What a used car dealer earns on a car it barely owned

On the car itself, a used car dealer may keep less than you'd guess. The only margin I could find is about 2% to 3%, from a dealers' association officer in 2013, and my hunch is that the loan and the extras matter far more than that sticker suggests.¹

The clock starts when the car arrives

A dealer can hold stock on borrowed money, through a short-term bank facility called floor stocking. In The Edge's 2013 report, dealers had three months to settle it, whether the car had sold or not.

So I mean "barely owned" in time, not on paper. A senior banker told the paper: "Based on our data, used-car dealers lose money on any car held for more than 50 days."¹

The money doesn't all come from the bank, either. One Petaling Jaya dealer in that report took a trade-in at RM58,000, and the banks would lend him only RM50,000 against it.¹ The gap was his to cover, and a lot of those gaps add up to a business with its cash parked in other people's old cars.

How I read the life of a trade-in

I couldn't find a newer figure for how long a car sits on a Malaysian lot, or a newer margin. That article is what I've got, and it was written in a bad patch for dealers, so it may be a low reading.

What's left on the car

The 2% to 3% came from a vice-president of the Kuala Lumpur and Selangor dealers' association.¹ The report doesn't say what comes out before that figure, so I can't tell you if it's before or after the interest and the salesman.

Say a car sells for sixty thousand ringgit, which is my own round number. Three per cent of that is about eighteen hundred ringgit. The Petaling Jaya dealer said he'd be "very happy" with RM2,000 to RM3,000 a car, so at least the two old numbers live in the same neighbourhood.¹

At that size, what matters is how many you shift. "I used to move 30 cars a month in the good old times," he said, and that June he'd sold six.¹

The loan form

Here's the part that surprised me. Car dealers used to earn a commission on hire purchase loans, based on the loan's size and length. Bank Negara's July 2000 notice describes that commission as gone and lets finance companies pay a handling fee instead, of up to RM600 a case.²

There are conditions. The finance company bears the fee, it can't pay the dealer anything else, the buyer must be offered the choice of going straight to the lender, and the dealer can't add hidden charges without consent.² Cash buyers can't be treated worse, either.

That notice is a quarter of a century old and written for finance companies. I couldn't find what dealers receive on a loan now, or whether that cap is still the number in practice.

Two old numbers on one hypothetical car, in ringgit

So on those stale numbers, one form is worth about a third of the car.² The stale part matters, but the shape is what I'd keep. My guess is a referral costs far less to make than a car costs to hold.

Everything else that travels with it

I'd guess the trade-in is where a dealer makes or loses the margin, and it's a big door. The president of the Federation of Motor and Credit Companies Association of Malaysia said in 2023 that more than 60% of new car buyers trade in on average.⁴ The reports I read don't give the gap between what a trade-in gets and what it later sells for.

Then the add-ons. In the same 2023 report he said many used car companies were offering extended warranties. I couldn't find what a dealer keeps on one.

The nearest thing to a real number comes from a company describing itself. Carsome is a used car platform with its own financing arm, not a one-lot dealer, and its chief executive put financing, insurance and aftersales at 20% of revenue in the first half of 2024.

That's revenue, not profit. My guess is the share of profit is bigger, because a loan or a policy doesn't arrive needing a respray. I could be wrong, and what would change my mind is one set of accounts split that way.

Why the extras may matter more

The car itself is getting harder to price. A January 2026 report had used car prices stable overall. Used electric cars had softened, though, and the federation's president put that down to aggressive new EV pricing and faster depreciation.

A dealer in the same piece described the other squeeze. Buyers wonder why they'd go used when "a new one is available within a similar price range", and owners are keeping their cars longer, so there are fewer newer ones to buy.⁵

The president's advice was to shift "from price-driven competition towards value, service quality and trust", and he named inspection reports specifically.⁵ I think he's right, and it also happens to suit the sums. A dealer who can't win on the sticker has to earn somewhere else, or turn the stock faster.

A car bought too dear on a falling model is the worst version of this. The fifty-day clock doesn't care why it's still on the lot.