Table of Contents
Why the trade margin is not the real profit
The three levels of margin and what each one includes
Full numerical example with REBU (Second-Hand Goods Scheme)
The most overlooked costs
Additional income that improves the real margin
How to calculate the minimum required margin per transaction
Why you need to calculate the margin per car, not just overall
Frequently Asked Questions
Why the trade margin is not the real profit
The trade margin is the difference between the price you sell the car for and the price you bought it for. It is the first number that any dealership is clear on and the one usually used as a reference to evaluate whether a transaction was good or bad.
The problem is that this number does not include what it cost to prepare the car, list it, manage it, finance it, and process its documentation. Nor does it subtract the VAT that must be paid to the tax authority, which in REBU transactions is included within the margin and is not business income.
A dealership selling a car with a trade margin of 2,000 euros might be making 1,200 euros or 400 euros depending on the costs incurred along the way. Without calculating the real margin, they do not know which of the two scenarios they are in.
The three levels of margin and what each one includes
Trade margin. This is the starting point, not the final result.
Trade margin = Selling price − Purchase price
Gross margin. This incorporates all additional income from the transaction and subtracts all costs directly associated with that vehicle.
Gross margin = Trade margin + Additional income − Transaction costs
Additional income includes finance commissions, income from warranty sales, insurance commissions, and any additional services invoiced alongside the sale of the vehicle.
Transaction costs include all expenses incurred between the purchase and sale of that specific car: cleaning, repairs, photography, listing on portals (pro-rata), transfer management, and transport costs if any.
Net margin. This is the real profit after deducting the taxes generated by the transaction.
Net margin = Gross margin − Transaction VAT (REBU or general scheme)
In transactions under REBU, VAT is included within the gross margin (it is not added on top of the selling price as in the general scheme). To obtain the net margin, it must be extracted correctly.
Full numerical example with REBU
Let's take a real transaction step-by-step.
Transaction details:
Concept | Amount |
|---|---|
Purchase price from private seller | €8,000 |
Selling price to customer (REBU) | €10,500 |
Finance commission received | €350 |
Warranty sold to customer | €180 |
Cleaning and preparation | €120 |
Mechanical repair | €280 |
Listing on portals (monthly share) | €60 |
Transfer management | €85 |
Step 1: Trade margin
10,500 − 8,000 = €2,500
Step 2: Gross margin
Additional income: 350 + 180 = €530 Transaction costs: 120 + 280 + 60 + 85 = €545
2,500 + 530 − 545 = €2,485
Step 3: Net margin with REBU
In REBU, VAT is included within the selling price (and therefore within the margin). To extract it:
REBU taxable base = Gross margin ÷ 1.21 = 2,485 ÷ 1.21 = €2,053.72 VAT included = 2,485 − 2,053.72 = €431.28 Real net margin = €2,053.72
The difference between the trade margin (€2,500) and the real net margin (€2,053.72) is 446.28 euros, almost 18% less. Multiplied over twenty transactions a month, that difference represents more than 8,900 euros a year that the dealership might believe it is earning but which actually goes towards costs and taxes.
Full summary table:
Concept | Amount |
|---|---|
Purchase price | €8,000 |
Selling price | €10,500 |
Trade margin | €2,500 |
+ Finance commission | +€350 |
+ Warranty sold | +€180 |
− Preparation and cleaning | −€120 |
− Mechanical repair | −€280 |
− Listing on portals | −€60 |
− Transfer management | −€85 |
= Gross margin | €2,485 |
REBU taxable base (÷ 1.21) | €2,053.72 |
VAT included (REBU) | €431.28 |
Real net margin | €2,053.72 |
The most overlooked costs
The cost of capital of stock days. Every day a car is in stock is tied-up capital that generates no return. For an €8,000 car with an annual financing cost of 5%, each day in stock costs €1.10. A car that takes 90 days to sell accumulates a financing cost of almost €100 which must be subtracted from the margin, even if it does not appear on any invoice.
The pro-rata cost of portals. If you pay €300 per month to list on portals and have 15 cars in stock, the cost per car is €20 per month. For a car that sells in 30 days, that is €20. For one that takes 90 days, it is €60. This cost varies depending on the rotation of each vehicle.
The stock insurance cost per car. The floating policy premium divided by the number of cars in stock and the days each vehicle spent in inventory is a real cost per transaction that is usually not allocated to each individual car.
Agency transfer fees. Transfer management has a cost between €60 and €120 depending on the agency. If the dealership manages it directly, the cost is the DGT fee (€55.70) plus the time spent. In any case, it is a transaction cost that must be in the calculation.
To see how stock days affect the real net margin, you can consult the article on the cost of a car sitting in stock.
Additional income that improves the real margin
The gross margin is not just the trade margin: it also includes the income generated by each transaction beyond the price of the vehicle.
Finance commission. Every time you close a deal with finance, the financial institution pays you a commission. Depending on the company and the amount financed, it can be between €200 and €600 per transaction. For a dealership that finances 50% of its sales, this income has a significant impact on the real margin.
Warranty sale. If you offer third-party extended warranties, the margin between the price you charge the customer and the cost of the warranty to you is a direct income from the transaction.
Insurance. If you act as an intermediary in setting up vehicle insurance, the commission from the insurer is another source of additional income per transaction.
This income is not guaranteed in every transaction, but in a business that manages it systematically, it can yield an additional €300 to €700 per car sold. Its impact on the real margin is significant and justifies investing in developing these channels.
How to calculate the minimum required margin per transaction
The minimum margin per transaction is the one that exactly covers the fixed costs of the business corresponding to that transaction. Below this margin, the transaction destroys value, even if it appears positive on the surface.
The calculation requires knowing the monthly fixed costs of the business (rent, salaries, insurance, subscriptions, administrative agency) and dividing them by the number of monthly transactions.
Example: monthly fixed costs of €4,500, 15 transactions per month. The minimum margin per transaction to cover fixed costs is €300. Any transaction with a net margin below that contributes negatively to the business result, even if the trade margin is positive.
Knowing this threshold changes how each transaction is evaluated. An offer to buy from a private individual that leaves an estimated net margin of €250 does not even cover fixed costs: it is better not to proceed or to adjust the purchase price. To calculate the minimum margin and the financial KPIs of your business in more detail, you can review the guide on how to calculate the margin on second-hand cars.
Why you need to calculate the margin per car, not just overall
A dealership that only looks at the overall monthly margin can have a distorted view of which cars are making money and which are not. A month with a good total margin can hide several cars with negative margins offset by other highly profitable ones.
Calculating per car allows you to identify patterns: which models have the best margin, which buying channel (private sellers, auctions, leasing) generates the most profitability per transaction, and which price range has the best ratio of margin to selling price.
With this information, buying stock decisions are made based on data. If cars under €5,000 systematically have tight net margins because preparation costs represent a high percentage of the price, it may be more efficient to concentrate stock on higher price ranges.
To see how margin KPIs integrate with other business metrics, you can read the article on KPIs that every dealership should measure.
More than 750 dealerships already use Dealcar to manage their daily operations
Dealcar logs the purchase price, all preparation costs, additional income, and the selling price of each vehicle, automatically calculating the gross and net margin per transaction. With this view per car available in real time, pricing and stock purchase decisions are no longer based on intuition.
If you want to see how it works, you can schedule a free demo at dealcar.io.
Frequently Asked Questions
Is the VAT under REBU always calculated by dividing by 1.21?
Yes. In REBU transactions, VAT is included within the selling price (and therefore within the margin). To extract it, divide the gross margin by 1.21. The result is the taxable base; the difference between the margin and the taxable base is the VAT that must be paid to the tax authority. Multiplying the margin by 0.21 is an error that overestimates the VAT payable.
Should I calculate the margin before or after buying the car?
Before, always. Calculating the estimated margin before purchase is what determines the maximum price you can pay for that car to maintain the target margin. If you calculate the margin after buying it, you can no longer influence the acquisition cost.
Is the cost of capital of stock days a real or theoretical cost?
It is a real cost even if it does not appear on any invoice. If you finance your stock with a loan or line of credit, the interest on that credit is the explicit cost of capital. If you use your own capital, the opportunity cost (what that money could generate in another use) is the implicit cost. In both cases, allocating it to each transaction provides a more precise view of real profitability.
How does the buyer's financing affect the margin?
The commission paid by the finance company to the dealership is an additional income that improves the margin. The selling price of the vehicle does not change because the buyer finances it: the taxable base for VAT (or REBU) is the total price of the vehicle, not the cash amount paid. For more details on the taxation of financed sales, you can consult the guide on how to declare the sale of financed cars.
Table of Contents
Why the trade margin is not the real profit
The three levels of margin and what each one includes
Full numerical example with REBU (Second-Hand Goods Scheme)
The most overlooked costs
Additional income that improves the real margin
How to calculate the minimum required margin per transaction
Why you need to calculate the margin per car, not just overall
Frequently Asked Questions
Why the trade margin is not the real profit
The trade margin is the difference between the price you sell the car for and the price you bought it for. It is the first number that any dealership is clear on and the one usually used as a reference to evaluate whether a transaction was good or bad.
The problem is that this number does not include what it cost to prepare the car, list it, manage it, finance it, and process its documentation. Nor does it subtract the VAT that must be paid to the tax authority, which in REBU transactions is included within the margin and is not business income.
A dealership selling a car with a trade margin of 2,000 euros might be making 1,200 euros or 400 euros depending on the costs incurred along the way. Without calculating the real margin, they do not know which of the two scenarios they are in.
The three levels of margin and what each one includes
Trade margin. This is the starting point, not the final result.
Trade margin = Selling price − Purchase price
Gross margin. This incorporates all additional income from the transaction and subtracts all costs directly associated with that vehicle.
Gross margin = Trade margin + Additional income − Transaction costs
Additional income includes finance commissions, income from warranty sales, insurance commissions, and any additional services invoiced alongside the sale of the vehicle.
Transaction costs include all expenses incurred between the purchase and sale of that specific car: cleaning, repairs, photography, listing on portals (pro-rata), transfer management, and transport costs if any.
Net margin. This is the real profit after deducting the taxes generated by the transaction.
Net margin = Gross margin − Transaction VAT (REBU or general scheme)
In transactions under REBU, VAT is included within the gross margin (it is not added on top of the selling price as in the general scheme). To obtain the net margin, it must be extracted correctly.
Full numerical example with REBU
Let's take a real transaction step-by-step.
Transaction details:
Concept | Amount |
|---|---|
Purchase price from private seller | €8,000 |
Selling price to customer (REBU) | €10,500 |
Finance commission received | €350 |
Warranty sold to customer | €180 |
Cleaning and preparation | €120 |
Mechanical repair | €280 |
Listing on portals (monthly share) | €60 |
Transfer management | €85 |
Step 1: Trade margin
10,500 − 8,000 = €2,500
Step 2: Gross margin
Additional income: 350 + 180 = €530 Transaction costs: 120 + 280 + 60 + 85 = €545
2,500 + 530 − 545 = €2,485
Step 3: Net margin with REBU
In REBU, VAT is included within the selling price (and therefore within the margin). To extract it:
REBU taxable base = Gross margin ÷ 1.21 = 2,485 ÷ 1.21 = €2,053.72 VAT included = 2,485 − 2,053.72 = €431.28 Real net margin = €2,053.72
The difference between the trade margin (€2,500) and the real net margin (€2,053.72) is 446.28 euros, almost 18% less. Multiplied over twenty transactions a month, that difference represents more than 8,900 euros a year that the dealership might believe it is earning but which actually goes towards costs and taxes.
Full summary table:
Concept | Amount |
|---|---|
Purchase price | €8,000 |
Selling price | €10,500 |
Trade margin | €2,500 |
+ Finance commission | +€350 |
+ Warranty sold | +€180 |
− Preparation and cleaning | −€120 |
− Mechanical repair | −€280 |
− Listing on portals | −€60 |
− Transfer management | −€85 |
= Gross margin | €2,485 |
REBU taxable base (÷ 1.21) | €2,053.72 |
VAT included (REBU) | €431.28 |
Real net margin | €2,053.72 |
The most overlooked costs
The cost of capital of stock days. Every day a car is in stock is tied-up capital that generates no return. For an €8,000 car with an annual financing cost of 5%, each day in stock costs €1.10. A car that takes 90 days to sell accumulates a financing cost of almost €100 which must be subtracted from the margin, even if it does not appear on any invoice.
The pro-rata cost of portals. If you pay €300 per month to list on portals and have 15 cars in stock, the cost per car is €20 per month. For a car that sells in 30 days, that is €20. For one that takes 90 days, it is €60. This cost varies depending on the rotation of each vehicle.
The stock insurance cost per car. The floating policy premium divided by the number of cars in stock and the days each vehicle spent in inventory is a real cost per transaction that is usually not allocated to each individual car.
Agency transfer fees. Transfer management has a cost between €60 and €120 depending on the agency. If the dealership manages it directly, the cost is the DGT fee (€55.70) plus the time spent. In any case, it is a transaction cost that must be in the calculation.
To see how stock days affect the real net margin, you can consult the article on the cost of a car sitting in stock.
Additional income that improves the real margin
The gross margin is not just the trade margin: it also includes the income generated by each transaction beyond the price of the vehicle.
Finance commission. Every time you close a deal with finance, the financial institution pays you a commission. Depending on the company and the amount financed, it can be between €200 and €600 per transaction. For a dealership that finances 50% of its sales, this income has a significant impact on the real margin.
Warranty sale. If you offer third-party extended warranties, the margin between the price you charge the customer and the cost of the warranty to you is a direct income from the transaction.
Insurance. If you act as an intermediary in setting up vehicle insurance, the commission from the insurer is another source of additional income per transaction.
This income is not guaranteed in every transaction, but in a business that manages it systematically, it can yield an additional €300 to €700 per car sold. Its impact on the real margin is significant and justifies investing in developing these channels.
How to calculate the minimum required margin per transaction
The minimum margin per transaction is the one that exactly covers the fixed costs of the business corresponding to that transaction. Below this margin, the transaction destroys value, even if it appears positive on the surface.
The calculation requires knowing the monthly fixed costs of the business (rent, salaries, insurance, subscriptions, administrative agency) and dividing them by the number of monthly transactions.
Example: monthly fixed costs of €4,500, 15 transactions per month. The minimum margin per transaction to cover fixed costs is €300. Any transaction with a net margin below that contributes negatively to the business result, even if the trade margin is positive.
Knowing this threshold changes how each transaction is evaluated. An offer to buy from a private individual that leaves an estimated net margin of €250 does not even cover fixed costs: it is better not to proceed or to adjust the purchase price. To calculate the minimum margin and the financial KPIs of your business in more detail, you can review the guide on how to calculate the margin on second-hand cars.
Why you need to calculate the margin per car, not just overall
A dealership that only looks at the overall monthly margin can have a distorted view of which cars are making money and which are not. A month with a good total margin can hide several cars with negative margins offset by other highly profitable ones.
Calculating per car allows you to identify patterns: which models have the best margin, which buying channel (private sellers, auctions, leasing) generates the most profitability per transaction, and which price range has the best ratio of margin to selling price.
With this information, buying stock decisions are made based on data. If cars under €5,000 systematically have tight net margins because preparation costs represent a high percentage of the price, it may be more efficient to concentrate stock on higher price ranges.
To see how margin KPIs integrate with other business metrics, you can read the article on KPIs that every dealership should measure.
More than 750 dealerships already use Dealcar to manage their daily operations
Dealcar logs the purchase price, all preparation costs, additional income, and the selling price of each vehicle, automatically calculating the gross and net margin per transaction. With this view per car available in real time, pricing and stock purchase decisions are no longer based on intuition.
If you want to see how it works, you can schedule a free demo at dealcar.io.
Frequently Asked Questions
Is the VAT under REBU always calculated by dividing by 1.21?
Yes. In REBU transactions, VAT is included within the selling price (and therefore within the margin). To extract it, divide the gross margin by 1.21. The result is the taxable base; the difference between the margin and the taxable base is the VAT that must be paid to the tax authority. Multiplying the margin by 0.21 is an error that overestimates the VAT payable.
Should I calculate the margin before or after buying the car?
Before, always. Calculating the estimated margin before purchase is what determines the maximum price you can pay for that car to maintain the target margin. If you calculate the margin after buying it, you can no longer influence the acquisition cost.
Is the cost of capital of stock days a real or theoretical cost?
It is a real cost even if it does not appear on any invoice. If you finance your stock with a loan or line of credit, the interest on that credit is the explicit cost of capital. If you use your own capital, the opportunity cost (what that money could generate in another use) is the implicit cost. In both cases, allocating it to each transaction provides a more precise view of real profitability.
How does the buyer's financing affect the margin?
The commission paid by the finance company to the dealership is an additional income that improves the margin. The selling price of the vehicle does not change because the buyer finances it: the taxable base for VAT (or REBU) is the total price of the vehicle, not the cash amount paid. For more details on the taxation of financed sales, you can consult the guide on how to declare the sale of financed cars.
