Emissions regulations 2025: how ZBEs affect used car dealerships

In an increasingly competitive market, knowing what profit margin is reasonable in the sale of used cars is essential for any dealership looking to be profitable without losing competitiveness. Below, we break down the common values in the sector, the factors that affect them, and key tips to improve profitability without compromising service quality.

What is the usual margin in the sale of used cars?

Profit margins can vary depending on the type of dealership, location, and vehicle profile. However, some reference values allow us to establish reasonable ranges:

• Gross margin per car: between 10% and 20%, according to data collected by Dealcar.

• Average total profitability of the dealership: around 0.92% in 2024, according to data from Faconauto.

• Profitability of used vehicles compared to new ones: the used vehicle offers slightly higher margins than the new one (8.8% vs 8.5%), according to Motoreto.

Factors that affect the profit margin

1. Type of vehicle

• Premium or highly demanded vehicles usually offer higher margins.

• Low-cost or very old cars may have fast rotation but tight margins.

2. Age and condition

• Nearly new vehicles under 3 years old offer a better margin than models over 10.

• A good refurbishment can increase perceived value and justify a better price.

3. Acquisition channel

• Buying directly from individuals typically offers better margins than acquiring through auctions or intermediaries.

4. Financing and extra services (F&I)

• Financial products, insurance, and warranties can increase profit per unit by an additional 2% to 5%.

Mini guide: how to correctly calculate your gross margin

To calculate the gross margin per car:

Gross margin (%) = [(Selling price - Total cost of the car) / Selling price] × 100

Practical example:

• Selling price: €12,000

• Purchase cost + refurbishment + paperwork: €9,500

• Gross margin = [(12,000 - 9,500) / 12,000] × 100 = 20.8%

This figure is key to measuring the profitability of each transaction.

Common mistakes that reduce your margin without you realizing it

• Over-refurbishing vehicles: Investing more than what the customer perceives as added value.

• Having stagnant stock: The longer a car sits on display, the higher its hidden costs.

• Not offering F&I services: This is a profitable and underutilized avenue in many dealerships.

• Setting prices without market analysis: This can lead to lost sales or leaving margin on the table.

Tips for optimizing margin without losing competitiveness

• Control refurbishment costs. Use in-house workshops or preferred agreements with suppliers.

• Improve stock rotation. Ideally, inventory should turn 4 to 6 times per year.

• Adjust prices dynamically. Tools like smart pricing can help you identify market value in real-time.

• Train the sales team. Good training in sales techniques and F&I can significantly increase margin per car.

Key KPIs to evaluate profitability

1. Gross margin per unit

Measures the difference between the selling price of the vehicle and the total acquisition cost (including refurbishment, paperwork, and transport). It is the main indicator to know how much you earn per car sold.

2. Average time in stock

This is the number of days a car stays in inventory before being sold. The longer a car remains unsold, the more associated costs it will have (insurance, space, financing).

3. Closing ratio per lead

This KPI reflects how many sales you close in relation to the number of opportunities or leads generated. A good ratio indicates commercial efficiency and good conversion of your team.

4. Average refurbishment cost

Calculates how much you invest on average to prepare each car for sale. If it is too high, it reduces your margin; if it is too low, it can affect perceived quality.

5. Profit from additional services

Includes income from financing, insurance, warranties, or maintenance. Increasing this income without inflating the base price improves the overall profitability of the business.

Conclusion

Knowing and optimizing the profit margin in the sale of used cars is not just a matter of prices but of strategy. Understanding which factors influence profitability and applying good business practices can make the difference between a competitive dealership and one that merely survives.

Frequently Asked Questions (FAQ)

What is the recommended gross margin per used car?

A reasonable gross margin is usually between 10% and 20%, depending on the type of vehicle and the additional services included.

How much does a dealership earn per car sold?

Net profit can vary widely, but on average it ranges between €500 and €1,500 per unit, considering also income from financing, insurance, and aftersales.

What is the average profitability of dealerships in Spain?

According to data from 2024, average profitability was 0.92%, a figure that has been declining in recent years.

Do used cars offer more margin than new ones?

Yes, in general, used vehicles offer a slightly higher gross margin than new ones, although it depends on the sales channel and the customer profile.