how much do car dealers make on new cars

[SamanthaMarie]

Car dealers typically make a profit of a few hundred to a few thousand dollars on the sale of a new vehicle. However, the actual amount is not a single figure but a combination of several income streams. The main source is the difference between the invoice price (what the dealer pays the manufacturer) and the final selling price. On average, this front-end gross profit is around $1,500 to $2,500 per vehicle, but it can be significantly less on high-volume, highly competitive models.

A critical, often overlooked component is the holdback. This is a percentage of the vehicle's MSRP (usually 2-3%) that the manufacturer returns to the dealer after the sale. This ensures the dealer makes a minimum profit even if they sell the car at invoice. Additional significant profit comes from the "back-end," including financing through the dealer's finance and insurance (F&I) department, selling extended warranties, and dealer-installed accessories.

The final profit is highly dependent on market conditions, vehicle demand, and the buyer's negotiation skills. On a high-demand model with limited supply, a dealer can command full MSRP or even an additional market adjustment fee, leading to a much larger profit. Conversely, on a slow-selling model, they might sell it at or below invoice to meet sales quotas and earn volume-based manufacturer bonuses.

Here is a breakdown of common profit components for a new car with an MSRP of $35,000:

Profit Component	Estimated Amount	Description
Front-End Gross Profit	$500 - $2,500	Difference between selling price and invoice price. Highly negotiable.
Holdback (2%)	$700	Rebate from manufacturer to dealer after sale, based on MSRP.
Dealer Cash Incentive	$0 - $1,500	Factory-to-dealer rebate to help move specific models. Not always available.
Finance Commission	$100 - $1,000	Kickback from the lender for arranging financing.
Profit on Extended Warranty	$400 - $1,200	Markup on service contracts sold in the F&I office.
Total Potential Dealer Profit	$1,700 - $6,900	Sum of all potential profit streams before overhead costs.

[Maeve]

It's usually not as much as you'd think on the car itself, maybe a grand or two after all their costs. The real money for them is in the finance office. They get a kickback from the bank when you use their financing and make a huge markup on those extended warranties. That's where they pad their profit. Your best move is to negotiate the car price and the financing separately.

[Gollum]

I just went through this buying my SUV. The salesperson showed me the invoice, which was only about $2,000 less than the sticker price. But my research said they also get a "holdback" from the factory, which is like a hidden rebate. So, even if you pay invoice, they still make money. I focused on getting a price below MSRP and didn't get pressured into add-ons I didn't need. That's where they try to make it all back.