Four Tips to Avoid Manufacturer Rebate Audit Headaches

Following manufacturer rebate guidelines could prevent an audit

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 come with a potential rebate audit by the manufacturer. Prevent a managerial headache, and a potentially large chargeback, by following these tips.

Create and follow a process

Build a clear and consistent submissions process for manufacturer rebates, and ensure that it is strictly followed. These steps should reduce the risk that an audit will discover problems.

  • Put procedures in writing
  • Train all employees involved with rebates and document the training
  • Demand that the procedures be diligently followed.

Document everything

Verifying customer eligibility is vital if your dealership plans to apply manufacturer rebates as intended. Here are some common rebate recipients and the documentation that should collected for each.

 Rebate recipients  Documentation
College graduate Copy of diploma
Participants in customer loyalty programs Customer and vehicle purchase histories
Employees Proof of employment e.g. W-2

Always print the rebate offer and guidelines from your manufacturer’s website, attach them to support documentation, and file these documents in the deal jacket for future access. Keep deal jackets for ten years per general record retention guidelines.

Timing is everything

Be careful with rebate dates. If vehicle delivery takes place during the manufacturer’s rebate period, all is well. But suppose a deal is re-contracted outside of the rebate period?

But what if the deal is re-contracted outside of those dates? For example, a rebate program ends on April 30th, and a customer signs a contract to purchase and take delivery of the vehicle on April 29th. So far, so good. But if financing approval is delayed, and the issues are not resolved until May 6th, then technically the customer isn’t entitled to a rebate. If you go ahead and honor the rebate, be prepared for challenges come audit time.

Check up on yourself before you get audited

Perform a self-audit at least quarterly. This practice will identify incomplete paperwork and ensure compliance with your written procedures. Assign the audit to office personnel acquainted with the rebate submission process, but not to the employee usually responsible. These general steps provide a framework for the self-audit.

  • Print the rebate reports submitted to manufacturers during the self-audit period
  • Pull the deal jackets that correspond to the deals on the printout
  • Create and use a checklist that outlines the audit steps, including:
    • Review rebate terms and time period.
    • Ensure vehicle delivery occurred within rebate period.
    • Review customer eligibility and associated documentation

Automakers are increasing the frequency of rebate program audits, so you need to make sure you’re in line with their guidelines. Otherwise, you risk paying the price in the form of chargebacks and recurring audits. Ensure that your dealership plays by the rules, and you’ll continue to maximize profits while eliminating the hassle of a rebate audit.

To learn more about the Brady Ware Dealership Services Team, or how we can your dealership establish an entire system of strong internal controls, please contact Sam Agresti at sagresti@bradyware.com or 614.384.8410.


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