Dealerships make money through various revenue streams. Understanding these sources of income can help consumers make informed decisions and negotiate fair deals.
Primary Revenue Streams
- Vehicle Sales: Dealerships buy vehicles from manufacturers at wholesale prices and sell them at retail prices. The markup covers expenses and profit margin.
- Financing: Dealerships offer financing to customers in partnership with financial institutions, earning commissions for connecting lenders with buyers.
- Trade-ins: Dealerships profit from reselling trade-in vehicles at higher prices after providing owners with trade-in values.
Additional income comes from service and maintenance departments, parts and accessories sales, and protection plans.
Dealership Employment Salaries
- Average monthly salary for a car salesman: $3,795
- Median annual salary: $42,645
- Commissions: $2,000-$3,000 per sale
- Back-end products like GAP insurance and warranties can also generate significant income.
Profitability and Turnover
- Average dealership annual turnover: $74 million
- Profit margins: 8-13% between invoice and actual dealer cost
- Salespeople bonuses are based on sales volume rather than profit per car
- Entry level car dealership positions start at an annual income of $486,000, while experienced workers can make up to $1,083,000.
Vehicle Inventory and Sales
- Average profit per new car: $2,000
- Average profit per used car: $2,337
- Financing and back-end products contribute significantly to dealership profits.