This KPI establishes the amount of Gross Profit that you retain in your used vehicles, this is usually after the deduction of V.A.T. where applicable and before any expenses such as Reconditioning Costs and Sales Commission payments are taken into account.
Example:
A) Vehicle Sale Price = R14,500 B) Vehicle S.I.V. = R12,679 C) *Vehicle Gross Profit = R1,821 (A X B) D) Gross Profit % = 12.56% (C รท A X 100)
Discussion:
The price that you paid for the vehicle may not be the same as the stand in value (S.I.V) due to the Write Down and write back policies and procedures of your business.
In any event, the value of Gross Profit that you retain from your used vehicles should be greater than 10% of the invoice price. (Not to be confused with the display price on the windscreen)
You need to retain sufficient margin here to pay for all of the Variable and Semi-Fixed Expenses and still have enough left over to make a contribution to Direct Profit.