What is the margin for the car dealer on the sale of each car?

Question

Are there any legal limits to the margin that can be made over the MSRP?

Answer 1

Dealers can sell cars at any price they choose. The MSRP (sticker price) is only a suggested retail price.

To find the actual margin for a particular car (assuming it is sold at MSRP), go to www.edmunds.com and compare the MSRP with Invoice Price. This is the difference between retail and wholesale price.

Dealers have other costs and other ways to make profit on deals, so it is difficult to know exactly what his true profit is on a particular deal.

Answer 2

No.  The only time the government really steps in to control pricing is when it would be considered price gouging.  When the purchase of a product has no effect on a civil emergency, the market controls the ultimate price on an item.

It is illegal for the manufacturer to dictate the price of an item.  MSRP is an abbreviation for Manufacturer's SUGGESTED Retail Price.  Like everyone else in the world, automotive salespeople & the dealerships they work for, are pretty much just trying to make a living.

The average mark up on a new car at MSRP is @ 5%.  For comparison purposes, the major gas companies are reporting margins of @ 8%, Costco's largest single item mark up is 14%, and a retail business is generally considered healthy when it averages @ 15% profit margin.

Answer 3

I know that when a new popular car comes out, the dealers charge as much as they possibly can, whatever people will pay. New beetles selling for twice MSRP in '99. The first Dodge Viper I ever saw at the dealer sold for $125K when the sticker was $59K. Many of the Ford GTs in '05 sold for $250K when the sticker was closer to $100K. You don't even want to know the margins in the used car lot.