Where Does the Car Dealer Make Money? - Edmunds.com

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Where Does the Car Dealer Make Money?

Mostly From Service, Not From Car Sales


It goes without saying that car dealerships can't exist unless they are profitable. That's true for every business, from a neighborhood dry cleaner to a mega-retailer like Wal-Mart. At auto dealerships, the rows of shiny new cars might prompt shoppers to believe that they're where the business makes most of its money.

But that's not the case. According to the most recent data from the National Automobile Dealers Association (NADA), the new vehicle department of a car dealership accounts for about 30 percent of a dealership's gross profits. In addition to car sales, that figure also reflects profits from finance and insurance (F&I) products sold on new cars. That means such things as Gap insurance, alarm systems and, notably, extended warranties.

The used vehicle

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