What is the typical mark up on a used car at a dealership?

[recycled sixtie]

Kaisen and others? Just curious what dealerships try to get and what is there bottom line? I know this is a generalized question and there are exceptions but just want to tap your brains!
Guy

[VaSteve]

I looked at a car last week that had an off the main location and did volume based on price. They said their typical markup was about $800.

[Christien]

30-40%. A car bought at auction for $10k would probably be listed at 14, sold for between 12 and 13. Of that, at least $1000 would be costs and overhead. Here's how we used to break it down:

10k auction price
300 fees/transportation
500-1000 reconditioning (cleaning, maybe tires, brakes, etc)
500 lot pack (overhead of property/utilities, advertising, etc)
300 sales commission

Try to make the better part of $2k off the car, so list at 14, sell at 12-13.

This wasn't a high-volume dealership. We mostly sold nice, solid car, with a lot of high-end stuff (corvettes, porsches, bmws)

I wanted to actually lay each line out on each car like this, so the customer could see exactly where the price of the vehicle came from. I thought we'd look more honest that way. I was voted down

[Christien]

Originally Posted by VaSteve

I looked at a car last week that had an off the main location and did volume based on price. They said their typical markup was about $800.

Bullscheisse.

[masraum]

I would guess that it depends a bit on what they pay for the car. For instance, car X is going for $14-16k. You manage to get that on trade in for $8k, I wouldn't think you're going to try to sell it for $10-11k, you're going to sell it for $14k.

[Rtrorkt]

as much as they can get

[biosurfer1]

at the dealership I worked at, it was usually around mid-blue book for most cars, where they made their money was buying it for as little as they could.

[BK911]

A buddy of mine is a general manager at a chevy dealership.
He said they usually make more money off the used cars than the new cars.

[nostatic]

With used it is a total crapshoot. Could be anywhere from 20-100% markup depending on how well they bought it.

[jcommin]

Originally Posted by Rtrorkt

as much as they can get

Well said - as much as can.

[McLovin]

I have some numbers right here in front of me for 2013 from a franchise luxury car dealership (it's a smaller volume luxury brand, not BMW/Mercedes, etc).

For their used car trade-ins they averaged:

Sales profit - a touch over $2,000 per car
Warranties/lending/service contracts profits - a touch under $1K per car.

They also have an in house reconditioning department, they generated around $1K profit per car.

So, all in, around $4K per used car, that was the actual average.

[trader220]

Really depends on the car, the market days supply for a car like that in their market. How much recon they do. What they hold their turn over days to, etc. etc.

If you're running a 30 day turn you're going to have to sell cars for less gross than the dealers who run 60 day turns.

If you're selling 40 or 50k dollar or higher end used cars you'd better be making more than $800 bucks because you're not going to sell 40 or 50 a month in most markets. You also have a lot more risk in those cars because they can easily decay in value in a month or two.

If you're selling 10k dollar cars the risk is a lot lower but so is the margin in the sale. Also with cheaper cars you're not going to sell much in financing or warranties. All reasons you need to do volume.

Bottom line is this: There is no one single answer and the range of answers is all over the map and none of them is essentially wrong, it all depends on what your goals are as a dealer and how you go about meeting those goals. Set reasonable goals. Figure out where your dealership falls on the margin vs. volume curve. Consider the types of cars you do best with and what your local market is geared towards. All of that will tell you how much you can make on your pre owned cars.

If you think dealers are making 5, 6, 7 grand on sub 20k dollar cars I would say we should find that market and start selling cars there.

[jcommin]

That's the gift of used cars. They are hard to shop against as opposed to buying a new one.

New cars have posted prices and details for optional equipment.

A used car- you have know idea what price point it was bought at and no two cars are equiped exactly alike as well as the condition or mileage.

When I look at buying a used car, I look at the price it was sold at and not the asking price. The NADA book values are close to real values as opposed to KBB or Edmunds.
Ebay is a good place to see how much a car sold for.

[berettafan]

Price range plays a part as does target audience.

Lots that cater to minorities with lousy credit probably are seeing an average markup of 60% plus usurious interest, etc.

Lots that cater to mid life crisis white guys probably see 40% markup.

[trader220]

Originally Posted by jcommin

That's the gift of used cars. They are hard to shop against as opposed to buying a new one.

New cars have posted prices and details for optional equipment.

A used car- you have know idea what price point it was bought at and no two cars are equiped exactly alike as well as the condition or mileage.

When I look at buying a used car, I look at the price it was sold at and not the asking price. The NADA book values are close to real values as opposed to KBB or Edmunds.
Ebay is a good place to see how much a car sold for.

I don’t think eBay is all that great for valuations. Look at the completed auctions section and see how many times you see the same car that appears to have been sold and gets relisted.

I agree KKB and Edmunds are not of much help in many cases. If you’re looking for a late model Camry or Honda KBB is spot on. That’s because if you live in a fair sized metropolitan area there will be at least 700 to 1000 listed for sale on the internet within 75 miles of your zip code. KBB uses an algorithm which looks at the data on hand and values the data closest distance wise to you. If you’re looking up what your 2003 Audi A4 3.2 manual sedan is worth there may only be 5 to 10 listed anywhere in the country therefore KBB’s “trade in value” is pretty much a guess. Don’t forget that condition plays a bigger and bigger role in the values the older and more miles any car has on it.

I agree new cars are a commodity, every dealer has the same cars or can get you the same car pretty quickly. Used cars are typically 1 of 1, since no two will have the exact same mileage, scratch or crease on the seat. If anyone tells you their used car is "flawless" you can laugh and keep looking.

[trader220]

Originally Posted by berettafan

Price range plays a part as does target audience.

Lots that cater to minorities with lousy credit probably are seeing an average markup of 60% plus usurious interest, etc.

Lots that cater to mid life crisis white guys probably see 40% markup.

Percentages are a bit deceiving. Sure you can make 60% on a 3 or 4k dollar car but in the end the real profit you make looks better as a percentage, its the old penny stock game. Yea I doubled my money on that stock. I bought at 1 cent and sold at 2 cents, problem was I could only do it on 1000 shares. Hey its a 100% profit. I would say there is no useful way to generalize about average markups for any segment of the population.

Financing on those kinds of cars is not much of a money maker either. Even when the lousey credit type client pays a massive interest rate the dealer is not making much on the rate. Its not like a dealer is buying money for 2 or 3% and selling it to a bad credit client at 25%. The dealer is the conduit for the finance company or bank and they're making a tiny sliver on the finance contract.

[VaSteve]

Quote de VaSteve

I looked at a car last week that had an off the main location and did volume based on price. They said their typical markup was about $800.

Bullscheisse.

Hard to say...they did show me something in their dealer system. They had a unique model....they also operated a high volume reconditioning business for the auction across the street. So their recon work was likely lower than the average lot. It was all a family business so who knows how they figured their costs.

[madmmac]

It's a bit less if you bring in your own condom to be used on yourself.

[kaisen]

Lots of good answers here. As much as they can get is accurate -- they are in business to make money. How much do they mark up the "asking" prices? They can make up whatever number they want. How much will they actually make? Typically a little less than a couple grand, give or take. And that's after any required reconditioning. Just what they actually sold it for, less what they actually have in it. It's very hard to average more than $2K per vehicle for a traditional, non-specialty dealership.

In the end, it doesn't matter -- at all -- what a dealer paid for the car they are selling. It only matters what it is *worth* in the current marketplace. If you can buy a similar car for less, you will. If it represents a decent value relative to other cars you've seen, you'll likely buy it. Whether the dealer made $4000 or lost $1000 should have nothing to do with what you pay.

[jyl]

Just look at the 10K for a publicly traded auto dealer. They report segment gross margin, including on used vehicle sales. Note though finance and insurance profit is reported separately. If the dealer is involved w/ that then the used car is more profitable.