At MSRP, how much do the dealers make?
Thread Starter
Race Director
Joined: Jul 2007
Posts: 10,701
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I believe in the Beer Fairy
At MSRP, how much do the dealers make?
I thought I had seen this before, but can't find it. If a dealer sells a car at MSRP, how much do they actually make? Does it matter HTC vs coupe? Trim level?
The reason I ask is I had an option to buy a C8 HTC off the floor and the sales manager told me straight up at MSRP he only makes $7,000. I guess that is just not enough as they also wanted 7K over MSRP. I swear I heard they made like 14-15K at MSRP and when I told him that he spit out the 7K and said he would show me the invoice. Can someone step in that knows the REAL answer to this for me.
THanks!
The reason I ask is I had an option to buy a C8 HTC off the floor and the sales manager told me straight up at MSRP he only makes $7,000. I guess that is just not enough as they also wanted 7K over MSRP. I swear I heard they made like 14-15K at MSRP and when I told him that he spit out the 7K and said he would show me the invoice. Can someone step in that knows the REAL answer to this for me.
THanks!
Popular Reply
Jan 31, 2023, 08:09 AM
Melting Slicks
Joined: Oct 2016
Posts: 2,876
Likes: 2,506
A 2023 Corvette has roughly a 6.5% profit margin from MSRP to invoice. An $80,000 MSRP car will have roughly $5200 in markup. In addition, usually on a quarterly basis, the dealer will get 3% holdback on the vehicle. This is calculated by MSRP, minus freight ($1395), times 3%. This would be roughly $2358 on a $80,000 car for a total profit margin of $7558. Any additional fees added to the sale such as a DOC fee or dealer added accessories could represent additional profit.
The dealer is in addition paid for the PDI which can be profitable and is normally paid floor plan assistance. In a normal market the dealer can be involved in manufacturer incentives such as contests, rebates, etc. Since every Corvette is basically pre-sold at this time, GM is not normally wasting their money to incentivize the car. After 40+ years of having multiple franchises of various makes, I am still waiting for the yearly volume checks everyone not in the business talks about. If anyone has real information on this, please contact me as I must be owed millions!
The dealer is in addition paid for the PDI which can be profitable and is normally paid floor plan assistance. In a normal market the dealer can be involved in manufacturer incentives such as contests, rebates, etc. Since every Corvette is basically pre-sold at this time, GM is not normally wasting their money to incentivize the car. After 40+ years of having multiple franchises of various makes, I am still waiting for the yearly volume checks everyone not in the business talks about. If anyone has real information on this, please contact me as I must be owed millions!
Team Owner
Joined: Jun 2005
Posts: 46,295
Likes: 2,596
From: Northern, VA
St. Jude Donor '15
"In honor of jpee"
To an extent, it varies from dealer to dealer. And unless you're the dealer you're not going to know the real numbers. There may be some numbers that are for all dealers in that line (chev), it's a big range and for financial reasons. Anyone who tells you a number may know something. But may not know everything. It's the last part that makes a dealer-owner smile big. Take it for what it's worth. It's an arcane business with a lot of twists and secret handshakes. 
Race Director
Joined: Apr 2017
Posts: 13,602
Likes: 12,866
From: Virginia
I thought I had seen this before, but can't find it. If a dealer sells a car at MSRP, how much do they actually make? Does it matter HTC vs coupe? Trim level?
The reason I ask is I had an option to buy a C8 HTC off the floor and the sales manager told me straight up at MSRP he only makes $7,000. I guess that is just not enough as they also wanted 7K over MSRP. I swear I heard they made like 14-15K at MSRP and when I told him that he spit out the 7K and said he would show me the invoice. Can someone step in that knows the REAL answer to this for me.
THanks!
The reason I ask is I had an option to buy a C8 HTC off the floor and the sales manager told me straight up at MSRP he only makes $7,000. I guess that is just not enough as they also wanted 7K over MSRP. I swear I heard they made like 14-15K at MSRP and when I told him that he spit out the 7K and said he would show me the invoice. Can someone step in that knows the REAL answer to this for me.
THanks!
Safety Car
Joined: Jul 2013
Posts: 4,408
Likes: 3,485
From: Granada Hills CA
This question has been asked before and when I provided a response in the past [gleaned from my late brother-in-law who ran numerous "stores"] others chimed in to say the number was correct. So, ... after holdbacks, factory-to-dealer incentives and other allowances, his gross margin on a new vehicle worked out to be around 15%. Note that he called his operations "stores" rather than "dealerships." He explained that it is psychological and calling a business a "dealership" can be intimidating to a customer and a hindrance to making a sale. Calling it a "store" makes it seem like buying a car is no different than going to the store to buy a can of corn.
Melting Slicks
Joined: Oct 2016
Posts: 2,876
Likes: 2,506
A 2023 Corvette has roughly a 6.5% profit margin from MSRP to invoice. An $80,000 MSRP car will have roughly $5200 in markup. In addition, usually on a quarterly basis, the dealer will get 3% holdback on the vehicle. This is calculated by MSRP, minus freight ($1395), times 3%. This would be roughly $2358 on a $80,000 car for a total profit margin of $7558. Any additional fees added to the sale such as a DOC fee or dealer added accessories could represent additional profit.
The dealer is in addition paid for the PDI which can be profitable and is normally paid floor plan assistance. In a normal market the dealer can be involved in manufacturer incentives such as contests, rebates, etc. Since every Corvette is basically pre-sold at this time, GM is not normally wasting their money to incentivize the car. After 40+ years of having multiple franchises of various makes, I am still waiting for the yearly volume checks everyone not in the business talks about. If anyone has real information on this, please contact me as I must be owed millions!
The dealer is in addition paid for the PDI which can be profitable and is normally paid floor plan assistance. In a normal market the dealer can be involved in manufacturer incentives such as contests, rebates, etc. Since every Corvette is basically pre-sold at this time, GM is not normally wasting their money to incentivize the car. After 40+ years of having multiple franchises of various makes, I am still waiting for the yearly volume checks everyone not in the business talks about. If anyone has real information on this, please contact me as I must be owed millions!
Racer
Joined: Dec 2021
Posts: 498
Likes: 450
From: Raleigh, NC
To make a long story short, selling the car at MSRP the dealer is making a healthy profit and anybody who pays over MSRP for a mass produced car is throwing their money away. You might as well put the money in a barrel and light a match to it.
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Thread Starter
Race Director
Joined: Jul 2007
Posts: 10,701
Likes: 1,136
I believe in the Beer Fairy
Thanks for all the info ! I figure he was full of ****, just does not really know or in the dark. I sure wish people could just be honest...people would not hate dealers if that happened.
Safety Car
Joined: Dec 2009
Posts: 4,317
Likes: 3,217
From: Oro Valley Arizona
Wild Wild West
While MSRP is much vilified here, until its adoption in 1958 new car pricing was the whatever any dealer decided it to be. The Monroney sticker was part of the Automobile Information Disclosure Act 1958 introduced by a Sen. Monroney from Oklahoma. Requiring the Monroney price list to be displayed on every new car. This gave consumer protection in the form of a consistent mfg 'list' price for identical cars at diverse dealerships. This metric has been the port in the storm of new car buying.
Last edited by papillion; Jan 31, 2023 at 09:46 AM.
Melting Slicks
Joined: Oct 2016
Posts: 2,876
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Please explain how you arrived at that number and at what price car? The only way you can get to $10,000 plus holdback would be on a $150,000 plus car.
Melting Slicks
Joined: Mar 2001
Posts: 3,261
Likes: 64
From: League City TX
@JALLEN4 Speaks truth. I spent some time in the car business - and you really never get out of the car business. I'd also always look at the entire deal: Repeat customer?, service customer?, willing to allow us to finance?, trade-in, buys ESC? A $7k out of state, cash buyer at MSRP was less appealing on a limited availability product than someone willing to do business across multiple departments. Those other factors could easily double the profitability of a transaction.
Safety Car
Joined: Jul 2013
Posts: 4,408
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From: Granada Hills CA
Ever notice that "advertised specials" are designed to get dozens of people onto the lot, while only one car is available at that price. That price is usually 15% below MSRP. What does that tell you?
Melting Slicks
Joined: Oct 2016
Posts: 2,876
Likes: 2,506
Fifty-years ago full size domestic cars had a 25% margin including holdback which was 2% then. Of course you could buy a loaded Chevy sedan for $4,000 which means there was around a $1,000 markup in the car and if you averaged $300 gross profit per car sold you were doing really well. As car prices increased over decades, the manufacturer started lowering the markup to control the price increase on the sticker. Of course some customers would argue that markup never changed. Unfortunately it did.
Safety Car
Joined: Jul 2013
Posts: 4,408
Likes: 3,485
From: Granada Hills CA
Ever notice that "advertised specials" are designed to get dozens of people onto the lot, while only one car is available at that price. That price is usually 15% below MSRP. What does that tell you?
I am not engaging in any car salesperson tricks or semantic games. When I referred to the price of the car being 15% below MSRP, I was referring to the dealer selling price which would be BEFORE any customer incentives. For example, I bought a car for my daughter where the MSRP was $18,745. Dealer asking price was $15,999 representing a 15% discount from list. Then we subtracted a $4,000 factory incentive and $750 college rebate since she had recently earned her Masters Degree. Her out the door price after taxes & fees was $13,063. I don't think the dealer made anything on the deal but a number of customers were asking about the car while our deal was being written-up. Salespeople were looking forward to selling the latecomers something else at their normal margin.
It doesn't tell you anything in today's market because you are not seeing it. Pre-pandemic it told you the factory had large rebates on the advertised vehicle and they were disclosed in the fine print.
Fifty-years ago full size domestic cars had a 25% margin including holdback which was 2% then. Of course you could buy a loaded Chevy sedan for $4,000 which means there was around a $1,000 markup in the car and if you averaged $300 gross profit per car sold you were doing really well. As car prices increased over decades, the manufacturer started lowering the markup to control the price increase on the sticker. Of course some customers would argue that markup never changed. Unfortunately it did.
Fifty-years ago full size domestic cars had a 25% margin including holdback which was 2% then. Of course you could buy a loaded Chevy sedan for $4,000 which means there was around a $1,000 markup in the car and if you averaged $300 gross profit per car sold you were doing really well. As car prices increased over decades, the manufacturer started lowering the markup to control the price increase on the sticker. Of course some customers would argue that markup never changed. Unfortunately it did.
Last edited by Bob Paris; Feb 1, 2023 at 01:44 AM.
Race Director
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From: Prosper TX/Austin TX
2020 C6 of the Year Winner - Modified
I don't remember the figures my uncle (who used to run very large dealership groups) told me, but don't worry, they're making money.
My wife recently ordered a '23 Grand Cherokee L Summit High Altitude 4x4. MSRP came to almost right at $70k. The dealership sold it to us at 4% below invoice, $180 doc fee & $45 transit tag fee - that's it. Plus they gave us $3k more for her '20 Grand Cherokee than Carmax's highest offer, and about $7k more than the dealership from whom we purchased the '20 offered. That dealership also didn't care about our repeat business and wouldn't order the new car for anything less than MSRP.
So our new dealership had to still be making $$ on the deal with us even though it was about a $10k positive net transaction for us (almost $7k off MSRP + the additional $3k on our trade).
My wife recently ordered a '23 Grand Cherokee L Summit High Altitude 4x4. MSRP came to almost right at $70k. The dealership sold it to us at 4% below invoice, $180 doc fee & $45 transit tag fee - that's it. Plus they gave us $3k more for her '20 Grand Cherokee than Carmax's highest offer, and about $7k more than the dealership from whom we purchased the '20 offered. That dealership also didn't care about our repeat business and wouldn't order the new car for anything less than MSRP.
So our new dealership had to still be making $$ on the deal with us even though it was about a $10k positive net transaction for us (almost $7k off MSRP + the additional $3k on our trade).
Le Mans Master
Joined: Dec 1999
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From: One Hour From Boston!
Thats pretty much in line with what my dealer told me back in 2014 when I purchased my C7. He said the dealership makes on average about $10K on each Corvette they sell. He then dropped the price on the C7 I was interested in by $7K off MSRP, and told me that’s the best they can do because “they need to stay in business”. I thought that was fair and went ahead and signed the sales agreement. ($70K MSRP, $63K out the door).
Drifting
Joined: Jul 2007
Posts: 1,634
Likes: 196
From: homosassa florida
apprx 15-20 percent depending how fast they could sell the car-all car salesman will tell you they do not make much on a new car-brainwashed from there new car manager. When was the last time you seen a new car dealer go bankrupt all that may change.