This KPI measures the amount of profit that you generate from used vehicles as a percentage of the investment you have in used vehicle stock.
The logic behind this KPI is straightforward in that it measures whether you are really making any profit from your used vehicle activity. Expenses that are deducted generally include Reconditioning Costs and Sales Commissions; however, some reports measure Gross Profit and do not deduct expenses, whilst others deduct further expenses such as basic salaries.
There are many different variations on this calculation, the example shown here is probably the most popular.
Example:
A) Used Vehicle Gross Profit = R480,000 B) All Used Vehicle Expenses = R160,000 C) Used Vehicle Profit = R320,000 (A - B) D) Used Vehicle Stock value = R460,000 E) Return on Investment = 69.56% (C ÷ D X 100)
Discussion:
Neither method is right nor wrong; it is simply a matter of what you want to measure. However, you should invest some time in understanding what is in your own statistics because the deduction of expenses makes a sizable distortion to the final result.