A practical guide to keeping profits steady when stock prices, finance costs, and overheads climb.
Introduction
The past two years have tested even the strongest motor dealers.
Vehicle purchase prices have risen sharply, finance and stocking costs have jumped, energy and wage bills continue to climb, and customers are still demanding discounts.
Across the UK, both franchised and independent dealers are asking the same question:
How can we stay profitable when everything around us is getting more expensive?
The short answer: by taking control of what you can manage — your numbers, your cash flow, and your decisions.
This guide from Accounting Matters – Specialist Motor Trade Accountants explains how proactive accounting, forecasting, and smarter financial habits can help you survive (and even thrive) through rising costs.
The Reality on the Forecourt
Dealer Reality:
“Fuel bills up 30 %, wages rising, but customers still expect the same deals they got in 2022. We’re selling cars — but it feels like we’re working twice as hard for half the margin.”
Sound familiar? You’re not alone. Every dealer in the country is facing pressure on at least one of these fronts:
✅ Higher stock prices – wholesale and auction values remain elevated, especially for low-mileage used cars.
✅ Rising finance costs – base-rate increases mean floorplan interest and stocking charges are eating into margin.
✅ Energy and overheads – lighting, heating, valeting and workshop energy use have all gone up.
✅ Staff and retention costs – pay rises needed to keep good people, plus training and recruitment expenses.
✅ Insurance, compliance and software – premiums and subscription fees creeping higher every renewal.
It’s easy to feel that these costs are outside your control. But with better insight into where your money goes, you can make smarter, faster decisions — and protect your profits.
Why Margins Are Eroding Faster Than Many Dealers Realise
For many small and mid-size dealers, the pain isn’t visible day-to-day. Sales are steady, the bank looks healthy, and VAT is being paid on time. But look deeper, and the profit per vehicle has quietly fallen.
Here’s why that happens:
🚗 Stock inflation outpaces retail pricing.
Dealers are paying more for vehicles but can’t always pass the full cost to customers.
💸 Finance interest accumulates silently.
When cars sit longer in stock, floorplan or stocking fees build up and eat margin.
🧾 Workshop and prep costs drift upward.
Labour, materials, and energy costs rise, but reconditioning prices rarely adjust quickly enough.
📉 Fixed overheads spread across fewer sales.
If monthly unit sales dip slightly, the same costs cover less volume — squeezing margin per unit.
Most dealers only notice when cash tightens — but by then, the erosion has already happened.
Early Actions to Protect Profitability
Here’s where forward-thinking dealers are already adjusting:
1️⃣ Track the real cost per vehicle.
✅ Record every expense attached to each unit — purchase price, transport, valeting, MOT, workshop hours, recon parts, advertising.
✅ Compare the true cost to the sale price to see your genuine margin.
2️⃣ Shorten stock-holding days.
⏳ The longer a vehicle sits, the higher the interest and depreciation risk.
✅ Regularly review stock ageing reports and discount or re-market slow movers.
3️⃣ Review finance and stocking arrangements.
💬 Ask lenders about rate reviews or flexible terms.
✅ Consider splitting stocking lines between providers to balance exposure.
4️⃣ Tighten energy and overhead monitoring.
⚙️ Review lighting, heating, and workshop efficiency — small savings multiply across a year.
✅ Track monthly costs versus turnover to see trends early.
5️⃣ Revisit pricing strategy.
💷 With accurate cost data, small adjustments in pricing can recover lost margin without losing competitiveness.
6️⃣ Introduce rolling cash-flow forecasts.
📊 Forecast 12 months ahead — include slower sales months, VAT due dates, and finance renewals.
✅ This shows when cash will tighten before it happens, so you can plan rather than react.
The Role of Specialist Accounting
Accounting shouldn’t just record history — it should guide the future.
A motor trade accountant understands that every dealership has moving parts: stock, finance, warranties, VAT margin rules, and unpredictable cash flow.
By working with a specialist like Accounting Matters, you gain:
✅ Real-time visibility of profit per unit and department.
✅ Accurate VAT margin treatment to avoid over- or under-payments.
✅ Forecasting tools that show exactly how rising costs impact your bottom line.
✅ Support to restructure costs and plan ahead for seasonal dips.
When your accountant speaks your language — floorplans, part-exes, recon, manufacturer bonuses — you save both time and money.
How Forecasting Stabilises Cash Flow
When costs rise unpredictably, the only way to stay in control is to see ahead.
Cash flow forecasting is no longer optional for dealers — it’s survival.
A rolling 12-month forecast shows how seasonal sales, VAT payments, finance renewals and wage costs interact.
🔍 Benefits of accurate forecasting:
✅ Predicts when cash tightens so you can act early.
✅ Avoids emergency overdrafts or missed supplier payments.
✅ Highlights which months are strongest for reinvestment.
✅ Shows the true cost of every car in stock, including finance days.
✅ Helps you decide whether to expand, hold or streamline.
When your accountant maintains a forecast that updates with every VAT quarter, you never get blindsided by the next cost surge.
Real-World Example: Staying Profitable During a Cost Surge
One mid-sized used car dealer in Derbyshire recently worked with Accounting Matters to stabilise profit margins after their energy bills and stocking charges doubled.
The situation:
They were turning over more than £3 million annually, but profit per unit had fallen by almost 15 %.
Their general accountant reported “healthy” numbers, yet bank balances kept dipping before VAT quarters.
What we found:
- Stocking finance costs were being buried under general interest expenses.
- Energy and valeting bills weren’t linked to each department.
- Prep costs per unit had never been analysed.
What we did:
✅ Rebuilt their management accounts to show profit by department.
✅ Created a live cash-flow forecast that synced with Xero and Dext.
✅ Introduced a target profit-per-unit dashboard.
✅ Set quarterly meetings to review trends and actions.
Within six months, the dealer increased their net margin by 5 %, despite costs remaining high.
That’s the power of clear visibility — you can’t fix what you can’t see.
The Profit Watch Checklist
Every dealer should review these five numbers monthly to stay ahead of rising costs:
1️⃣ Gross margin per vehicle – what you actually earn after recon and finance costs.
2️⃣ Average stock-holding days – how long each car sits before sale.
3️⃣ Total overhead % of turnover – reveals creeping costs early.
4️⃣ Finance and stocking interest – ensure it stays within plan.
5️⃣ Cash-flow forecast balance – your look-ahead lifeline.
Keeping these under constant review turns guesswork into control.
How Accounting Matters Helps Dealers Stay Profitable
At Accounting Matters, we don’t just report what happened — we help you plan what’s next.
As your motor dealership accounting partner, we:
✅ Build forecasts that adapt to real trading patterns.
✅ Analyse margins and cost trends across departments.
✅ Spot cash-flow pressure before it becomes a problem.
✅ Guide you on pricing, stock turnover and tax efficiency.
✅ Implement digital systems that cut admin and error.
Our motor trade accounting experts use tools like Xero, Dext, and Armalytix to give real-time visibility, so you know exactly where you stand each day.
What Dealers Should Monitor This Year
With inflation still uncertain and finance costs likely to stay elevated, smart dealers are focusing on:
🚗 Lean stock strategies – buying less, turning faster.
⚙️ Energy and facility efficiency – LED conversions, smart heating.
👥 Team productivity – tracking hours to billable work.
💷 Tax planning mid-year – to manage cash, not just year-end surprises.
📈 Digital adoption – automating data capture and reporting.
Rising costs aren’t going away — but strong data and specialist support turn them from threats into manageable variables.
⚠ TAKE ACTION BEFORE COSTS DO ⚠
The dealers struggling most right now are the ones who still “run by feel” — reacting to the month rather than planning the quarter.
If your accountant doesn’t:
❌ Provide a cash-flow forecast
❌ Review your margins per vehicle
❌ Understand floorplan finance or VAT margin
❌ Meet with you regularly to plan ahead
…then you are operating blind against rising costs.
Every dealer needs a financial co-driver who understands the road ahead.
At Accounting Matters, we combine real-world dealership knowledge with proactive financial planning to help you:
✅ Protect profit margins
✅ Reduce risk
✅ Manage cash flow confidently
✅ Stay compliant and competitive
If you want your numbers to drive decisions — not surprises — now is the time to act.
Contact Accounting Matters – Specialist Motor Trade Accountants
📍 Accounting Matters – Specialist Motor Trade Accountants
📞 01773 747 990
📧 welcome@accountingmatters.co.uk
🌐 https://www.accountingmatters.co.uk/specialist-accountancy-for-motor-dealers
Book your free consultation today and let’s make sure rising costs don’t drive your profits into the ground.