How to Track Expenses in an Auto Dealership
Most auto dealers don’t set out to ignore their expenses -- it just happens.
But when it’s time to figure out where the money went, or worse, explain it to HMRC, those small oversights start to hurt. The last thing you want is to be caught off guard when the numbers don’t add up.
That’s why smart dealerships take expense tracking seriously. It’s about having control. Knowing where your money goes gives you more power over how your business grows.
So, if you’ve been winging it, this blog post will show you a better way - simple, practical and tailored for auto dealers like you.
Track Expenses in an Auto Dealership
Table of contents
Understanding Expense Categories for Auto Dealerships in the UK
Tracking expenses starts with knowing exactly what types of costs your dealership faces.
Auto dealerships have a variety of expenses that need clear categorisation for easier bookkeeping and better financial management. These include:
Vehicle purchase costs: The amount you pay to acquire used or new cars for resale.
Repairs and maintenance: Costs for fixing and prepping vehicles before sale.
Staff wages and salaries: Payments to your sales team, mechanics, and administrative staff.
Rent and utilities: Costs for your showroom, office space, and workshop utilities.
Marketing and advertising: Utilizing various promotional channels, including online ads and traditional media.
Insurance: Vehicle, business, and liability insurance premiums.
Office supplies and software subscriptions: Everyday operational costs such as stationery and accounting tools.
Properly categorising these expenses makes it easier to track where your money goes and helps when preparing financial reports or tax submissions. This clarity also supports better budgeting and identifying areas to reduce costs without harming your operations.
Understanding these categories is the first step to setting up an efficient system that keeps your dealership financially healthy and compliant with UK accounting and tax regulations. You can also check out our essential accounting guide for used car dealers for help with that.
How to Set Up a Reliable System to Track Expenses at Your Car Dealership
Start by separating your personal and business finances. Open a dedicated bank account for your dealership to make tracking straightforward.
Use simple accounting software tailored for car dealers like QuickBooks, which lets you categorize expenses like vehicle purchases, repairs, or marketing costs.
Make it a habit to record expenses as soon as they happen; waiting until the end of the month makes it easy to forget or misplace receipts. Speaking of receipts, scan or photograph every invoice and store them digitally in folders organized by month or category; this reduces clutter and speeds up tax time.
Regularly reviewing your expenses can help you spot unnecessary spending or opportunities for tax deductions. If you want to dive deeper into record-keeping, check HMRC’s guidance for car dealerships.
Best Accounting Software for Car Dealerships
Choosing the right accounting software can make a huge difference in how efficiently you track expenses at your dealership.
Instead of juggling spreadsheets or relying on memory, good software helps you automate record-keeping, categorise costs, and stay compliant with tax regulations.
Most UK car dealerships, especially those operating under the VAT Margin Scheme, benefit from tools that allow proper expense tracking, VAT reporting, and integration with inventory systems. QuickBooks, Xero, and Sage Business Cloud are some of the most popular options. Each has its strengths:
QuickBooks: Great for expense categorisation, mobile receipt capture, and detailed reporting.
Xero: Known for its clean interface and real-time bank feeds, ideal for dealerships with high transaction volumes.
Sage: Offers strong compliance tools and works well for medium-sized car dealerships that need more customisation.
When choosing software, consider:
Can it track VAT-specific transactions under the margin scheme?
Does it support mileage tracking, payroll, and inventory control?
Can it produce reports to make tax returns and audits easier?
Investing in the right software now saves you time, reduces costly mistakes, and keeps you ahead of HMRC requirements.
Expense Tracking Templates for Used Car Dealerships
If you’re not ready to jump into accounting software just yet, an expense tracking template can still keep your dealership organised.
A well-structured spreadsheet helps you record daily running costs, vehicle purchases, refurbishment expenses, and even marketing costs, all in one place.
The best templates for used car dealers should include sections for:
Vehicle acquisition costs
Repairs and refurbishment
Advertising and listing fees
Business utilities and rent
Staff wages and commissions
Insurance and finance charges
You can find helpful templates online, including free ones from trusted sources like Microsoft Excel, Google Sheets, or accounting blogs that tailor tools for small businesses.
For dealerships under the VAT Margin Scheme for auto dealership, make sure your template has a column for VAT margin-eligible stock, as this will be essential when calculating VAT and cost of goods sold. You should also record the date of purchase, stock number, and final sale value, so your records are always audit-ready.
Tracking Irregular Expenses in Your Auto Dealership
Irregular expenses can quickly disrupt your dealership’s cash flow if left unmanaged.
To track these effectively, start by categorising them separately in your accounting system. Things like emergency repairs, unexpected regulatory fees, or one-off marketing costs should not get lost in general expenses. Use accounting software with customizable expense categories to flag these immediately.
Set up a regular review schedule, weekly or monthly, to analyse these irregular costs and identify patterns. Are there recurring unexpected expenses you can plan for?
For example, do certain vehicle models often require costly repairs? This insight can help you budget better or negotiate service contracts.
Keep detailed documentation for all irregular expenses such as receipts, vendor agreements, or photos if relevant. This not only aids accurate record-keeping but also supports you if HMRC ever questions your deductions.
Finally, train your team to report unusual expenses as they arise. Encourage a culture where everyone understands the importance of timely and accurate expense tracking to maintain healthy finances.
Conclusion
Without clear records, it’s easy to lose sight of where your money’s going and even easier to fall behind on taxes, miss deductions, or overspend without realising it.
By using the right tools, keeping business and personal spending separate, and recording every purchase (yes, even the small ones), you’ll build a system that gives you more control, fewer surprises, and a clearer view of your profits.
At Rhombus Accounting firm, we help used car dealers simplify their finances, keep HMRC happy, and spend more time focusing on their business. Need support with expense tracking or accounting in general? Get in touch with us for straightforward advice that actually makes sense.
Thanks for reading!
Meet Lewis
Lewis is a professional accountant and founder of Rhombus Accounting. He regularly shares his knowledge and best advice here on his blog and on other channels such as LinkedIn.
Book a call today to learn more about what Lewis and Rhombus Accounting can do for you.
