Alex, you're usually limited when you go with the local newspaper and cable station websites. Not saying they don't have their place but from my experience they usually under perform.
Yes, your larger Display Ad Agencies can geo target..some by DMA while others can break it down by region and zip. However, it will never be 100% accurate do to floating IP's and homebase IP's being located in another state (AOL).
Yeah, I have never heard nor seen a CPS model for display advertising in our industry. I doubt that will ever happen. As I said before..there is a play for CPA (cost per action) and off the top of my head the only ones in our industry offering this is Cobalt, though not sure how they are pricing it.
I would work with a company that will give you the ability to track every action on your site (KPI's - Key Performance Indicators). This will allow you to identify values per action from your display advertising efforts and help determine an ROI.
Track Track and Track everything you can on your site. If your using "plug-ins" like a Credit App, Virtual Inventory or an Online Trade appraisal tool, be sure to get them on board with installing the tracking code as well, otherwise you can be loosing a lot of conversion tracking. Take it another step and track your phone calls as well....humm, this is still a challenge.
Keep in mind that display plays nicely with other media. Research generally shows that search receives a 20% lift with a strong display campaign.
As Nick said above..this is an element of tracking you can't "always" accredit back to your display advertising but if done correctly it is possible to track a lift in traffic to your dealer website from natural search. For me, this is the more important part of display advertising - the branding piece. Remember, in 2008, the average CTR for banner ads was round 0.25%.
Side note: Some companies tracking codes are very HEAVY and can really tax your website load time. Can you say..
Code Bloat? I would find out who else is using their services and before signing on, visit their site and keep eye on the load time and your web browser status bar (lower right corner) to see how many servers they are pinging up against.
Another side note: I personally would NOT do Display Advertising without Retargeting. If you do a lot of email marketing I would be a good idea to work with a company that offers the ability for you to place a retargeting pixel in your marketing emails.