ROAS gets thrown around in every vendor meeting, usually right before they show you a number that makes their work look brilliant. Return on ad spend is a genuinely useful measure, but only if you calculate it yourself and understand what the vendor’s version leaves out.
What ROAS Means for a Dealer
Return on ad spend answers a plain question: for every dollar you put into advertising, how many dollars did you get back? If you spend 10,000 dollars with a vendor and that spending produces 50,000 dollars in return, your ROAS is five to one. It is a ratio of what you earned to what you paid, and it lets you compare very different vendors on the same scale.
The trick is agreeing on what counts as the return, because that is exactly where the numbers get bent.
Gross Earned, Not Revenue
A lot of ROAS claims use total vehicle revenue as the return. That is misleading. Selling 50,000 dollars worth of cars does not mean you earned 50,000 dollars. You earned the gross profit on those units. For a dealer, the honest input is front and back end gross, not the sticker total.
When you measure ROAS against gross earned, the picture gets real. A vendor might look like a hero against revenue and look ordinary against actual gross. Gross is the number that pays your bills, so gross is the number your ROAS should be built on.
Run the two side by side and the gap jumps out. Say a vendor helped move ten cars at forty thousand dollars each. Against revenue that is four hundred thousand dollars, and on a ten thousand dollar spend the vendor reports a dazzling forty to one. Now use gross. If those ten units averaged two thousand dollars in combined front and back end gross, the real return is twenty thousand dollars, and the honest ROAS is two to one. Same cars, same spend, a wildly different story depending on which number you let the vendor use.
How to Compute It Per Vendor
Do not settle for a blended, store-wide ROAS. Calculate it vendor by vendor so you can see who actually earns their spot.
- Pull the exact amount you paid each vendor for the period.
- Attribute the vehicles that spending helped sell back to that vendor.
- Total the gross earned on those vehicles.
- Divide the gross earned by the amount you paid. That is that vendor’s ROAS.
Line the vendors up next to each other and the weak performers stop hiding behind the strong ones. A blended store-wide number lets a mediocre vendor ride the coattails of a great one. Break it out and you might find one vendor returning four to one on gross while another barely clears one to one, both buried inside a comfortable-looking average. The split is where the budget decisions live.
Why a Vendor’s ROAS Claim Is Not Incremental ROAS
Here is the part vendors rarely volunteer. Their ROAS claim usually counts every sale their campaign touched, including buyers who would have purchased from you anyway. That is not the same as incremental ROAS, which measures only the additional sales that would not have happened without the spend.
A vendor bidding on your own dealership name will report a fantastic ROAS, because those shoppers were already coming to you. The spend earned credit without earning the sale. Incremental ROAS strips that out and shows you what a vendor truly added. It is a harder number to produce and a far more honest one.
Think about the shopper who already saw your billboard, already knew your store, and typed your name into search. The vendor running that branded campaign serves the ad, gets the last click, and books the sale on its scorecard. Pause that campaign for a month and watch what happens. If the same buyers still call and still show up, the vendor was counting cars it did not cause. That test, spend on versus spend off, is the closest a dealer gets to seeing incrementality in the real world.
Make ROAS Your Number
Calculate ROAS on gross, break it out by vendor, and push toward the incremental version wherever you can. When you own the inputs, no vendor can hand you a flattering ratio you cannot check. That is the difference between measuring your return and being told what to believe about it.
Frequently asked questions
What is a good ROAS for a dealership?
There is no single magic ratio, because it depends on whether you are measuring against revenue or gross and whether the number is incremental. The more useful habit is comparing vendors against each other on the same honest inputs, gross earned and verified sales, rather than chasing a benchmark someone else set. The vendor with the higher incremental ROAS on gross wins the next dollar.
Why should I use gross instead of revenue?
Because revenue is not money you keep. You pay for the car, the flooring, the reconditioning, and everything else out of that sticker total, and what is left is gross. Measuring ROAS on revenue lets a vendor take credit for dollars that never touched your bottom line. Gross is the honest input.
How do I get to incremental ROAS?
The practical path is testing. Pause or reduce a campaign and watch whether the sales it claimed actually disappear. Pair that with checking claimed sales against your DMS. You will not get a laboratory-perfect number, but you will get close enough to see which vendors add sales and which ones stand next to sales that were already coming.
These are the numbers you should own, not rent from a vendor. See how VCTRS helps dealers hold every vendor accountable on our vendor accountability page.