does a gm car dealership and/or salesman make less profit on a car sold at gm employee discount?

Question

how much does a dealership make from the sale of a new car? how about the salesman? with gm employee pricing i paid $42,000 for a car that stickered for $50,000, does gm still make money on this deal? what does it cost to produce this car? thanks, keith

Answer 1

GM always makes money on a car whether you buy it at employee price or not. It's the dealer who takes the hit if they don't process paperwork correctly. Their profit margin on employee pricing is based on bonus money they earn from GM for processing the sale. It's actually minimal if you consider it by percentage. It's about 1.5% of the invoiced price, which on your vehicle would work out to somewhere around $620 which then has to go towards keeping the lights on and paying employees. Most people don't realize that, other than the grocery business which operates at a 1% net profit margin, car dealers have the second lowest net profit margin, with the more successful dealerships operating between 1.5% and 2%. That's not much when you think about how much a vehicle sells for these days.

Keep in mind that the dealerships are NOT part of GM. They're independently owned and operated and their profit margin is not the same as GM's. GM makes the profit by selling the car to the dealer, so it makes no difference to them whether you buy at window, discount or employee price.

Answer 2

GM makes a tidy profit on that deal. The dealer and salesman, much less so.

Most employee discount programs from the auto manufacturers are below "dealer invoice" but are still within the 3% holdback range so the dealer usually is looking at 1% - 2%, plus any factory-to-dealer incentives, if any are on at the time of the deal.

A skilled negotiator can often beat "Employee Pricing" on most cars except the hottest sellers (Toyota Prius & Camry, Honda Accord, etc.) or Saturns (which are only sold at full MSRP).

On employee discount or supplier discount deals, the salesman usually gets minimum commission -- $50 at most houses. That's not a big deal, since they didn't do much work to get the sale in the first place.