how much does a dealer make on a car

[ColtonMarie]

The average dealer's gross profit on a new car is typically between $1,500 and $2,500, but the actual net profit is often much lower, sometimes just a few hundred dollars per vehicle. The real money for dealerships isn't made on the car's sale price alone; it comes from a combination of other sources like financing, add-ons, and the service department.

This difference between gross and net profit is key. The gross profit is the simple difference between what the dealer paid the manufacturer (invoice price) and what you pay. However, dealers also receive money from manufacturers called holdback (usually 1-3% of the MSRP), which is paid after the sale to help cover the dealership's floor plan financing costs. This effectively lowers their true cost. There are also dealer incentives—bonus payments from the manufacturer for selling specific models or hitting sales targets—which can add thousands of dollars to the profit on a particular car.

After accounting for these "hidden" earnings, the net profit is calculated by subtracting the dealership's operating costs (salesperson commissions, advertising, utilities, etc.). On a popular, high-volume car, the net profit might be slim. Dealers make up for this with high-margin areas.

Profit & Loss Component	Typical Amount / Percentage	Notes
Average New Car Gross Profit	$1,500 - $2,500	Before holdback and incentives.
Dealer Holdback	1% - 3% of MSRP	Common with most major manufacturers.
Average New Car Net Profit	$300 - $800	After all costs; can be negative on slow-selling models.
Dealer Incentive (Example)	$500 - $5,000	Varies greatly by model, time of month/quarter.
Profit Margin on Financing	1% - 2% of loan amount	From the lender for marking up the interest rate.
Profit on Extended Warranty	$1,000 - $2,500+	One of the highest-margin products.
Profit on Fabric Protection	400% - 500% markup	Low cost, high profit add-on.
Profit on Paint Sealant	300% - 400% markup	Another high-profit dealer-installed option.
Service Department Profit Margin	60% - 70%	The primary source of long-term dealership profitability.
Used Car Gross Profit	$2,000 - $3,500+	Generally higher margins than new cars.

The most significant profits are made in the Finance & Insurance (F&I) office. This is where you're offered an extended warranty, tire protection, fabric protection, and financing. The profit margins on these products are substantially higher than on the car itself. Furthermore, selling your trade-in as a used car is often more profitable for the dealership than selling you a new one.

[Grayson]

Honestly, they make very little on the car's sticker price these days, especially on common sedans and SUVs. The real game is in the back room. When you sit down to sign the paperwork, that's where they push the extended warranties, paint protection, and financing. That's their cash cow. The car is just the thing that gets you in the door so they can sell you the high-profit extras.

[VonManuel]

From my experience, it's all about volume and backend products. On a high-demand vehicle, they might hold firm to the MSRP and make a solid $3,000 or more. On a slow-moving model, they could be losing money just to hit a manufacturer quota and get a big bonus. The profit from the sale is just one piece. The holdback from the manufacturer and hitting their sales targets are often more critical to the dealership's bottom line than the profit on any single deal.

[DeSienna]

I used to work in a dealership, and most customers would be surprised. The profit on the actual new car sale is often razor-thin, sometimes just a few hundred bucks after all expenses. We made our real money on your trade-in. We'd appraise it, give you a fair price, and then recondition it to sell on our used lot for a much healthier profit. The finance office is the other big one—that's where the real magic happens for the dealership's numbers. The new car department is often there to feed the more profitable used and service departments.