how much do car dealers make on used cars

[KingLee]

Car dealers typically make a front-end gross profit of $2,000 to $2,500 on a used car, but the actual net profit is significantly less after accounting for expenses. The final margin depends heavily on the vehicle's price, reconditioning costs, and how long it sits on the lot. On average, the profit margin for a used car falls between 11% and 15% of the selling price.

This profit isn't just the difference between what the dealer paid and what you pay. It's a more complex calculation. The initial profit, known as the front-end gross, is reduced by several key expenses incurred by the dealer to get the car ready for sale.

Key Factors That Determine Dealer Profit:

• Acquisition Cost: What the dealer paid at auction, through a trade-in, or via a direct purchase.
• Reconditioning Costs (Recon): This is a major expense. It includes necessary repairs, new tires, brakes, a full detail, and any cosmetic fixes to make the car sellable.
• Advertising and Overhead: Costs like lot fees, salesperson commissions, and marketing are factored into the final price.
• Pack Fee: Some dealerships add a flat fee (e.g., $500) to each car's cost to cover administrative overhead.

The table below illustrates a typical profit breakdown for a used car sold for $20,000.

Expense/Profit Category	Amount	Note
Selling Price	$20,000	Price paid by the customer.
Acquisition Cost	$16,500	What the dealer paid for the car.
Reconditioning Cost	$1,200	Average for necessary safety/mechanical work.
Pack Fee / Overhead	$500	Covers administrative costs.
Total Dealer Cost	$18,200	Acquisition + Recon + Pack.
Front-End Gross Profit	$1,800	Selling Price - Total Dealer Cost.
Commission & Other Costs	~$400	Estimated cost of sale.
Estimated Net Profit	~$1,400	What the dealer keeps.

Ultimately, a dealer's goal is to turn inventory quickly. A car that sits for months costs them money in interest and lot space, often forcing them to sell it for a thinner margin or even a loss just to move it. Understanding these components can empower you during negotiations, as there is almost always some flexibility built into the front-end gross profit.

[DeCorey]

They make a decent chunk, but it's not all pure profit. Think about it: they have to fix the car up, clean it, pay the salesperson, and advertise it. On a $15,000 SUV, they might clear $1,500 to $2,000 after all those bills are paid. The longer a car sits on the lot, the more money it costs them, so they're often motivated to make a deal to get it off their books.

[BraxtonDella]

From my experience, the markup varies wildly. A high-demand, low-mileage used truck might have a gross profit of over $3,000. Conversely, a common sedan might only net a few hundred dollars after reconditioning. The real money isn't always in the sale price; it can also come from selling you financing, an extended warranty, or other backend products. These add-ons significantly boost their overall profit on the deal.