Consumers think car dealers are making wildly inflated profits from the sale of new and used cars, according to a new survey.
What Car? conducted an exclusive piece of research for Car Dealer Magazine on what percentage of a sale customers thought car dealers make in profit.
The survey of 1,000 car buyers revealed that most consumers (47.3 per cent) think dealers are making between 10 and 30 per cent on a new car sale.
And even more buyers (56.7 per cent) thought car dealers were making between 10-30 per cent profit on used car sales.
Recent figures from Pendragon – one of the most profitable car dealership groups according to the Car Dealer Top 100 – revealed it made an average of 8.9 per cent on new car sales and 8.1 per cent on used cars in the first half of 2022.
These percentage figures are more like the reality across the industry.
Cazoo, the online used car dealer, makes just three per cent on the used cars it sells.
Jim Holder, editorial director of What Car? publishers Haymarket, said: ‘Car makers and retailers are enjoying incredible profits at the moment as a result of the supply crisis and a laser focus on prioritising the manufacture of the most profitable vehicles.
‘It’s clear from this survey that consumers are acutely aware of that – and that the headline numbers are creating perceptions that are out of touch with reality.’
What profit buyers think car dealers make on USED cars
- 0-5% profit – 10.1%
- 5-10% profit – 26.86%
- 10-20% profit – 38.07%
- 20-30% profit – 18.76%
- 30-50% profit – 4.55%
- 50-75% profit – 1.33%
- 75%+ profit – 0.33%
What profit buyers think car dealers make on NEW cars
- 0-5% profit – 12.87%
- 5-10% profit – 32.63%
- 10-20% profit – 31.85%
- 20-30% profit – 15.54%
- 30-50% profit – 4.88%
- 50-75% profit – 1.44%
- 75%+ profit – 0.78%
Source: What Car? survey of 1,000 consumers, October 2022
Holder said consumers have more knowledge of the margins car dealers are making and know that profits have grown in recent years thanks to buoyant used car prices and new car supply issues.
Car dealers enjoyed a record year in 2021 thanks to increased demand and reduced supply of both new and used cars.
The supply issues pushed up prices of used cars while new cars were sold at greater margins.
Car dealer group Pendragon said its profit margins were up nearly 60 per cent on new car sales in the first half of 2022 with £2,576 made on each new car it sold. The average new car selling price was £29,036 for the period.
On used cars the car dealer group’s margin increased £310 to an average of £1,676 per car.
The Pendragon results have been echoed by other car dealer groups across the country.
Arnold Clark, the most profitable car dealer group in the UK, made an incredible £263m profit last year.
Holder added: ‘More car buyers are in the ballpark of the true margins, suggesting a deeper understanding of reduced discounts and the current balance between supply and demand.
‘The car industry has been in the headlines a lot in recent years, for good and bad.
‘But I think these figures underline the public’s greater awareness of the record profits being recorded by car retailers and makers at this time.
‘The watch-out must be that even in these profitable times some of the public’s perception of profitability seems to outstrip the reality, and that during a cost of living crisis car makers should be careful not to convey that the money is being used frivolously or ostentatiously, either of which could risk a substantial backlash.’