
Used Vehicle Sales	$1,500 - $2,800	Acquisition cost, reconditioning, market demand
Finance & Insurance (F&I)	$800 - $1,600 per vehicle sold	Service contracts, extended warranties, financing reserve
Service & Parts	65% - 70% profit margin on labor and parts	Routine maintenance, collision repair, customer-pay services

Ultimately, a dealership's success hinges on balancing these departments. New car sales drive traffic, which feeds the highly profitable F&I and service operations, creating a sustainable business model beyond just the initial sale.

[AdamFitz]

Everyone thinks we make a killing on the sticker price. Truth is, after haggling and online competitors, we might barely break even on a new car. The real money? It's in the finance office. That's where we push the extended warranty, the fabric protection, the tire insurance. That stuff is almost pure profit. And if we can get you coming back here for your oil changes, that's the golden ticket—steady money for years.

[DeThomas]

From a business perspective, dealership profitability is a volume game with multiple revenue streams. The front-end gross on a new vehicle is often minimal. Profitability is secured through manufacturer-to-dealer incentives, known as holdback, and by achieving volume-based quarterly bonuses. The back-end, particularly F&I products and the service department, generates consistent, high-margin revenue that ensures the operation's overall financial health, turning a low-margin sale into a profitable long-term customer relationship.

[StTaylor]

I always tell friends to focus their negotiation on the "out-the-door" price, but to be prepared in the finance office. The dealer might have only made a few hundred dollars on the car itself. They'll try to make it up by selling you a $2,000 extended warranty that costs them very little. It's not necessarily a bad deal, but understand that's where their profit motive shifts. Politely declining those add-ons is how you keep the savings you negotiated on the car's price.

[LolaRose]

It's a high-volume, lower-margin business than most realize. A successful dealership isn't about making a huge profit on one sale. It's about moving a lot of metal to earn factory bonuses and, more importantly, building a large customer base for the service department. The service bay is the engine of the business. While sales get the glory, the reliable, high-margin income from maintenance and repairs is what pays the bills and generates real, long-term wealth for the dealership owner.