What does a test drive in a new car cost for a dealer?

What does a test drive in a new car cost for a dealer?
The dealer will incur a few costs in allowing potential customers to test drive their vehicles, most of which are built into the 'overhead' costs of the business. Generally, the dealer will incur the following costs:

1. They will have to take out some kind of Public Liability and Business insurance to cover for any damage a customer may cause on a test drive.

2. Wear and tear of the vehicle. Since most dealers treat their vehicles as 'trading stock' there are specific tax rules which determine the eligibility of deductions in relation thereto.

3. The dealer will also bear the opportunity cost of not having the vehicle/salesperson in the showroom for the duration of the test.

Since allowing test drives of vehicles is within the ordinary course of a dealerships' business, the cost to the dealer is usually minor and certainly should not have an impact on the efficiency of their operations. Most dealerships welcome test drives as they see it as 'investments' in future sales, goodwill and customer relationships.