How are dealerships such as BMW making money from a vehicle if say an m340i is 10% off msrp. Since invoice is 6%, they are losing 4% on the vehicle. If they aren’t having any bogus dealer fees and marking up the mf how are they making money on this vehicle. Do dealerships get money from bmw for each vehicle sold or is that just a monthly quota thing?
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They make money all kinds of way.
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Holdback, fees, finance, warranties, extras, etc. Dealers don’t just make money on a vehicle’s sales price. And that’s not even considering the killing they make thru the service department.
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And remember not every car is sold 10% discount. Some customers might be super happy buying at invoice thinking they are getting a great deal and the dealer pockets the incentives.
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Thanks to all for the insight
Often times it’s a game of robbing Peter to pay Paul.
There’s cars I really have no room to play on due to any number of conditions and thus I don’t offer them unless someone is willing to pay to play. There’s other cars where we can go nuts on due to market supply.
There’s also year end pay outs tied to CSI scores. If your scores are over xyz then the manufacturer pays you xyz per car
because invoice <> dealer cost.
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Many of the big dealership holding companies are public companies. They publish annual reports and 10-K’s and Q’s on the regular and their profit sources are all public information.
Making a broad generalization across several companies, gross profit looks something like
20% new car sales
20% financial and insurance products
60% between used car sales and service/parts (not necessarily even split: some companies make more from one than the other).
New car sales are not directly all that profitable. They generate 20% of GP despite generating 50%+ of revenue. But that big OEM logo up front and selling new cars are the difference between being a bonafide franchise dealership and Joe’s Used Car Lot. That perceived legitimacy drives a lot of the other profit-makers such as used/CPO sales; service; and F&I sales
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Wait one arbitrary number provided by the seller, which is lower then another arbitrary number provided by the mfg doesn’t indicate cost…color me surprised.
Please ask this question on r/askcarsales and specifically ask about backends. You’ll get some awesome answers
/s