how much car dealership make

[OJade]

The average car dealership's profit margin on a new car sale is surprisingly thin, often ranging from 2% to 5%. This means on a $40,000 vehicle, the dealership might only make $800 to $2,000. However, this "front-end gross" (the profit on the car itself) is just one part of their revenue stream. The real money is made in the "back-end," including financing, insurance products, and especially the service department.

A dealership's financial health is a complex ecosystem. While the sale of a new car might be a low-margin event, it sets the stage for more profitable activities. The Finance and Insurance (F&I) office is a critical profit center. Here, they earn commissions from lenders for arranging loans and sell products like extended warranties, paint protection, and pre-paid maintenance plans. These add-ons have significantly higher margins than the vehicle.

The service and parts department is the engine of long-term profitability. As cars age and require maintenance and repairs, customers return to the dealership. This creates a steady, high-margin revenue stream that is less susceptible to the cyclical nature of car sales. Finally, the used car department often outperforms the new car side in terms of gross profit per unit, as pricing is more flexible and inventory is unique.

According to the National Automobile Dealers Association (NADA), here's a typical breakdown of a dealership's gross profit per unit retailed:

Profit Source	Average Gross Profit	Notes
New Vehicle Sale (Front-End)	$1,500 - $2,500	Highly dependent on the vehicle's MSRP and demand.
Used Vehicle Sale	$2,000 - $3,000	Generally higher margins due to pricing flexibility.
Finance & Insurance (F&I)	$1,000 - $2,000	Commission-based, from loans and sold products.
Service & Parts	$700 - $1,200 (per repair order)	High-margin, recurring revenue from maintenance and repairs.

So, when you negotiate the price of the car, you're often just chipping away at one piece of a much larger pie. A dealership can afford to break even or even take a small loss on the front-end if it means securing a customer for its more profitable back-end services.

[VanCarlos]

Honestly, not as much as you'd think on the sticker price. I just bought a new truck, and after haggling, I figured the dealer was crying. But my buddy who works in sales explained it's a volume game. They make their real money on the back end—like when they talked me into the extended warranty and the rust-proofing package. The finance guy is where they clean up. Then, they count on you coming back for all your oil changes and service.

[JasmineRose]

It's less about the profit from a single car and more about the overall business model. A dealership operates on thin margins for new vehicles, sometimes as low as 2-3%. Their strategy is to move high volume to earn manufacturer bonuses and incentives. The sustainable profit comes from the service bay and selling used cars, which have more pricing flexibility. They're building a customer for life, not just making one sale.

[LeStella]

From a financial perspective, dealership profitability is multifaceted. The front-end gross on a new car is minimal. The key metrics are penetration rates on F&I products and the absorption rate of the service department. A high absorption rate means the service department's profits cover the dealership's fixed overhead, making the profit from car sales almost pure margin. This is why customer retention for service is their ultimate financial goal.