A car showroom has two kinds of expenses: the fixed cost of keeping the doors open each month, and the costs that belong to individual cars. Fixed costs are rent, salaries, utilities, listings and fees. Car costs are repairs, detailing, transfer, commission paid and fuel. Mixing the two is the most common reason an owner does not know what a car really made or what the showroom needs to sell each month to break even.
Ask a showroom owner what the business costs to run and the answer is usually the rent and the staff. The real list is longer, and the items that are left off are the ones that turn a good-looking month into a short one.
Monthly running costs
These are paid whether or not a single car sells.
| Expense | Notes |
|---|---|
| Rent of the plot or showroom | Usually the largest fixed cost. Advance and security are capital, not monthly cost. |
| Salaries | Sales staff, a helper or guard, a driver, and anyone who keeps the books. |
| Electricity, water, internet and phones | Lighting a showroom at night is a real bill. |
| Listings and advertising | Paid listings, featured ads and boosted posts. |
| Cleaning and upkeep of the premises | Small, steady and easy to forget. |
| Accountant, software and bank charges | Including any monthly software subscription. |
| Entertainment of buyers and dealers | Tea and meals add up over a month, and they are a real cost of selling. |
Costs that belong to a car
These should be booked against the specific car, by registration number, the day they are spent.
- Repairs, denting and painting, tyres and parts.
- Detailing and washing before a car is shown.
- Transfer, token tax handling and paperwork.
- Commission paid to an outside agent who brought the buyer.
- Fuel and driver time to collect or deliver the car.
When these sit in a general expenses notebook instead of on the car, every car looks more profitable than it was, and investors are paid from profit that did not exist. The full list of costs that go missing is in the costs that vanish from a car's file.
Your break-even number
Add up a normal month's running costs. Divide by the average amount a car makes after its own costs. The answer is how many cars you must sell each month before the showroom earns anything.
For example, with invented figures: running costs of 600,000 a month and an average of 120,000 made per car means five cars a month just to break even. The sixth car is the first that pays the owner. Knowing that number changes how hard you push an ageing car, which is worked through in what a car costs you for every day it stands.
Where expenses usually leak
- Cash paid without a note. Small cash payments for a car are the ones most often never written down.
- Bills recorded after the sale. A repair bill that arrives after the car sold is still that car's cost.
- Listings no one checks. Paid ads left running on cars already sold.
- Staff costs spread thin. A driver paid by the trip with no record of which car the trip was for.
A weekly look at four numbers catches most of this early, see the four numbers to check every week.
Common questions
What are the main expenses of a car showroom?
Fixed monthly costs such as rent, salaries, utilities, listings, upkeep and the accountant, and per-car costs such as repairs, detailing, transfer, commission paid to agents and fuel. Fixed costs are paid every month; per-car costs should be booked against the specific car.
How many cars does a showroom need to sell to break even?
Divide a normal month's running costs by the average amount each car makes after its own costs. If running costs are 600,000 and the average car makes 120,000, the showroom needs five sales a month before it earns anything.
Should repair costs be counted as showroom expenses?
No. Repairs belong to the car they were done on and should be added to that car's total cost. Counting them as general expenses makes each car look more profitable than it was.
Every cost on the car that caused it
Odometric books each expense against the registration number as it is spent, so the profit on every car is right and the running costs stay separate.
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