Ask a showroom what a car made and you usually get sale price minus purchase price. That number has a name, and the name is not profit. It is the spread, and it is the beginning of the calculation rather than the end of it.
Here is the whole thing, in the order it should be done, on one car.
The car
The same unit used throughout this site, so the figures can be checked against the other pieces.
Starting facts
| Purchase price | PKR 3,200,000 |
| Sale price | PKR 3,750,000 |
| Days on the floor | 62 |
| The spread | PKR 550,000 |
Five hundred and fifty thousand is what most showrooms would call the profit on this car. By the end of this it will be a little over a hundred thousand, and every step in between is real money that was genuinely spent.
Step one: direct costs
Everything spent on this specific car between buying it and selling it. Workshop, denting and painting, transport, the transfer, the agent's commission, detailing before it went on the floor. The transfer line is not a fixed number nationally: it depends on which authority the plate belongs to, which is why it is worth reading separately for a showroom trading across ICT and Punjab.
Direct costs
| Workshop and paint | PKR 95,000 |
| Transport | PKR 18,000 |
| Transfer and paperwork | PKR 27,000 |
| Agent commission | PKR 25,000 |
| Detailing | PKR 15,000 |
| Total direct | PKR 180,000 |
Spread of 550,000 less 180,000 gives gross profit of 370,000. This is the figure most showrooms that do keep records arrive at, and it is the one investors usually get shown.
It is also the figure most damaged by the costs that never reach the file. The commission and the transport above are the two most commonly missing, and between them they are 43,000 on this car.
Step two: holding cost
The car occupied capital and space for sixty-two days. That is not free, and it is the single largest omission in most showroom costing.
Using the method in what a standing car costs per day, roughly 2,525 a day on a car at this price:
Holding
| 62 days at 2,525 | PKR 156,550 |
| Gross profit after holding | PKR 213,450 |
The car has now lost 42% of its apparent profit to time, and nobody wrote a cheque for any of it.
Step three: the investor share
If the car was funded, part of what remains belongs to someone else. Take the showroom-cut model from the three split models: a 20% management cut off the top, remainder divided by capital, with the showroom holding 12.5%.
An important decision presents itself here, and it is worth being deliberate about: do you split the gross profit or the profit after holding cost?
Most arrangements split the gross, because it is simpler and because holding cost is invisible. That means the investor is insulated from how long the car stood, and the showroom absorbs the entire cost of slow stock. Defensible, as long as everyone knows that is the arrangement. Less defensible is discovering it afterwards.
Splitting the gross 370,000, as most do
| Showroom cut, 20% | PKR 74,000 |
| Remainder | PKR 296,000 |
| Investors, 87.5% of remainder | PKR 259,000 |
| Showroom capital share, 12.5% | PKR 37,000 |
| Showroom total | PKR 111,000 |
What the showroom actually kept
The full walk
| Spread | 550,000 |
| Less direct costs | −180,000 |
| Less investor share paid out | −259,000 |
| Less holding cost absorbed | −156,550 |
| Showroom keeps | PKR −45,550 |
The car lost money. It sold for a hundred thousand more than the showroom hoped, and it lost money, because it stood sixty-two days and the investors were paid on a figure that ignored that. Nothing here is unusual. This is a normal car on a normal floor with a normal arrangement.
Two things follow, and they are the entire point of doing the calculation.
The holding cost has to appear somewhere. Either it comes off before the split, or the showroom accepts it entirely and prices that into its management cut. Both work. Pretending it does not exist does not, and it is why showrooms with good margins on paper are not accumulating cash.
Sixty-two days was the whole story. At thirty days this car keeps about 35,000 for the showroom instead of losing 45,000. The purchase was fine, the sale was good, the arrangement was standard. Time did all the damage.
Common questions
How do you calculate profit on a used car sale?
Start with the spread, which is sale price minus purchase price, then subtract in four steps. Direct costs on that specific car: workshop, transport, transfer, commission and preparation. Holding cost for the days it stood, which is capital, depreciation and a share of showroom overhead. The investor share if it was funded. What remains is what the showroom actually kept. Most showrooms stop after the first subtraction and call that the profit.
Should holding cost be deducted before splitting profit with investors?
It has to be accounted for somewhere, and there are two honest options. Deduct it before the split, so the investor shares the cost of slow stock, or leave it out and price it into the showroom's management cut, so the showroom absorbs it deliberately. Both are defensible if agreed in advance. Splitting gross profit while ignoring holding cost entirely is how a car that stood two months pays out more than it earned.
Why does a car that sold above the asking price still lose money?
Almost always time. A car costing around 2,500 a day to hold loses roughly 156,000 over sixty-two days, and if the investor split is calculated on gross profit then the payout ignores that entirely. A unit can sell for more than expected, pay its investors correctly, and still leave the showroom worse off, purely because it stood too long. This is invisible unless holding cost is part of the costing.
The whole walk, per car, automatically
Odometric records every cost against the plate as it happens and computes the spread, gross, holding cost and investor share on each unit, so the number you see is what the car actually made.
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