I detail below some critical inputs that should be considered when budgeting for your new vehicle Gross Profit (GP):

• What is the planned OE volume over your budget period?
• What is the model mix of the planned OE volume?
• What percentage of the planned volume and mix is your dealership responsible for considering your dealership’s client base?
• Are there seasonal impacts that could affect sales of particular models? Holidays, harvest time etc?

Once you have the volumes and model mix for your area, you need to calculate/estimate the selling price of your models as well as the GP% you expect per model.

What are you going to charge for PDI? This needs to be considered as part of your cost of sale.

With the above info, you will be able to calculate the dealership’s new vehicle volumes, average selling price and GP for new vehicles (first gross).

I like to break down GP into first gross, second gross and F&I gross:

Second gross consists of all additional products that are not finance or insurance related. This includes accessory sales, “3 in 1” sales, window tint, documentation fees, admin fees and any other products that you sell that are not finance and insurance related.

You need to consider model mix when determining your second GP as the potential for accessories on an LDV is way higher than it is for an entry-level car.

F&I GP is you finance commission, warranty sales and GP, maintenance/service plan sales and GP.

Lastly, you may want to include a provision for after-sales, advertising or any other type of provision that you deem necessary.

In order to pinpoint performance, I would recommend a separate line item for each of the components that make up first GP, second GP and F&I GP. It is then much easier to measure areas of performance and non-performance.

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