Enter invoice cost and selling price, with optional holdback, to estimate a dealer gross profit.
Dealer margin is the gap between what a vehicle cost the dealer, its invoice price, and what it sells for, plus any manufacturer holdback. A car with a $28,000 invoice sold for $31,000 is a $3,000 gross profit before holdback. A 2 percent holdback on price adds about $620, lifting the gross to roughly $3,620.
Dealer gross profit
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What Is Dealer Margin?
Dealer margin is the gross profit a dealer makes on a single vehicle: the difference between the invoice cost and the selling price, plus any manufacturer holdback. It is the headline number on a sale, though it is not the whole story of how a dealership makes money.
Because new-car margins are often thin, holdback, financing, add-ons and trade-ins all matter to real dealer profit.
How to Calculate Dealer Margin
Profit = Selling price - Invoice cost + HoldbackA car with a $28,000 invoice cost sold for $31,000 is a $3,000 gross profit before holdback. A 2% holdback on the price adds about $620, lifting the gross to roughly $3,620. The calculator also shows the gross margin as a percentage.
How to Read Your Result
The main figure is the dealer gross profit in dollars. The margin box shows that profit as a percentage of the selling price, and the holdback box isolates the manufacturer refund, so you can see how much of the profit comes from the sale versus the holdback.
More detail
What Is Holdback?
Holdback is a portion of the price or MSRP, typically a small percentage, that the manufacturer refunds to the dealer after a sale. It lets a dealer sell close to invoice and still make money, which is why real dealer profit is usually higher than the invoice-to-price gap alone.
The underlying math is the same as any gross margin, and if you prefer to think in terms of adding to cost, the markup calculator shows the other side of the same figure.
Gross Profit Is Not Net Profit
This is gross profit on the vehicle. Real net profit also depends on overhead, sales commissions, financing and any add-ons, which this tool does not include. If you are the buyer financing the purchase, the auto loan calculator shows what the deal costs you over time.
What is a typical dealer margin on a car?
It is often just a few percent of the price on new vehicles, which is why holdback, financing, add-ons and trade-ins matter so much to dealer profit. Used cars typically carry a larger margin.
What is holdback and who gets it?
Holdback is a portion of the price or MSRP that the manufacturer pays back to the dealer after a sale. The buyer does not see it directly, but it is real dealer income.
Is this the dealer net profit?
No. It is gross profit on the vehicle. Real net profit also depends on overhead, sales commissions, financing and any add-ons, which this tool does not include.
Does a lower selling price mean the dealer loses money?
Not necessarily. Thanks to holdback and other income, a dealer can sell at or near invoice and still make a profit, which is why the invoice price is not the true floor.
Is my data saved?
No. The calculation runs in your browser and nothing you enter is stored.
Sources
- Gross profit definition (Corporate Finance Institute).
- Gross margin explained (Corporate Finance Institute).
- Managing small-business finances (U.S. Small Business Administration).
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