What is a Car Dealer’s Real Cost Per Vehicle Sold?

Selling Cars for Profit

Selling Cars for Profit and Fun

Why the old method of calculating 

your Dealership’s Advertising cost should go out the window.

 

Typical cost per sale calculations for vehicle sales need to get thrown out the window. Throw them out and when your ad agency, NADA, regional sales manager even reference these old figures, please show them the door. Sorry you traditional ad agency types won’t like this, but I’m not blogging for you  =)

Cost per car sold is typically based on dividing your advertising cost (all of it) into the amount of vehicles sold. The fact is, your ad budget is taking credit for cars that you would normally sell without any advertising whatsoever. Think about it. If you stopped all advertising, would you sell cars? Yes you would.

Typical calculations:

$20,000 budget, 50 cars sold = $400 cost per car sold.

WRONG!

The reality is that based on your market share, and brand share in your DMA, you may already sell 40 cars even if you never spent an additional penny on advertising. So in that case, you need to divide your advertising expense into the cost for the *additional units* sold. Which in the above case, is 10 cars. You paid $20k to sell 10 cars. Do the math.

$20,000 budget, 10 additional cars sold = $2,000 cost per additional car sold. Not looking so good is it?

Now these REAL numbers are actually not too hard to figure out. You just need the registration info for your state, market share for your brand, number of dealers in your DMA, marketing budget, and cars sold. With some quick math, you can figure out what your “expected” sales would be if you never ran a single ad, and then you can see what the cost is for getting incremental sales.

It’s not a pretty number, but it’s time to get off the crack that all car dealers have been fed for years and start analyzing the best cost per sale and cost per opportunity in the market. Reach more for less is what the goal is, and nothing is perfect but looking at the real cost per sale is a real eye opener.

To discuss more, or if you want our free Excel spreadsheet that will help you run these numbers, let us know.