Last post on Apr 04, 2013 at 3:40 PM
You are in the Smart Shopper
What is this discussion about?
#1 of 1024 How Much Profit Should A Car Dealer Make?
Aug 14, 2005 (12:28 pm)
How much profit is fair for a dealer to make when they sell a car?
This is a general question. Let's say just an average car.
We all know that the principle of Economics- “Supply and Demand” dictates the market, so there are exceptions.
My question is related to just an "average car".
The reason I ask this question is because I have read many post's to this discussion board, and I am amazed at the perception that people have about buying a car, and what they should pay for a car. It seems that many people lose sight of the fact that, like any business, car dealerships have operating expenses, and balance sheets that they need to “balance” to stay in business.
I have read post's that state that some people travel across country to save a small amount of money to buy a car. It does not seem logical to go through all of the trouble to save a small amount of money. Personally, I would rather buy a car in the State, County, and City that I live in, so that the sales tax dollars generated from the sale of the car stay within my community.
With all of the information that is available to a consumer today, (such as Edmunds.com, and others), there are no secrets as to what a fair price for a car should be, but in reading many of the conversations that people are having, some people seem baffled about the car buying process.
Negotiating the price of the car should be easy, and I think, in my opinion, the dealer should be allowed to make a reasonable profit. In reading many of the posts to this board, it seems that the general public perceives giving the dealer a profit as being “ripped off”.
So, what is a fair profit for a dealer to make when they sell a car?
#2 of 1024 Re: How Much Profit Should A Car Dealer Make? [mikethecarguy]
Aug 14, 2005 (3:06 pm)
Enough at least to cover exspenses.
#3 of 1024 Let's be careful with this one.
by pf_flyer HOST
Aug 14, 2005 (3:15 pm)
I want to make this point early... this is not to be a "let's bash dealers" topic. People's opinions are going to vary on this question all the way from "whatever they can make" to "they shouldn't make a dime", and both views are going to have their reasons and will clash over this.
There also will be the temptation to drift off into a discussion of capitalism, economics, etc. If we stick to the topic, we should be able to have a resonable discussion with differing opinions that we all can learn from.
Besides, it's too HOT to start up anything!
Aug 14, 2005 (4:15 pm)
As much as he can, within legal and/or ethical boundaries.
It's an imformation age, caveat emptor
Aug 14, 2005 (10:41 pm)
in the sense that there shouldn't be laws to govern it. But the process of buying a new car can be an amazing PITA, and I think all dealers would be wise to go to the no-haggle system that GM seems to be adopting.
In general, I would say 5% is the max the dealer should make. The average new car transaction exceeds $26K now, which means that at 5% they make a very healthy $1300 profit - more than enough to cover the costs of the lights and insurance, while giving the sales person a few hundred dollars per sale.
This would be for the"average" car.
I think the reason people on these boards talk about getting the dealer for every last penny, is that they know all too well that for everyone who pulls that last dime out of the dealer's hand, there are two or three customers paying sticker. So let's not feel TOO bad about wheeling and dealing here - after all, that's the system dealers have set up. Go to no-haggle, and this problem goes away, not to mention you save a LOT of time on each transaction.
#6 of 1024 I'm with Fin
Aug 15, 2005 (6:19 am)
as much as they can without breaking the law. Same goes for every other business. It's not like a dealer is a public monopoly of an essential good (like the water company say).
As long as it is a competitive environment (and car sales sure is that), then market forces will keep any dealer from getting too "greedy" if they want to stay in business.
And be careful what you wish for. If you decide that some # is good (say 1% over expenses), you may end up paying lots more for a car!
But, from the number of dealers near me doing majore remodels/expansions (the new MB dealership by me is a palace), they must be making enough to stay in business.
#7 of 1024 Really simple:
Aug 15, 2005 (8:52 am)
The dealer should make as much as possible on everything they sell.
The buyer should pay as little as possible for everything they buy.
There is accurate price/cost information available from many sources. Buyers just need to use it.
#8 of 1024 Profit
Aug 15, 2005 (9:13 am)
Dealers should make a ton of profit to spur job growth and local economies.
Not on my car, of course.
#9 of 1024 Where is Isell when we need him ?
Aug 15, 2005 (5:03 pm)
Isell, give us your opinion on this. I feel the dealer should make as much as the traffic will bear. That's the free enterprise way, right ?
Aug 15, 2005 (11:25 pm)
"free enterprise" gets people to sign on the dotted line for 26% interest (and up) car loans too, simply because they don't know better. "Should" that be fine too, seeing as it's all in the spirit of free enterprise, and "caveat emptor"?