What is meant by the term 'dealer markup' in vehicle sales?

The term 'dealer markup' specifically refers to the amount added to the invoice price of a vehicle to establish the retail selling price. This markup is the difference between what a dealer pays the manufacturer for a vehicle and what they ultimately charge consumers. It is an essential aspect of vehicle sales as it helps cover operating costs and allows the dealership to make a profit.

Understanding dealer markup is crucial for both car buyers and sales professionals, as it sheds light on how vehicle pricing structures work. It distinguishes the costs incurred by the dealer versus the final selling price offered to customers, giving insight into how much leeway there may be for negotiation.

Examining the other options provides a clearer contrast: the original cost to the manufacturer relates more to production expenses than to dealer pricing strategies; discounts for loyal customers pertain to pricing strategies aimed at fostering customer retention; and sales tax is an additional cost that varies based on jurisdiction and is not part of the dealer's markup.