Former Leeds boss says they must sign a player capable of pushing the rest of the side to the next level.
McAllister, who also won the league title with Leeds as a player, believes the club must act this summer to make the step from also-ran to promotion challenger.
He said: "For them to make the leap to even get into the playoffs is going to require some big investment.
"I think they need to make a signing which sends a message that they are real contenders and actually want to be part of the mix to get out of the league.
"When Leeds were trying to get out of the old second division, they made signings like Gordon Strachan and Vinnie Jones - two very contrasting players, but they were characters. They're the sort of players Leeds need."
The name which immediately springs to mind in light of McAllister's comments is free agent Joey Barton, who was released by QPR after their relegation to the Championship. Barton was linked a fortnight ago The Sun with a move to Leeds United.
Leeds yesterday announced the signing of Motherwell forward Lee Erwin, who is a real livewire, and showed at the end of the Scottish season he is a confrontational character, with his bust-up with Rangers defender Bilel Mohnsi.
A player in Barton's centre-midfield position could be more vital to Leeds to next go on and sign, to help alleviate the pressure on young players Alex Mowatt and Lewis Cook, and replace Rudolph Austin who was released at the end of this month.
Leeds' summer business has been positive so far, with Sol Bamba also set to sign, and a big name addition could just be what they need to take them to the next level they crave.