Many car buyers leave dealerships feeling like they’ve secured a fantastic deal, boasting about their negotiation skills. However, the reality is that a great car price is only one part of the equation. Dealerships operate on two profit fronts: the “front end” and the “back end.” While the front end focuses on the vehicle’s selling price, the back end is where finance managers come into play, and it’s often significantly more lucrative for the dealership.
The “back end” encompasses profits generated after the initial car sale. This includes arranging vehicle financing and selling various add-on products and services such as extended warranties, paint protection, and Guaranteed Asset Protection (GAP) insurance. These back-end products can contribute substantial revenue, averaging around $1,000 per vehicle but sometimes reaching upwards of $5,000.
The linchpin of this back-end profitability is the finance manager, also known as the business manager. They are among the most highly compensated professionals in a car dealership, and for good reason. Finance managers are often responsible for a significant portion – sometimes as much as 50% – of a dealership’s total gross profit. This substantial contribution directly impacts their earning potential.
So, How Much Do Finance Managers At Car Dealerships Make? A large portion of their income, typically around 80%, is derived from commissions earned on the back-end products they successfully sell to customers. This commission-based structure creates a powerful incentive for finance managers to be highly effective salespeople, often employing persuasive and high-pressure tactics. Their sales expertise is honed to maximize profit generation for the dealership, which in turn boosts their personal income.
It’s crucial for car buyers to understand that dealing with the finance manager is an unavoidable part of the car buying process, regardless of whether you plan to finance your purchase or pay cash. They handle all the essential paperwork and ensure its proper execution. Their role extends beyond financing to encompass the sale of those highly profitable back-end products.
For car buyers seeking to minimize exposure to these potentially high-pressure sales tactics, one strategy exists: home or business delivery. If you reside within a reasonable distance, generally within 25 miles of the dealership, requesting vehicle delivery can circumvent the traditional dealership finance office experience. By completing the purchase remotely, you can potentially avoid direct, in-person negotiations with the finance manager and their persuasive sales techniques.
In conclusion, finance managers at car dealerships are highly compensated due to their crucial role in generating substantial back-end profits for dealerships. Their income is largely commission-based, directly tied to their ability to sell financing and add-on products. Understanding their compensation structure and sales motivations is key for car buyers to navigate the dealership experience with confidence and make informed decisions about back-end product purchases.
