New Report Shows Average Profit on Used Cars

Dealers Can Make Good Margins Selling to Sub-Prime Customers

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Griffin, Keith. "New Report Shows Average Profit on Used Cars." ThoughtCo, Aug. 23, 2016, thoughtco.com/new-report-shows-average-profit-on-used-cars-3308270. Griffin, Keith. (2016, August 23). New Report Shows Average Profit on Used Cars. Retrieved from https://www.thoughtco.com/new-report-shows-average-profit-on-used-cars-3308270 Griffin, Keith. "New Report Shows Average Profit on Used Cars." ThoughtCo. https://www.thoughtco.com/new-report-shows-average-profit-on-used-cars-3308270 (accessed October 21, 2017).
2012 Ford Fusion. (c) Ford

Ever wonder how much profit a used car dealer makes? In the sub-prime market it can be pretty substantial for certain makes and models.

That’s according to information via the ProMax Unlimited CEO blog written by its CEO John Palmer. ProMax Unlimited is an automotive software company aimed at dealerships.

Palmer says over 40 percent of car buyers are special finance customers. In effect, that’s customers with credit scores below 620 down to 460.

Credit scores below that aren’t going to qualify for most car financing regardless of how much you put down. (The About.com credit and debt management expert explains credit scores.)

Here is how the research breaks down for July 2015. (Palmer does a monthly update – click on the first link in this article if you are reading this after August 2015.) There are three credit tiers his research focuses on. Determine your credit score to see what tier you are in.

Credit Tier 575-619

  1. 2013 Ford Focus: $4,494.38
  2. 2014 Chevrolet Cruze: $3,852.71
  3. 2012 Chevrolet Cruze: $3,627.27
  4. 2013 Chevrolet Cruze: $3,600.26
  5. 2013 Kia Soul: $3,218.34
  6. 2012 Chevrolet Malibu: $3,102.32
  7. 2012 Toyota Camry: $3,001.35
  8. 2013 Chevrolet Malibu: $2,981.18
  9. 2013 Hyundai Sonata: $2,946.06
  10. 2013 Ford Fusion: $2,920.35
  11. 2013 Dodge Grand Caravan: $2,886.46
  12. 2011 Chevrolet Malibu: $2,788.54
  13. 2013 Kia Optima: $2,784.82
  14. 2013 Chevrolet Sonic: $2,759.05
  15. 2013 Hyundai Elantra: 2646.98
  1. 2013 Chrysler 200: $2,524.60
  2. 2012 Ford Focus: $2,266.01
  3. 2013 Dodge Avenger: $2,250.00
  4. 2013 Chevrolet Impala (Fleet): $2,230.22
  5. 2012 Ford Fusion: $2,135.75

Credit Tier 520-574

  1. 2013 Ford Escape 4WD: $3,463.21
  2. 2013 Ford Fusion: $3,137.13
  3. 2012 Ford Fusion: $3,013.60
  4. 2013 Hyundai Elantra: $2,982.77
  5. 2013 Kia Soul: $2,956.19
  1. 2014 Nissan Altima: $2,923.39
  2. 2012 Nissan Altima: $2,778.23
  3. 2014 Chrysler 200: $2,623.67
  4. 2012 Chevrolet Malibu: $2,483.58
  5. 2013 Chevrolet Cruze: $2,267.88
  6. 2013 Dodge Grand Caravan: $2,250.34
  7. 2013 Hyundai Sonata: $2,206.30
  8. 2012 Chevrolet Cruze: $2,203.18
  9. 2013 Chevrolet Impala (Fleet): $2,195.01
  10. 2014 Ford Fusion: $1,861.77
  11. 2013 Chrysler 200: $1,829.98
  12. 2012 Ford Focus: $1,739.23
  13. 2013 Dodge Avenger: $1,727.26
  14. 2013 Chevrolet Malibu: $1,718.37
  15. 2014 Chevrolet Cruze: $1,653.25

Credit Tier 460-519

  1. 2012 Nissan Altima: $3,582.73
  2. 2014 Chevrolet Cruze: $3,519.93
  3. 2012 Chevrolet Malibu: $3,351.51
  4. 2013 Dodge Avenger: $2,766.95
  5. 2013 Dodge Dart: $2,716.96
  6. 2013 Ford Focus: $2,715.42
  7. 2013 Ford Fusion: $2,652.25
  8. 2013 Kia Optima: $2,612.91
  9. 2014 Nissan Altima: $2,601.81
  10. 2013 Nissan Altima: $2,544.57
  11. 2013 Chevrolet Cruze: $2,473.77
  12. 2014 Toyota Corolla: $2,404.98
  13. 2012 Ford Fusion: $2,231.35
  14. 2013 Chrysler 200: $2,208.38
  15. 2013 Kia Soul: $2,104.89
  16. 2014 Chrysler 200: $1,934.95
  17. 2013 Hyundai Elantra: $1,902.93
  18. 2013 Chevrolet Impala (Fleet): $1,456.55
  19. 2011 Ford Fusion: $1,357.39
  20. 2013 Chevrolet Malibu: $745.25

What’s the biggest takeaway from this information? There is wiggle room on price. Say, for example, you wanted to purchase a 2013 Ford Focus. If you have credit in the 575 to 619 tier, the average dealer profit on the car is $4,494.38.

Now that profit is not going to come just from the price of the car. That’s not where your wiggle is going to come from.

With a sub-prime dealership (i.e. a used car dealer that specializes in sub-prime customers) a lot of the profit comes from the actual financing. A lot of Buy Here Pay Here dealers are really just lending institutions who happen to attach their products to cars. They are in the business of lending money and not selling cars primarily.

Let’s look at the potential financing of a 2013 Ford Focus with its profit of almost $4,500. According to Edmunds.com, its dealer price (assuming good condition and average mileage) should be from $14,800 to $15,700. Either see if the dealer will come down on price or financing terms. Interest rates can be 15 percent or higher. Getting that loan rate down to 13% could save you almost $1000 over the curse of a four-year loan.

There’s another lesson to take away from this list. Of the 60 vehicles listed (and there is a lot of overlap) only three of the spots are anything but sedans. You have a Ford Escape and a Dodge Grand Caravan. That demonstrates that bad credit is going to limit your vehicle choices and the supply of sedans is plentiful.

After all, the vehicles that get sold to customers with poor credit tend to be those that don’t sell well at auction. Crossovers and pickups appear to still have a strong market.

One other concern is these are all relatively late-model vehicles. It seems odd they wouldn’t be certified pre-owned. That means any one buying these should definitely make sure they have pre-purchase inspections done.

Something else to point out. Two of the cars on this list, the Ford Fusion and the Nissan Altima, make my list of 5 used cars that are popular but not good deals. Yet another reason to avoid them if at all possible.