As a car dealership owner or general manager, understanding vehicle holding costs is crucial for effectively managing your dealership’s profit and loss. Cost per vehicle per day is another way to say holding costs. Holding costs refer to the expenses incurred while a vehicle stays in inventory, including depreciation, financing, insurance, maintenance, and other miscellaneous costs.
In this guide, we will provide a step-by-step explanation of how to calculate vehicle holding costs for your dealership, assuming an average reconditioning period of 10 days. We will also present industry averages based on a dealership selling 100 cars per month to provide a comprehensive understanding of the financial implications. Run scenarios with our online calculator.
Depreciation is a key component of vehicle holding costs and represents the decrease in the value of a car over time. To calculate depreciation, determine the average monthly depreciation rate for your vehicles. This can be based on historical data or industry averages. Multiply the average depreciation rate by the purchase price of each vehicle to obtain the monthly depreciation cost per car.
If your dealership finances the purchase of vehicles, financing costs are another significant aspect of holding costs. Calculate the financing expenses by multiplying the outstanding loan balance by the average monthly interest rate. This will give you the monthly interest expense per car.
Insurance costs are essential for protecting your inventory while in holding. Calculate the average monthly insurance premium for your vehicles and divide it by the number of cars sold per month to obtain the monthly insurance cost per car.
Regular maintenance and repairs are necessary to keep your vehicles in top condition. Estimate the average monthly maintenance and repair expenses for your inventory based on historical data. Divide this amount by the number of cars sold per month to obtain the monthly maintenance and repair cost per car.
In addition to the main components mentioned above, there may be other miscellaneous holding costs to consider. These can include storage fees, advertising costs, taxes, and administrative expenses. Estimate the average monthly cost for each miscellaneous expense category and allocate it accordingly to each vehicle sold.
Let’s assume your dealership sells 100 cars per month. Based on industry averages, we can calculate the total monthly holding costs for your dealership.
Effectively calculating vehicle holding costs is vital for managing your car dealership’s profit and loss. Car cost per day can be done by considering depreciation, financing, insurance, maintenance, and other miscellaneous expenses, you can gain a comprehensive understanding of your financial obligations. Monitoring these costs closely allows you to make informed decisions about inventory management, pricing strategies, and overall dealership profitability. As an industry average, let’s review the monthly holding costs for a dealership selling 100 cars per month in the table below.
Table: Vehicle Holding Costs Calculation (Based on Industry Average – Selling 100 Cars Per Month)
Please note that the figures provided in the table are for illustrative purposes based on industry averages. The actual holding costs will vary based on your dealership’s individual circumstances and financial data. It is recommended to consult with a financial professional or accountant to ensure accurate calculations tailored to your specific dealership.
https://reconrelay.com/wp-content/uploads/2024/07/Front-view-of-a-car-in-focus-at-a-dealership-showroom-and-a-man-blurred-in-the-background.jpg
1250
2000
Gracie Scanga
/wp-content/uploads/2024/03/ReconRelay-Logo-1030x422.png
Gracie Scanga2024-07-09 12:49:012024-09-19 08:56:11Get the Details on ReconRelay’s Auto Reconditioning Software
https://reconrelay.com/wp-content/uploads/2024/07/Business-woman-working-on-a-laptop-at-the-office-of-car-showroom.jpg
1250
2000
Gracie Scanga
/wp-content/uploads/2024/03/ReconRelay-Logo-1030x422.png
Gracie Scanga2024-07-09 12:21:552024-09-19 08:56:11ReconRelay’s Recon Software
https://reconrelay.com/wp-content/uploads/2024/07/Car-shop-dealer-working-on-financial-documents.jpg
1250
2000
Gracie Scanga
/wp-content/uploads/2024/03/ReconRelay-Logo-1030x422.png
Gracie Scanga2024-07-09 12:09:192024-09-19 08:56:11How Auto Dealer Car Reconditioning Software Can Help
https://reconrelay.com/wp-content/uploads/2024/07/Side-view-of-two-young-salespeople-in-car-dealership-showroom.jpg
1250
2000
Gracie Scanga
/wp-content/uploads/2024/03/ReconRelay-Logo-1030x422.png
Gracie Scanga2024-07-05 15:05:032024-07-05 15:07:31Unlocking the Potential of Dealership Marketing: Strategies and Tips to Drive Revenue
https://reconrelay.com/wp-content/uploads/2024/07/Software-mockup-on-phone-and-laptop.jpg
1250
2000
Gracie Scanga
/wp-content/uploads/2024/03/ReconRelay-Logo-1030x422.png
Gracie Scanga2024-07-05 14:45:462024-07-05 14:48:57How to Increase Used Car Sales: 9 Proven Strategies for 2023
https://reconrelay.com/wp-content/uploads/2024/07/Illustration-of-a-man-pointing-to-a-car.jpg
1250
2000
Gracie Scanga
/wp-content/uploads/2024/03/ReconRelay-Logo-1030x422.png
Gracie Scanga2024-07-05 14:27:212024-07-05 14:29:14Streamline Your Used Car Reconditioning Software Process with Automation
https://reconrelay.com/wp-content/uploads/2024/07/Two-people-smiling-in-car-dealership-showroom.jpg
1250
2000
Gracie Scanga
/wp-content/uploads/2024/03/ReconRelay-Logo-1030x422.png
Gracie Scanga2024-07-05 14:10:582024-07-05 14:11:00Dealerships are in the business of Creating Memories: A Heartwarming Car Sales Experience with ReconRelay.
https://reconrelay.com/wp-content/uploads/2024/07/Side-view-of-photos-of-white-sedans-on-a-wall.jpg
1250
2000
Gracie Scanga
/wp-content/uploads/2024/03/ReconRelay-Logo-1030x422.png
Gracie Scanga2024-07-05 14:08:152024-07-05 14:08:18Driving Success: Elevating Car Sales with Innovative Strategies and Car Sales Software
https://reconrelay.com/wp-content/uploads/2024/07/Side-view-of-a-sports-car-painting-in-dealership-showroom.jpg
1250
2000
Gracie Scanga
/wp-content/uploads/2024/03/ReconRelay-Logo-1030x422.png
Gracie Scanga2024-07-05 14:03:222024-07-05 14:03:25Car Sales Growth Acceleration: Strategies to Increase Car Sales for Your Dealership
