A recent survey conducted by leading UK motoring magazine What Car?, assessed what the everyday car buyer thinks the average car dealer makes on a new car sale. Interestingly, the survey revealed a stark disparity between the actual profits made by the dealers, and the public’s perceived figures. The same applied when these same people were asked about the profit margins that car dealers can expect when selling used cars.
Now, our online car auctions here at RAW2K are frequented by a fair number of professional mechanics, looking to buy a salvage car at a discount, fix it up, and legally ‘flip’ it for a profit. If you were to ask one of them, they’d probably tell you that it doesn’t rake in mountains of cash immediately - at least not like lots of people seem to think! Instead, to even come close to making a living doing this, you need time, patience, and no small amount of efficiency and skill. So if you’ve not got a tonne of professional experience yourself, you might be surprised at how much car dealers actually make on each sale!
How much does the public think dealers make?
Jim Holder, the editorial director for What Car?, sums up this grand misconception. He said of the survey: “While everyone knows car dealerships are there to make money, the public’s perception of how easy it is for them to rack up profits provides a fascinating insight into the challenges during a negotiation.” Mr. Holder is referring to the negotiations that take place between dealers and customers haggling for a price. The survey’s findings seem to do a good job of validating his position.
The survey found that a whopping 28.2% of the 5,000 car buyers surveyed think that car dealers make 10-20% profit on every new car they sell. The same buyers were also under the impression that the dealers were making the same amount of profit percentage on used car sales as well.
Now, the average price of a used car is somewhere around £20,000, which means that more than a quarter of the survey’s respondents believe that the dealer would make about £2000 to £4000 on every vehicle they sell. (It’s worth noting that used car prices are especially high at the moment.) New cars command even higher prices, generally around £30,000 or so, which means that more than 25% of respondents assume that the dealer makes between £3000 to £6000.
The survey also found that 5.8% of car buyers believe that dealerships make 50% or more profit on new vehicle sales (so for a £30,000 car that would be £15,000), with a small minority (2.6%) of people under the impression that the dealers make more than 75% profit (£22,500!).
On the other end of the spectrum though, 5.2% of the people asked think the dealers make 5% profits on each sale they complete. (The profit on that hypothetical £30,000 car would be a more realistic £1500 - much closer to the truth!)
How much do dealers actually make on new car sales?
The only one that comes close to the truth is the last stat we’ve mentioned above; car dealers actually make an average of around 7% profit on new car sales, and a little bit more (12-15%) on used car sales.
This means that the dealer of that £30,000 new car will actually make something like £2100 on its sale, whereas for a used car they’d be looking at something like £2400 to £3000. Sure, when we’re simply focused on individual sales, it may not sound like that much of a difference between the truth and the public assumptions. But a difference of just a few hundred pounds on each sale adds up cumulatively over the course of a year, which means the annual earnings of most car dealers and mechanics are probably significantly under what some people imagine.
Whatever you’re actually making each year though, you can always count on one thing - you’ll always find some amazing deals right here at RAW2K. Whether you’re a mechanic or private driver, we specialise in providing you with great bargains on used vehicles. Our online car auctions are refreshed on a daily and weekly basis, and we include makes and models available from some of the world’s leading manufacturers, like Volkswagen, Ford, Renault, and many more. Why not take a look around, and see what you can find?