Do you have a love-hate relationship with manufacturer rebate incentives? On the one hand, they draw customers to your showroom and can bump up sales with alluring customer discounts. But they also pose the risk of your dealership undergoing a rebate audit by the manufacturer. Prevent a managerial headache – and a possibly large chargeback — by following these five tips:
1. Create a rebate submissions process. Adherence to a clear and consistent submissions process will help reduce your audit risk. Put procedures in writing and train all employees involved with rebates so that the procedures will be followed diligently. This also will provide for less confusion for the customer.
2. Be careful with rebate dates. If vehicle delivery takes place during the manufacturer’s rebate period, all is well. But what if the deal is recontracted outside of those dates? For example, a customer signs a contract to purchase and take delivery of the vehicle on April 29, but delivery is stalled due to financing issues. On May 6, financing is approved, a new contract is signed, and the vehicle is delivered. Technically, the customer isn’t entitled to a rebate.
3. Document the deal carefully. You should collect documents that support your customers’ eligibility:
- For college graduates, a copy of their college degree,
- For participants in owner loyalty programs, the customers’ and vehicles’ purchase histories (you must document that the customer bought the prior vehicle new), and
- For employee discounts, proof of employment.
Also print the rebate offer and guidelines from your manufacturer’s website, attach them to support documentation and file in the deal jacket for future access. Keep deal jackets for 10 years per general record retention guidelines.
4. Perform a self-audit quarterly. This will help prevent incomplete paperwork and ensure compliance with your manufacturer’s requirements. Assign the audit to office personnel acquainted with the rebate submission process, but not to the employee who’s usually responsible. To get started, print out the details for all manufacturing rebates that were submitted to the manufacturer the previous quarter. Office personnel should then pull the deal jackets that correspond to the deals on the printout.
5. Use an audit checklist. Create an audit checklist that outlines the rebate steps to be audited. For example:
- Viewed the delivery date.
- Viewed the rebate offer time period and guidelines printed from the manufacturer’s website. If delivery fell outside of the incentive period, provide the reason for accepting the rebate.
- Viewed documents supporting the customer’s eligibility for the rebate.
With a reported increase in manufacturer rebate audits by automakers, you need to make sure you’re in line with your manufacturer’s guidelines — or you’ll risk paying the price in the form of chargebacks and possible recurring audits. By ensuring that your dealership plays by the rules, you’ll maximize profits while eliminating any downside of manufacturer rebates.
Please contact John Comunale via our online contact form for more information.
Councilor, Buchanan & Mitchell (CBM) is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC.
