DRIVE DAILY

(It’s Not Just the Car)

The uncomfortable truth about the modern dealership

Most people still believe car dealerships make their money the old-fashioned way: buy low, sell high, shake hands, job done.

That era is basically over.

In 2025, the metal on the forecourt is often the least profitable part of the entire operation. Sometimes it’s a loss leader. Sometimes it barely breaks even. And occasionally, it’s just bait.

The real money is layered. Quiet. Strategic. And usually invisible to the buyer.

Let’s pull the curtain back.

1. The car itself: surprisingly thin margins

Let’s start with the obvious.

New cars

On brand-new cars, dealer margins are typically

• 2–8% on list price

• Often lower on high-demand models

• Frequently wiped out by discounts or manufacturer targets

On a £35,000 car, that can mean £700–£2,000 gross before:

• staff wages

• premises

• marketing

• valeting

• warranty prep

That’s not exactly champagne money.

This is why dealerships obsess over volume bonuses from manufacturers — sell X cars this month, unlock a backend payment. Miss the target by one unit? That bonus evaporates.

This alone explains:

• end-of-month pressure

• quarter-end “madness”

• why you suddenly get a call saying “We might be able to do something on price”

Used Cars (it’s getting warmer)

Used cars have better margins, but still not wild:

• £1,500–£3,000 gross is common

• Some cars are absolute dogs and eat margin in prep

• Stock risk is real (especially in volatile markets)

A used car sitting 60+ days becomes radioactive. Price drops follow. Margin dies quietly.

Which brings us to the first real truth:

Dealers don’t want cars. They want turnover.

2. Finance: the silent profit engine

This is where things get interesting.

When a customer takes finance, the dealership usually earns:

• a commission from the lender

• sometimes scaled by APR, term length, or product type

On a typical PCP or HP deal, this can be:

• £500–£1,500 per deal

• sometimes more on higher-value cars

This is why:

• finance is encouraged

• “cash price” can feel oddly higher

• sales conversations subtly steer towards monthly payments

It’s not evil. It’s economics.

Finance turns a low-margin sale into a viable business transaction.

This is also why trusted, transparent finance partners matter — something Drive Daily actively filters for within its Trusted Partner Programme (TPP).

3. Add-ons: small items, big margins

Now we’re in the danger zone.

Add-ons are where margins get… spicy.

Common examples:

• paint protection

• alloy insurance

• tyre & wheel cover

• cosmetic repair plans

• service plans

The key thing buyers miss:

• these products are high-margin

• often optional

• and frequently poorly explained

A £399 add-on might cost the dealership £80–£150 wholesale.

Multiply that across hundreds of deals per year.

You get the idea.

This isn’t inherently bad — some products are genuinely useful — but understanding which ones matter is where buyers win and dealerships respect you.

4. The part nobody sees: the workshop

Here’s the plot twist.

The service department is often the most profitable part of the business.

• Labour rates: £90–£180 per hour

• Parts markup: significant

• Warranty work: manufacturer-paid

• MOTs & servicing: consistent, predictable income

Sales is sexy

After-sales is stable.

Many dealerships would survive losing sales before they’d survive losing the workshop.

This is also why:

• service retention is aggressively pushed

• booking reminders never stop

• service plans are heavily promoted

A customer who services with a dealership for 6–8 years is often worth more than the initial car sale.

5. Trade-ins: the hidden leverage point

Trade-ins aren’t just convenient — they’re strategic.

Dealerships make money here by:

• buying below retail market value

• reconditioning efficiently

• reselling quickly

Even when a “good price” is offered, it’s often balanced elsewhere:

• finance

• add-ons

• reduced discount on the new car

It’s all one spreadsheet.

This is why separating:

• car price

• finance

• part-exchange

is the smartest move a buyer can make.

6. Data, retention, and the long game

Modern dealerships aren’t just selling cars.

They’re building:

• customer databases

• remarketing lists

• service pipelines

• upgrade cycles

If a dealership knows:

• when your PCP ends

• when your MOT is due

• when your warranty expires

They can time outreach perfectly.

This is why:

• email follow-ups feel eerily well-timed

• upgrade offers land “out of the blue”

• loyalty suddenly matters when you’re about to leave

It’s not coincidence. It’s CRM.

⸻

7. So… is the system rigged?

No.

But it is optimised.

Dealerships aren’t villains — they’re businesses operating on:

• thin margins

• high overheads

• intense competition

• manufacturer pressure

The problem isn’t profit.

The problem is asymmetry of knowledge.

Buyers walk in thinking the deal is about the car

Dealerships know it’s about the entire transaction.

That gap is where mistakes happen.

⸻

Where Drive Daily fits into this (quietly)

Drive Daily exists in the space between:

• buyers who want clarity

• and businesses that operate ethically

By spotlighting Trusted Partner Programme (TPP) members:

• finance becomes transparent

• pricing becomes comparable

• and incentives are explained, not hidden

No smoke. No panic tactics. Just informed decisions.

⸻

The takeaway (tell-it-like-it-is)

If you remember one thing, make it this:

The car is just the headline. The deal is the story.

Understand how dealerships really make money, and suddenly:

• negotiations feel calmer

• decisions feel slower (in a good way)

• and regret becomes rare