Our average gross margin (by type of deal): 👇

Used cars average margin to be around 6-8%.

But 2021 and the first half of 2022 were bonkers.

Some dealers got as high as 10-12%.

And that doesn’t include any ancillary product sales.

Let’s put some numbers to that:

Assume your average vehicle sales price is $25K.

8% of that is $2,000.

Let’s also assume that this dealer does sell ancillary products.

Extended warranty:

Cost: $800

Sale price: $1,800

Gross margin: 55%

GAP insurance:

Cost: $189

Sale price: $750

Gross margin: 75%

Add all of these together and you get your basic economics of a car dealership:

Average order value: $27,750

Gross margin: $3,561 or 12.83%

But it doesn’t end there... Now the really fun begins.

Dealers make MOST of their money in other ways:

So yeah,

If run correctly, dealerships are extremely lucrative.

Check out the Tax Advantages section for more info on how dealer’s maximize their earnings in clever ways.