Trust me, I know buying a car isn’t easy. Believe it or not, neither is selling a car. After doing it for 43 years, I can assure you that being on either side of a car deal isn’t the most pleasant experience either. This is in large part because of information asymmetry, meaning that the dealer has more information than the car buyer, and the car buyer has most likely been taken advantage of in the past by one dealer or another.
By now you know what our objective here at CarEdge is: we exist to support car buyers as they navigate the process. Today I wanted to share with you my best guess as to how much dealers make on new cars broken down by brand. These are estimates, and not facts. During my 43 year career I worked for a lot of OEMs (original equipment manufacturers), but not all of them. I don’t know every brands profit margins, but I do have a good sense of what they are for most.
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Keep in mind that profit margins are different by model and not just make. What do I mean? I mean that a Mercedes-Benz C300 is going to have less profit built into it’s MSRP than a G550. That being said, on average, my best guess is that Mercedes-Benz’ have eight percent profit built into the MSRP price. I hope that makes sense.
If you work for one of these manufacturer’s, or at a dealership and you have insight into how much profit is built into the MSRP price for each brand, please leave a comment below and we will update the table to reflect that. This is a “living” document, and should be used as a guide for your car buying process, not as fact. The only way to truly know how much a dealer is making when they sell a new car is to ask them. More on that can be found here.
If you haven’t already, be sure to use our FREE Market Price Report which contains a suggested offer price to help you begin negotiations with any dealer on any car.
Without further ado, let’s dive in!
|OEM||Profit built into MSRP|
I attempted to buy a car from a local Honda dealer here in So Cal but it was marked up $6400 above MSRP. They wouldn’t budge on the markups except for a few hundred.
Simple, go elsewhere.
A few years ago, I read that new Porsche models carried a 24 % profit margin for the mfg.
Care to comment on that?
The nerve of these automakers for trying to make a profit what a horrible business plan. Never could understand why the Auto industry always seems to be targeted. When there are so many other purchases that you make in which the maker is marking up the product 100 to 500%. Please enlighten me as to what the fascination is with the Auto industry itself. Personally I’d be more aggravated when I’m paying 500% markup on a mattress which is about right versus paying over MSRP for a car.
The nerve of a company trying to turn a profit what a disgrace
My comment is awaiting moderation. Can’t get away from censorship anywhere today.
sounds like Chris works for a car stealer ship. nothing wrong with car dealers making money just dont like getting ripped off.
It’s pretty simple. Getting a 1% discount on a loaf of bread is no big deal Getting a 1% drop on the price of a $50,000 car is meaningful.
Does the margin in your table include holdback, or is this the estimated spread from Dealer Invoice to MSRP without holdback or other incentives? Also, as you know, there will be spiffs from time to time and other incentives that may or may not relate to the unit you are buying. Those factors may be based on total units sold that month or year, growth in total units, or of certain target models, etc.
I have heard that some OEM’s will allocate distribution of desirable (rare) models, such as a 4Runner TRD Pro based on how many more common cars they are moving – say Corollas. So if you are in the market for the TRD Pro, too bad, you are going to pay full MSRP or possibly an ADM, but if you want a Corolla, you might be able to cut a better deal. Am I right?
Love your YouTube show!
thanks for the info
I don’t know about new cars but I just sold my Prius to CarVana and they “only” made $3000 on my car when it sold. It went to them for $20000. I kept looking on their website for my car and it showed up a week later. It sold in a few days for $23000. So what is that.. 15% Not too shabby for a quick flip. A win win all around.
Now buying a new car after the sale was a horror show… Did everything in your book and they STILL screwed me out of some money at sale… Bottom line was they would not honor their own “out the door price”. Westshore Mazda in Tampa really sucks a big one… Just a bunch of bold face LIES… YMMV
Used is much different than new. They also spent on average 1500 to 2000 to recon a used car. Wake up
Interesting, I enjoyed reading this
hi guys, great show….how do I find the invoice price for a Jeep Wrangler Unlimited Sport S, a configuration ~40k, above you say 6%…. that means ~2.5k in profit? Can you get deals on Wranglers? Trucar doesn’t show that much
one more question is on the money factor…..how do I find what is the standard? one dealer gave me a money factor of 0.00152 (3.65% APR), another one 0.0021 (5% APR)….both these are huge give how the economy is doing and how low the interest rates are
If the invoice price on a Jeep Grand Cherokee (2021 model Laredo X ) is indicative of say 45k and currently with employee discount is being sold for $41,559, which is obviously already below MSRP, can I still negotiate on what the margin average (6%) could be plus any incentives? As it is already lower is this something that can be negotiated or is the lower price the final price due to it being on employee discount as is? Thanks and love your channel by the way, I have learned so much!
I look at and enjoy your shows. I’m thinking of buying a new truck. Are these auto buying services like USAA, Costco and others good to use ? I don’t wish to spend hours at a dealers show room.
Phil, thanks for the kind words. Take a peek here: https://wordpress.caredge.kinsta.cloud/guides/costco-auto-program/
You will pay more to go through those programs.
dealer wont negotiate much on price since they have to pay costco 500$ for referral.
Randall this is just the margin built in from invoice cost to MSRP and is not reflective of any holdback or other dealer incentives. Most manufacturers operate on what is called a turn and earn system, the faster you turn (sell) a model the more you earn, so as a dealer who turns vehicles more quickly or agrees to accept more of the slower moving vehicles, the manufacturer may choose to reward them with more of the harder to find vehicles such as the 4Runner TRD Pro.