Small Margins

Before I got into the car business I kind of assumed it was a cash cow pretty much automatically.  I'd have assumed a bare minimum 10% profit on just about every vehicle sold, probably more often 20%-30%.

It isn't that way.

We generally are trying to obtain a 3% -7% profit margin on the vehicles we sell.  As an example, that means that for a vehicle on which we have spent $30,000 (buying it initially, reconditioning it to get it lot-ready, any repairs it needed, putting it through our 150-point safety inspection, etc.) we need to make $900-$2100. 


In order to be competitive at all we have to price vehicles close to the money, i.e. near to our cost.  All dealers have access to the same sources for vehicles (chiefly auctions) so padding the price with lots of profit simply means other dealers will undercut us, and their advertised prices will be so much lower that almost no one will even come by to view our inventory, online or in person.


There is money to be made in the car business, but that money depends enormously on volume. We generally need to sell 4 vehicles to make $5000, not 1 vehicle.  We simply don't have the margins to be able to 'throw in' things like Extended Warranties (which cost us more than the profit we have in the truck.)