Understanding the 4 Types of Dealership Expenses — and What You Can Control

🚗 Understanding the 4 Types of Dealership Expenses — and What You Can Control

At the end of the day, dealership profitability doesn’t just depend on how much you sell — it depends on how well you manage what you spend.

While your financial statement may be dozens of pages long, the expenses really break down into four main types. Understanding the difference between them is the first step toward taking control of your bottom line.

Here’s a simple breakdown of the four expense categories and what’s actually within your power to manage.

1️⃣ Variable Selling Expenses

What They Are:
These are expenses that only occur when you make a sale. Examples include:

• Salesperson commissions

• Sales manager bonuses tied to volume

• Delivery costs (e.g., gas, prep, clean-up)

• Policy or make-good work

Can You Control Them?
✅ Yes — but indirectly.
These expenses rise and fall with your volume. You can influence them by improving process efficiency or optimizing your pay plans, but you don’t "cut" these costs without affecting sales performance.

2️⃣ Personnel (Employment) Expenses

What They Are:
These are your fixed people costs — regardless of how many cars you sell.

• Salaries (non-tech, non-commission)

• Payroll taxes and benefits

• Bonuses not tied directly to sales

Can You Control Them?
🟨 Partially.
You can restructure teams, reallocate roles, or adjust headcount over time — but these aren’t expenses you tweak month-to-month. Managing them is about long-term strategy and efficiency, not quick wins.

3️⃣ Semi-Fixed (Direct) Expenses

What They Are:
These are expenses that don’t vary with sales but are more flexible than true fixed costs.

• Advertising

• Floorplan interest

• Travel & training

• Demo vehicles

• Supplies

Can You Control Them?
✅ Yes — significantly.
This is often the most “controllable” bucket. You decide how much to spend, when to spend it, and whether it's delivering ROI. Dialing in these costs can have an immediate impact on profitability without affecting revenue directly.

4️⃣ Fixed (Indirect) Expenses

What They Are:
These are the non-negotiables of running a dealership.

• Rent and property taxes

• Building depreciation

• Utilities

• Insurance

• Equipment amortization

Can You Control Them?
❌ Not easily.
These are largely out of your hands day-to-day. You may be able to renegotiate contracts, audit utility usage, or review lease terms — but changes are slow and usually require high-level decisions.

🔁 Wrapping It All Up

As a department or dealership leader, you can’t cut your way to profitability — but you can optimize your spending.

Start by understanding:

• Which expenses are tied to performance

• Which ones you can adjust in the short term

• Which require long-term planning or strategic changes

Want to go deeper? Our Auto FS 201 course unpacks exactly how each of these costs impacts the financial statement — and how you can use that knowledge to lead with confidence.