How Much Does a Used Car Dealer Make Per Car in Pakistan?

There is no reliable published figure for what a used-car showroom in Pakistan makes per car. No trade body reports it, and the numbers quoted in conversation are usually the best deal of the year. Any single percentage offered as "the" margin is a guess. What can be said honestly is how to work out your own, and why the answer is smaller than the gap between buying and selling price suggests.

Start with the spread, then take things off it

The spread is the sale price minus the purchase price. It is the number everyone quotes, and it is not the margin. The margin is what is left after every cost that belongs to the car, and after the time the car stood on the floor.

Here is a worked example. The figures are invented to show the method, not to describe the market.

A quarter of a million on the spread became 125,000, half of it. That is 4.4 percent of the sale price, and it is before any investor takes a share. A showroom that quotes the spread to itself thinks it makes twice what it does.

What moves the number most

Days on the floor. The cost of capital and space is paid every day whether or not a buyer appears. In the example, a car that sells in twenty days instead of forty-five keeps 25,000 more. The daily arithmetic is in what a car costs you for every day it stands.

Costs booked late. Repairs paid in cash, a commission settled after the sale, a transfer fee nobody wrote down. Each is real and each is missing from the figure the owner remembers. See the costs that vanish from a car's file.

Buying price discipline. A car bought well needs fewer good things to go right afterwards. The checks that protect the purchase are in what to check before you buy a car for stock.

Sale on terms. A car sold on instalments often carries a higher price, and that extra is only earned if the instalments are collected. Booked profit and received cash are different numbers, see why a profitable showroom runs out of cash.

Working out your own margin

1. Take the last ten cars you sold, not the best three.
2. For each, add purchase price and every cost you can find, including commission and transfer.
3. Add a holding cost for the days it stood. Pick a daily figure you can defend and use it for every car.
4. Subtract the total from the sale price.
5. Divide the sum of those profits by the sum of the sale prices.

The result is your real margin. The ten cars will usually include one or two that lost money, and those are the ones a spreadsheet of "profitable sales" leaves out. The full method is in how to work out what a car actually made. If sales tax applies to your sales, check the FBR sales tax post for what it is charged on.

Common questions

How much profit does a used car dealer make per car in Pakistan?

There is no reliable published figure, and it varies with price band, how fast stock turns and how much repair a car needs. The useful number is your own, worked out from the last ten cars you sold after every cost and holding time is deducted. The spread between buying and selling price is not the profit.

What is the difference between spread and margin on a used car?

The spread is the sale price minus the purchase price. The margin is what remains after repairs, transfer costs, commission and the cost of holding the car for the days it stood. In a typical worked example the margin is about half the spread.

Why is my showroom profitable on paper but short of money?

Usually because profit is booked when a car is sold, while cash arrives over months on instalment sales, and costs were left out of the figure. Compare cash received against profit booked, and list what is still receivable.