How do car dealers make their money and why are they some of America's richest

With the new CNN report showing that auto dealer owners are some of Americas richest companies.

We break down how they make their money.

Those cars you see on the lot are not bought, they're "rented" from the manufacturer. Basically, the dealer pays a fee to the manufacturer to store the cars on the lot. The quicker they turn the cars over, the less they pay. Also, manufacturers give dealers incentives for turning over certain numbers of cars in short amounts of time. They actually make a very small amount of money from the sale price of the car. Almost all of it goes to the manufacturer.

This is how they make their money:

Financing

Additionally, dealers make craploads of money off of a thing called reserves. That's the markup on loan interest. Basically, let's say you have your car financed. The dealer says they got you approved for $20k at 6%. In reality, they got you approved for $20k at 4%, but are telling you the bigger number so they can pocket the difference.

Extras

Dealers also make a bunch of money from extras. That's the extended warrantees and maintenance plans, things like that. These are scams. Never get them. The reason they sell you them is because, not only do they pocket 100% of these plans, they also add their cost to the principal on your loan, costing you more in interest, and adding to their reserves, making the dealer even more money.

Dealers make money from everything surrounding the selling of cars, not the actual selling of cars.

Servicing

Most new car dealers make a 75-90% from servicing the vehicles, rather than profit from selling. Extended warranty and financing is where they make the rest, my brother was a GM for 25 years and said they usually made less than $500 on a new car, used car sales were decent too, but only if it was 7 years old or less, anything older they would sell at auction