Why Is My New Car Showing Too Much Profit?

A new car deal can show inflated profit when sale components, dealer options, and On-The-Road (OTR) pricing structures are misunderstood or incorrectly entered.

Why This Matters

• Reporting Integrity: Inflated profit figures break trust in management reporting.

• Financial Accuracy: Incorrect profit views lead to skewed performance data and potential errors in commission calculations.

Common Causes of Inflated Profit

• Incomplete OTR Structure The sale price has been entered without correctly accounting for the full On-The-Road breakdown.

• Dealer Option Misalignment Dealer options (such as protection packs) are shown as separate sale lines, while the base vehicle sale value remains overstated.

• Missing Costs Costs for options, accessories, or protection packs have not yet been recorded or allocated against the deal.

• Focusing on Projections Staff are relying on Retail or Expected figures instead of the Actual realised profit.

How to Diagnose the Issue

Step 1. Use the Profit Analysis Screen

1. Open the deal record and select Profit Analysis.

2. The Rule: Focus exclusively on Actual Sale and Actual Cost. Ignore all other columns during this audit.

Step 2. Audit Sales Order Totals

1. Select View Sales Order.

2. Check the On-The-Road (OTR) Price.

3. Verify: Does the base vehicle price plus all added options equal the final deal total? If the total is higher than the agreed customer price, profit will be inflated.

Step 3. Verify Dealer Options & Packs

1. Review items such as Service Plans and Protection Packs.

2. Confirm Costs: Check if a cost is associated with these items.

3. Action: If a cost exists, ensure it is posted and allocated to the specific option line.

Step 4. Validate Wholesale Purchase Cost

1. Open the Purchase tab.

2. Confirm the Net Cost matches your manufacturer source system exactly. If the cost is too low, the profit will appear artificially high.

The Corrective Approach

1. Correct Sales Order Totals: Adjust the OTR structure first to ensure the total sale value is accurate.

2. Apply Missing Costs: Add any missing accessory or option costs and ensure they are allocated to the deal.

3. Final Review: Re-check the Profit Analysis screen to ensure the £ margin is now realistic.

4. Close Deal: Only proceed to Close Deal once the figures are validated.