I stumbled into this (full document after the jump) at the GM Heritage Center site, a letter from Oldsmobile to all its dealers clarifying the retail price discounts. They’re pretty healthy, compared to what one might expect nowadays, especially since the internet and so much transparency about invoice vs. MSRP pricing on cars. Today’s dealers live mainly on profits from service and used cars.
The base discount from list price was 21% for the mid0sized models, and 25% for all of the full-sized ones. 2% was held back, to be earned by the dealers based probably on various incentive plans and such.
Of course the real question is how close to MSRP buyers were paying back then. I know what it was in the case of my father: 100%. Haggling was just not his thing. And I suspect that was the case with a lot of other folks. One would hear of discounts, but how big and widespread they were was another story. Dealers made the bulk of their profit on new car sales, and most fought hard to not discount too much. At least not until the economy started tanking… Does anyone know what kind of discounts were common?
NADA, the dealer’s association, recently released their annual report on dealer’s finances. Total net pre-tax profits held steady at 2.2%, a very modest rate. So much for “stealerships”. It averaged to a bit over a million dollars per dealer. Gross profits from new car sales, as a percentage of selling price, averaged 3.42%, or $1,144 per car. Used car sales gross profits, as a% of sales price, were 12.23, or $2,372 per car sold.
According to an analysis at autonews.com, net profit for dealer’s service departments were nine time higher than their new car departments, and five time higher than their used car departments.