Just saw this and thought it was itneresting:
Say Goodbye to the Car Salesman - Yahoo Finance

 

Bought our last 4 cars shopping the internet.

 

Car dealership money is really made on auto financing and real estate return.

 

While many car dealers are selling cars slightly over invoice as mentioned in the article or at invoice in allot of cases, car dealerships get "hold backs" and "incentives" from the manufactuers.

This is a very profitable business. Just look at the dealerships that are publicly traded on the NYSE like AutoNation and Lithia. These stocks have out performed and most car dealerships have highly profitable franchises.

Don't even think that the dealership you may have bought a car from is losing money. They make BIG money on extended warranties, paint coatings, tire waranties, and misc gimicky type items. Latest is Nitrogen in tires at a usually cost of about $50.00 per car. Then there is also mandatory window tint at excessive prices, far more than what a consumer can get at a local window tint shop. Another gimick is the etched VIN number in windows for car theft. This is usually a $150.00 fee. In our neighboring city (El Paso, TX) the police dept has a annual car theft preventative program and they etch the VIN into the windows for free. Service Departments are the mainstay for any dealership in addition.

As for financing, very few dealerships offer direct in-house dealer financing. The big brands all have their own financing divisions. Chrysler Credit, Ford Motor Credit, GMAC, Porsche Financial, etc. The dealers get incentives (commissions), not only from these finance companies but also from the banks like Wells Fargo Auto Finance and Chase Auto Finance based on the business they write. The dealers sell cars not finance them. The dealerships don't hold the financing paper on these loans, the finance companies do.