How UK Car Dealers Earn From Selling New And Used Cars

This is How Much UK Car Dealers Earn From Selling New and Used Cars

Most car purchasers in the UK believe that car dealers get up to 20 per cent profit margin on the sale of every new vehicle, reports a survey from What Car? The study included 5,000 car purchasers, and out of those, 28.2 per cent thought that dealers keep between 10 and 20 per cent profit on new car sales.

In the same survey, the participants also shared their opinions on used car profits. Around 35.8 per cent agree that dealers earn 10-20 per cent on used car sales. 

Some car buyers think that dealerships make abnormal profits. The survey revealed that 5.8 per cent of vehicle buyers deem dealers keep 50 per cent or more profit on new vehicle sales.

However, we are aware that car deals bring revenue for both car dealers and manufacturers. Who earns more of the two? The survey does answer that as well. 56.7 per cent of the participants said that automakers make the most cash out of selling a new vehicle. The remaining 43.3 per cent believed that dealerships earn the most.

Editorial Director for What Car?, Jim Holder, shed some light on the subject: “While everyone knows car dealerships are there to make money, the public’s perception of how easy it is for them to rack up profits provides a fascinating insight into the challenges during a negotiation.”

“While I’m sure it’s possible, the suggestion from the significant proportion of respondents that dealers and carmakers make more than 20 per cent margin on every new or used car deal is surely fanciful.”

“But there’s no question that the belief the dealer is racking up big earnings would compel buyers to haggle harder.”

The research also focused on the dealership’s profit share in the new car sales. 15.2 per cent of participants think that the dealer’s profit amounts to 5 per cent or less on every new car sale. On the other hand, 30.8 per cent of car buyers believe that car dealers earn more than 20 per cent. Surprisingly, 2.6 per cent of respondents deem the dealerships generate more than 75 per cent profit on new vehicle sales.

Similarly, car buyers also shared their thoughts about retailer’s profit on secondhand vehicle sales. 8.5 per cent of the participants believed the dealer’s returns account for 5 per cent or less on every used car they sell. Alternatively, 2.1 per cent of vehicle purchasers assume dealerships collect more than 75 per cent of profits from used car sales.

How Much Profit UK Car Dealerships Make in Reality? 

However, the reality is completely different from what vehicle purchasers believe. The dealers only keep approximately a 7 per cent profit margin when they sell a new car. On the other hand, on used car proceeds, the dealerships hold 12 to 15 per cent profit.

Mike Jones, an industry expert, and analyst agreed with the variance between actual and anticipated figures, adding: “Many people think dealers make large sums because the showrooms are that nice and expensive, they must be making that much.”