It’s the question that comes up the moment a dealer sits down with the P&L: “What should we be spending on marketing?” Usually it’s asked with an industry percentage already in mind — something a 20-group buddy quoted, something a vendor rep dropped into a QBR, something pulled from a benchmark deck. My answer disappoints people at first, because it isn’t a percentage. The right number for your rooftop is the one that ties directly to sold VIN, fixed ops ROs, and gross — not the one that matches the store two states over.
Copying an industry average is the most expensive shortcut in dealer marketing. It feels safe because everyone else is doing it, and it produces average results because that’s exactly what it’s designed to produce. If you want the average outcome, buy the average mix. If you want a specific outcome at your store, you have to compose the budget from the store’s own math.
The Short Answer, Before the Long One
Spend the amount that produces your next incremental sold unit and next incremental RO at an acquisition cost below the contribution gross those outcomes generate — and not a dollar more until you’ve proven the next dollar works. That’s the whole framework. Everything below is how you actually operate it.
Notice what that answer doesn’t do. It doesn’t reference a percentage of gross. It doesn’t reference what the dealer down the street is spending. It doesn’t reference what your OEM co-op program wants you to match. It references your store’s unit goals, your store’s gross per copy, and your store’s marginal cost per incremental sale. Those three numbers belong to you and nobody else.
Context, Not Prescription: What NADA Actually Reported
Here’s the industry backdrop, and I want to frame it carefully because these numbers get misused constantly.
NADA’s 2025 full-year report for franchised new-car dealers put total advertising spend at $9.96 billion, averaging $586,246 per dealership and $718 per new vehicle retailed. Digital categories represented 74.8% of that total.
Read that paragraph twice, because the label matters. Those are franchised new-car figures. They are not benchmarks for used-only operations, RV, powersports, or marine. A pre-owned superstore, an indoor powersports rooftop, and a marine dealer have entirely different shopper behaviors, entirely different average grosses, and entirely different channel economics. Applying a $718-per-new-vehicle number to any of those is a category error.
Even within franchised new-car, the average is a distribution — not a target. Some stores are hitting their unit goals at half that per-vehicle figure. Some are spending double and still short. The average tells you where the industry landed collectively; it tells you almost nothing about where your store should land.
Copy the mix and you’ll reproduce the industry average. That is the trap.
Build the Budget From Your Own Targets
This is a method built from first principles rather than industry averages — the same budgeting discipline I’ve applied across twenty-five years in marketing, translated into a dealer’s own inputs: sold VIN, fixed ops ROs, and gross. It’s built for how a store actually makes money, not copied from a benchmark deck.
1. Set the incremental goal by department
Start with what you’re actually trying to produce. Not total sales — incremental sales above the baseline you’d hit with no marketing at all. Break it out by department: new, used, service, parts. A store that needs 40 additional new units, 60 additional used, and 300 additional customer-pay ROs per month has a very different budget than one that needs half of each. Marketing is a system for producing those specific outcomes, so name them first.
2. Estimate contribution gross per incremental outcome
From your own DMS, pull the contribution gross — front plus back for vehicle sales, effective labor rate times hours plus parts gross for service. Not the total gross. The incremental gross, net of variable selling expense. Here’s the catch: this number is sitting in almost every store’s DMS, and almost nobody uses it to size a marketing budget. This is what you’re buying with every marketing dollar.
3. Set the highest tolerable acquisition cost
Below that contribution gross, set a ceiling on cost per incremental sale. If your incremental new-car contribution gross is a certain figure, your acquisition cost has to sit meaningfully below it or you’re producing units at a loss. Set the ceiling explicitly, in dollars, per department. Write it down. Every channel gets measured against it.
4. Estimate what each channel must produce
Now you can work backward. How many qualified opportunities does paid search need to deliver at your target close rate to hit the new-car number? How many service appointments does the retention program need to book? This is where most dealer budgets fall apart — the spend exists, but nobody has assigned each channel a specific unit or RO quota. If a vendor can’t tell you what their line item is supposed to produce, that line item is a donation.
5. Reserve budget for controlled tests
The last piece — and the one almost everyone skips. A portion of the budget, small but non-trivial, should be reserved for controlled tests. New channels, new creative, new offers, measured against a holdout. Not recurring vendors renewing on autopilot. If 100% of your budget is committed to the same twelve invoices you paid last year, you have no mechanism for finding what works next year.
The Formulas, Stated Plainly
Four measurements do most of the work. Every dealer marketing conversation should be able to reference these without reaching for a calculator.
Cost per qualified lead. Total channel spend divided by leads that meet your definition of qualified — not raw form fills, not phone rings, but opportunities a BDC or salesperson would actually work.
Cost per matched sale. Total channel spend divided by sold VINs matched back to that channel’s leads through your CRM. This is where the attribution work lives, and it’s non-negotiable.
Gross ROAS. Front gross plus back gross generated by the channel, divided by channel cost. Tells you whether the channel is producing gross efficiently on a reported basis.
Incremental gross ROAS. Gross above a control condition, divided by incremental cost. This is the honest one. It answers: what would have happened if we hadn’t spent this money? Reported ROAS almost always overstates the truth because it credits the channel for sales that would’ve happened anyway.
The gap between reported ROAS and incremental ROAS is where most dealer marketing budgets bleed.
The Attribution Tension Nobody Wants to Name
Here’s the operational problem, and I want to be direct about it. Paid search, third-party listings (the AutoTraders and Cars.coms of the world), and your own SEO and website capture are all working the same shopper — just at different points on the timeline. A customer who searches your brand, clicks a third-party listing, then lands on your VDP through organic search has touched three channels. If you grade all three on last-click, you overcredit the final demand-capture touch and underinvest in the earlier work that actually created the demand.
This is why the answer to “what should we spend?” is never “put 21.1% into search” or any other single-channel share. The answer is:
- Give each channel a specific job — demand creation, demand capture, retention, conquest, reactivation.
- Deduplicate outcomes so the same sold VIN isn’t counted three times across three vendor dashboards.
- Add spend to any channel only while its marginal cost per incremental sale stays under your ceiling.
That’s the discipline. It’s less satisfying than a percentage, and considerably more accurate.
Fixed Ops Deserves the Same Rigor
One aside, because it’s where the most obvious money gets left on the table. Fixed ops marketing at most stores is an afterthought — a monthly service email, an oil change coupon, maybe a retention vendor nobody’s audited in three years. The contribution gross per RO is knowable. The customer file is sitting in the DMS. The math works the same as new and used. If your budget doesn’t have a fixed ops line with its own cost per RO and its own ROAS, you’re subsidizing variable ops with gross you should be defending.
Who Owns the Decision?
Here’s the diagnostic question I’d finish with, and I mean it literally. Walk into your dealership tomorrow morning and ask: who owns the marketing budget decision at this store?
If the answer is a person — a marketing director, a GM, a principal — who can tell you, in specific dollars, what each channel is supposed to produce this month against unit and gross goals, you have decision ownership and you’re operating a marketing function. If the answer is a stack of vendor invoices auto-renewing on the fifteenth, you’re operating a subscription bundle. Those are different things and they produce different results.
The businesses that compound year after year are always the first kind. Not because they spend more. Because they know exactly what they’re buying, what it’s supposed to return, and when to cut it.
That’s the work — building the architecture that tells you which channel earned the sale, sizing spend against contribution gross rather than industry averages, and holding every vendor to a number they agreed to hit collaboratively. It isn’t glamorous and it doesn’t fit on a benchmark slide. It’s the difference between a dealership that markets on purpose and one that markets by inertia. If your invoices are running the store’s marketing decisions right now, that’s the underlying problem worth naming next.