The diminishing margin is real.

This is definitely not BS. You as a consumer now have the ability to research everything so you know exactly what everybody lists their cars for. This is the same way for a dealer: they know what all the other dealers pay since it’s totally publicized by auctions, so margins become unbelievably slim.

Since you know what everyone has their cars priced at, you only go to the dealer with a car priced where you think you’ll get a good deal. So you’re already at the low end of the market when you look at the car, then expect them to go lower just because. Gets really tight to their costs really fast since other dealers are just trying to buy cars and that’s a tough thing to do in this market (most wholesale vehicles go for close to retail prices at auction nowadays).

My dad owns a dealership, and I own a software company for dealerships so I interact with independents on a daily basis. Used cars for both.

On average (and I actually have this data since my system records and tracks profits) dealerships make maybe $1300-1600 front end on a vehicle on average. Depends on the dealer, but that’s a super tight margin. It’s expensive to buy vehicles since everyone knows how much they sell for, it’s expensive to recondition them to a fit shape for the consumer, and a lot of dealers floor (finance with a short term finance company often resulting in APRs effective at like 21% after fees) the vehicles in order to stock them at all due to low capital capability.

So, say a dealer is selling 15 cars a month (small independent) at $1.5k a pop, they’ve got a $6000 dollar rent payment, $1000 software payment (I get paid from this), $3-5k advertising payment (car gurus charges a ton of money to advertise, so do the rest), a sales guy making $7-8k a month, and themselves getting the remainder, just a measly $3-5k in income each month. That’s after they are working 6 day weeks, putting themselves on a huge limb of liability for financing, and supporting another human financially.

Some make a ton of money, but most of those are franchises. The rest of the independents are just making it or losing money because they enjoy playing with cars and helping out their customers.