How Much Profit Do Car Dealers Really Make?

Whatever the reason, purchasing a car is probably the most combative transaction out there. We could delve into the psychology and history of what makes it that way, but for now let's look at it from an isolated angle. Both parties, the consumer and the dealership/salesperson/sales manager, don't want to leave any money on the table. The consumer is looking after his/her own best interest, trying to ensure that they don't get raked over the coals or mistreated. The salesperson makes a living on the profit of vehicle sales, and so he/she is doing their best to put food on the table.

Admittedly, this is a simplified version of what takes place. But it raises an important question that dovetails with the previous post: How much does the dealership make on a new car sale?

As Mr. or Mrs. Car Buyer, when you are out there negotiating the price of a new car, do you see inflated prices that must be whittled down to reality? After all, we buy things every day that have built-in profit margins. Bath soap, enchiladas for dinner, duct tape. The company you work for sells its product/service for a profit, or the company would go under. (Non-profit organizations not included)

"Hold on just a minute" you might say. "I think about the profit in those items, just not as much as when I purchase a $25,000 car. Besides, we don't generally negotiate on every day items." Quite right. Buying a car is truly different from any other transaction. But no neighborhood restaurant has ever been criticized for selling its mashed potatoes for profit, even though some restaurant owners are crooks.

Websites like Edmunds, Kelly Blue Book, and others provide all sorts of information on dealer invoices, average sales prices for your area, and buying tips. But getting down to the brass tacks, must car dealerships and their salespeople be battled with for hours to ensure a fair price, or do they make less than is generally accepted?