What do Dealerships Really Pay for Cars? [Explained]

When it comes to selling a car to a dealership or buying a new one, it’s important to know what you’re looking at and to go into the situation with the full knowledge of what’s going on and what’s going to happen next. You want to feel comfortable and confident buying a new car or even selling your old one, so make sure you’re doing what it takes to learn.

What Do Dealerships Really Pay for Cars?

Dealerships pay directly for the invoice price of the vehicle but the pricing of vehicles is more complex than that. While the invoice may be the price the dealership pays upfront for the vehicle, the manufacturer will likely give the dealers a holdback or discount to cover other costs like commission and overall costs.

This means that the invoice price isn’t exactly what is paid on that vehicle by the time the dealership sells it. The upfront cost is there, but then there’s a deal for actually getting rid of the vehicle. After all, manufacturers want those cars on the road, not sitting in a dealership lot, so they’re going to do what they can to get the dealership to move their vehicles over the vehicles of someone else. 

How Does Buying a Car From a Dealership Work?

If you’re looking for a new car you can look at the manufacturer or dealer websites to determine which vehicle you are looking to purchase. From there you can visit the dealership to start the purchase process of a vehicle. 

Keep in mind that there are plenty of things that are going to go into getting your next vehicle. Whether you’re looking at a new vehicle or an old one you’ll have to find the vehicle that you actually want on the lot (in most cases) and then you’ll need to negotiate with the salesperson to get the price that you’re looking to pay. Keep in mind that there’s a lot involved in negotiating and you may have to make some concessions or they might, depending on whether it’s a good time of the year for car buying. 

What Should You Not Do at a Car Dealership?

The first thing to not do is to lie to the salesman. If you are dishonest to them they are more likely to be dishonest to you. You should also not go in with no idea of a budget or vehicle in mind. If you go in with almost nothing not only will you annoy the salesperson you will likely get out with a car that is out of your budget.

Make sure you have an idea of what you want and what you’re willing to spend. Then, let the salesperson know what you’re actually looking for. It’s not a good idea to let them point out a lot of vehicles that you know you don’t want or that aren’t even in your price range because they’re more likely to feel like you’re wasting their time. Then, once you do find a vehicle you want they’re less likely to want to negotiate with you. 

How Much Can You Negotiate on a New Car?

This depends on the vehicle and the dealership. Usually, you can negotiate with as much information as you have with you, this is why going informed is important. If you go in with a number that others in your area are getting for the same vehicle you are likely to get the same amount off.

Make sure that you’re firm but still polite and professional when you’re negotiating. If you get rude or ignorant you may be asked to leave, even if the price you’re trying to get is considered a fair one or a reasonable one. Being firm on what you’re willing to pay but still understanding that you’re dealing with real people is the best way to get what you’re looking for.

Will Car Dealerships Lower Price for Cash?

This is not a very likely scenario anymore, especially for new vehicles. As margins are fairly slim on new vehicles and based on their sales they may not get much back on the price of the vehicle. If you can offer 100% cash on your purchase you may get your finance costs cut, however.

Do Dealers Like Cash Buyers?

Well for one thing cash buyers can make the finance and insurance room almost useless, cutting time to complete the transaction. And since the salesperson doesn’t get much on the back end he’s ok with getting you out and getting to the next walk-in. Cash buyers also likely know exactly what they want upfront, speeding the process even more.

Will a Dealership Buy My Car if It Has Damage?

Every vehicle is worth something, some worth just scrap, and some worth a good portion of their original value. If your vehicle is damaged and you don’t believe that repairing it will increase the value enough try to get a couple of offers for your old vehicle when it’s time to turn it in.

How Much Does a Car Salesman Make a Year?

It is estimated that the average salesperson in any dealership across the United States makes about $40,000 per year. That’s not extremely surprising considering almost all salespersons are paid entirely on commission. Many dealerships also set minimum commissions, and new vehicles are more likely to have a minimum for the salespersons.

This will also depend on just how good of a salesperson they are as better salespeople will get higher commissions and more commissions off the bat. This helps them to increase their overall take-home pay.


If you’re looking to buy a new car you want to make sure that you go into the situation fully informed. After all, it’s going to be a process to get the vehicle you want at the price you want. Just make sure that you’ve done your research and that you are remaining polite at every opportunity. It’s likely going to get you a whole lot further than you think.

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