A dealer with a workshop has an advantage and a blind spot, and they are the same thing.
The advantage is obvious. You bought the car at £7,400, it needed two tyres, a service, a set of rear pads and a day of the valeter's time, and you did all of it in house. A dealer without a workshop would have paid a garage to do that and known exactly what it cost, because there would be an invoice.
The blind spot is that you did not get an invoice. So when the car sells at £9,995, the margin on your stock list reads £2,595, and it is not £2,595. It is £2,595 minus a day of a technician you paid anyway, minus four hundred pounds of parts you bought from a factor, minus the tyres.
The work happened. The money was spent. Nothing recorded it against the car.
The number you are running the business on
This matters more than it first appears, because the retail margin on a vehicle is the number that drives almost every decision a dealer makes.
It sets what you will bid at auction. It tells you which makes and models are worth stocking. It decides whether a part exchange was a good buy. It is the number you look at when a car has been on the forecourt for ninety days and you are deciding what to do with it.
If that number is systematically too high, every one of those decisions is made on a flattering version of reality. And it is not wrong by a random amount, which would at least average out. It is wrong in proportion to how much work the car needed, which means the cars that look best on your stock list are frequently the ones that quietly cost you the most.
The heavy prep car with a £2,900 apparent margin and £1,100 of unrecorded work made less than the tidy one showing £2,200. You bought two more like the first one, because the number said to.
Where the money actually goes
Three things happen in a workshop during prep, and they have different levels of visibility.
Parts are the easiest to lose. Pads, discs, filters, a battery, wiper blades, a headlamp unit. Bought from a factor, fitted by your own technician, never charged to anybody. The cost is on a supplier invoice in the purchase ledger with a hundred other lines, indistinguishable from parts that went on paying customers' cars.
Labour is the most argued about. Some dealers insist in-house prep labour is free because the technician is salaried and would have been there anyway. That is true only if the workshop had nothing else to do. If there was retail work you turned away, or pushed to next week, the prep cost you the margin on that work. Even if you genuinely had a quiet Tuesday, the hours are worth recording so you know how much of your capacity prep is eating.
Sublet is usually captured, because somebody else invoices you for it. Which tells you something: the only category dealers reliably record is the one where an external party forces the paperwork.
An internal job card fixes this by existing
The mechanism is not complicated. Prep work goes onto a job card like any other job, with the difference that the customer is your own stock vehicle rather than a member of the public.
The technician clocks on. The parts go on the lines with their cost and supplier, exactly as they would on a retail job. The job gets completed.
At which point, in Vehiso, completing that internal job card writes its parts and labour to the stock vehicle's costs. The car's cost price goes up by what the work actually cost, and the margin on your stock list becomes the real one.
Nothing new to remember, which is the important bit. Nobody has to maintain a separate prep spreadsheet, and nobody has to remember at the end of the month what went on which car. The recording happens because the work was done on a job card, and the work was going on a job card anyway if you want to know what your workshop is doing.
What to charge yourself
The question that follows immediately, and it has a right answer and a lot of wrong ones.
Do not charge retail. If prep parts and labour go on at full retail price, your workshop's figures look magnificent, funded entirely by your own sales department, and the vehicle margin swings too far the other way. You have moved the distortion rather than removed it.
Do not charge nothing. That is where you started.
Charge an internal rate. A defined labour rate for internal work and an internal parts price level, set once, applied consistently. Both numbers then mean something: the workshop is not being flattered by captive work, and the vehicle carries a genuine cost.
The parts side of that is one of the four price levels covered in stop pricing parts in your head. Set it once and it applies itself.
What you find out
Dealers who start costing prep properly usually get one uncomfortable month and then a much better set of decisions.
Average prep cost per car, by source. Auction cars, part exchanges, trade buys. Most dealers have a strong opinion about which is cheapest to prepare and are wrong about one of them.
Which models eat prep. Usually not the ones you would guess, and frequently a model you keep buying because the headline margin looks good.
How much of the workshop is internal. If half your capacity is prepping your own stock, that is a legitimate business decision, but it should be a decision rather than something you discover.
Which cars are genuinely not worth buying. The ones where the gap between bid price and retail looked fine until the real prep number went in.
The link back to parts
This post sits at the end of a series about workshop parts, and it is where the workshop argument meets the sales floor.
Every part fitted during prep has a cost. If that cost is not recorded on the line, it cannot reach the job, and if it cannot reach the job it cannot reach the vehicle. The whole chain depends on the smallest link, which is an advisor or a technician putting a cost against a part.
That is the same two fields that make parts margin possible on retail jobs, covered in you do not need a stores man to know what parts make you. Get that right and you get accurate parts margin, accurate job costing and accurate vehicle margin, in that order, from one habit.
Where to go next
- You do not need a stores man to know what parts make you
- Stop pricing parts in your head
- Vehicle preparation tracking: how to use tasks in your dealer management system
- Stock and sales reports for car dealers
Internal job cards are part of Vehiso Workshop at no extra cost, and are not available on the Free plan.
