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Sewells best practise: Do you charge sales full rate or discount?

"That old dispute about internal work reared its ugly head during a dealer visit recently. So, should internal work carried out for the sales department be charged at retail or discounted? Should internal parts, and especially accessories, be discounted?

Dealers break down into two camps on this issue. There are those who say the sales department, as the biggest single customer for aftersales, is entitled to a hefty discount on labour and parts. As a result, say these dealers, the sales department will be able to compete and sell more new and used cars, which is ultimately good for aftersales too.

On the other hand, there are those dealers who believe that every department has to stand on its own two feet. That means aftersales charges the sales department at full retail. The thinking behind this is that the sales department will at least recover the full cost of internal work, but if you give them a discount they will almost certainly give it all away.

Sewells’ research tends to support those dealers that charge full retail for internal work. Clearly their aftersales gross profits are higher. But their sales department gross profits are not significantly down. What we don’t know is whether unit sales of new and used cars are affected, as there are few studies of dealers that have switched between the two methods of charging. In one case we looked at unit sales were marginally down, but the increase in gross profit retained by the dealership made up for this many times over.

The subject of internal charging is more often a matter of inter-departmental relationships. Maybe the answer is the middle ground with the sales manager booking workshop or bodyshop time in advance just like a retail customer – if they want a discount on labour.

Bookings are then allocated to a vehicle at least one day in advance, or cancelled. Any work not booked subject to normal lead times is charged at full retail. In this way, the sales department benefits from a discounted labour rate, and aftersales can manage loading more accurately.

For parts, offer an internal discount for all but emergency orders, which should be retail.

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