Dealer Profit Percentage on a Used Car--How Much in metro areas?
If Edmunds is correct, and apparently they might be because they have nailed the metro area dealer retail price on 2 older used cars I was looking at (approx $11K sale price), based on what it's reasonable to believe that this dealer paid for each car, I have computed their profit margin at about 40%....because it's older used cars, that translates into a few thousand bucks. I know they have to earn a profit, have to pay the salesman about 30% of the profit, but if I open negotiations with them earning a 10% profit, (several hundred dollars), it's a bad faith deal killer probably. Aside from getting as much profit as possible, what's the business metric on their end for any used car....no less than 20%? ....or is it a minimum dollar amount, when dealing with smaller numbers such as these?
There is no set number, if they want to sell the car bad enough they will come down. Prices depend on condition, seller, and area. They always start high to maximize profits. Most used cars are sold for a few thousand more than what the dealership purchased it for to cover costs. You said you want to pay them up to a10% profit? Do you really know what they paid for their vehicles? They usually get them on trade or auction sites. They get them for a decent price, recondition and get them ready for sale. But offer what you like, I'm sure if they are insulated they will say no and come back at you at another price. Only pay what you think is fair. Use Edmunds as a guide. From my experience, when dealing with a dealer, a good deal is paying between Private party sale and Dealer retail.
Tom, the salesman indicated that the 2006 Lexus was being placed on Manheim auction, since it's been over 60 days on the lot. So they're kind of desperate...although I don't know if they'd agree to most Manheim auction prices.....so there's still time for me....I mentioned to the salesman the other day that if all things checked out, at this point I'd base my offer based on what that auction would fetch, and would no longer just negotiate off of the retail price. Meanwhile, I have no idea if Kelly Blue Book online is accurate, or is it Kelly Black Book---but would a dealer looking to BUY at auction take a look at the KBlue Bk Trade In Value of the car, and that's the 'sweet spot" for most offers?---OR, do they further discount from that trade in number and offer Seller even less than trade in value, since they're taking risk of buying sight unseen? And what's Manheim's vig? There must be some metrics in that auction business that CarGurus know...any further thoughts you have are most appreciated!
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