Don’t be fooled by % rebate points schemes
Parts rebates are one of the few things in a garage that can drop straight into profit without adding a single extra job to the diary. Done well, they protect your margin, stop staff racing to the bottom on price and give you a bit of breathing space when everything else is going up.
They are also a game, and you are not the one writing the rules.
Most factors will talk about partnership, support and loyalty. What they really watch is your spend and how predictable it is. Rebates and targets are their way of nudging your behaviour and if you pretend it is anything else, you will sleepwalk into decisions that suit them more than they suit your business.
As a business owner, the clean version is attractive:
1. You agree a percentage back on what you buy
2. You hit a target
3. The rebate arrives
Lovely.
In reality, you only get that result if you keep very tight control of where your team is actually buying parts. Encouraging staff to build relationships with multiple suppliers is good service practice, but it can quietly smash your rebate plan to pieces.
All it takes is one technician who prefers a certain counter staff member, or a service advisor who feels bad saying no to a friendly rep, and whole chunks of your spend drift away from the supplier that is funding your rebate. They are not trying to be awkward, they are just doing what feels easiest in the moment. Unless you are watching the numbers and challenging it, your hard won deal is being chipped away on a Tuesday afternoon without you even noticing.
Targets sit right in the middle of this as a blessing and a curse. Targets give you something concrete to aim for, which can focus your buying and help you negotiate better terms. They also tempt you to push volume through one factor when another supplier might offer better availability, quality or warranty back up on a given day. Staff do not see the board in your office plotting this out, they see a queue of jobs and a phone that will ring until someone answers it.
Then there is the cloak and dagger side. Very few factors lay their entire rebate structure on the table. Instead, they hint. They test. They see what you will accept. You might be offered a certain percentage, yet know in your gut that another garage of your size up the road is on more. You will rarely see a simple, written menu of what is possible at different spend levels. That lack of transparency is deliberate and I for one get annoyed by that. If you do not know the full picture, you cannot benchmark and you cannot push as hard.
Points schemes take it even further. You are told that every pound you spend earns points that reflect your rebate percentage. Sounds simple…until you try to cash them in. Suddenly the rules change. Gift vouchers that cost £75 swallow £150 worth of points. Deals look attractive on the surface, but when you do the maths the true percentage back is nowhere near what you originally agreed. The only way to see the full value is to re-spend the points with the same factor on their chosen products, tools. That is not a rebate - it is a loyalty trap.
Here is the uncomfortable bit. Owners sometimes help this along by treating rebates as a nice surprise rather than a strategic tool. If you never explain the basics to your team, you cannot be shocked when they buy wherever feels easiest. You do not have to share every percentage or cash figure, but you can be clear that approved suppliers exist for a reason, that spend will be monitored and that drifting off plan has consequences for the business.
For staff, it is worth seeing it from that side of the desk. When rebates land properly, they help keep the lights on, fund training, pay for test equipment and yes, keep wages moving in the right direction. When they are diluted by random buying habits and clever points schemes, that money does not just vanish from the owner’s pocket. It never reaches the garage at all.
The bold view is this. Stop treating rebates as a perk and start treating them as part of your pricing strategy. Challenge factors to be open about what is really available, refuse points deals that water down the percentage you believe you are on. Audit where every part comes from and hold staff to account for sticking to agreed suppliers.
Rebates can be brilliant. Just make sure they are working for your garage, not quietly turning you into someone else’s loyal customer.