Dealership Advertising Cost Per Vehicle Sold
The Pocket20 benchmark for variable (sales) advertising is about $650 per retail unit, counting new and used together. As a share of the whole store's gross, advertising should stay at or under 8%. Over 12% is a clear flag.
The two measures
Advertising per retail unit = variable advertising expense ÷ (new + used retail units)
Advertising % of gross = total advertising expense ÷ total dealership gross profit
Use both. The per-unit figure shows whether the store is overspending to sell each car. The percent-of-gross figure can look high simply because gross is thin, even when spending is reasonable.
How to find it on the statement
Advertising usually appears on the expense pages by department: new, used, and sometimes service and parts. Take the new and used (variable) lines for the per-unit measure. Take the total of all advertising lines for the percent-of-gross measure. Some manufacturers also print advertising rebates or co-op credits; read advertising net of them where the statement nets them.
Variable advertising per retail unit: about $650 or less
Total advertising % of total gross: 8% or less (over 12% is a clear flag)
Independent dealers typically run leaner per unit.
Example (hypothetical round numbers): $780,000 of variable advertising on 1,000 new and used retail units is $780 a unit. At $650 the same volume would cost $650,000, a $130,000 difference that drops straight to net.
Related
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