Internal work
Internal work explained: what "internal" means on a repair order
Internal work is the pay type on a dealership repair order where the workshop performs labour and fits parts for the dealership itself, billed to another department inside the business rather than to a customer or to the manufacturer. Controllers shorten it to internal, or I/C on some systems. No money leaves the building.
It is the third of the three pay types every job is coded to, alongside customer pay, where the vehicle owner funds the work, and warranty claim work, where the manufacturer does. The repair order itself is the same document in all three cases. Only the account it is charged to changes.
Where does internal work come from?
- Reconditioning: the largest source in most stores. A trade-in arrives, the workshop services it, replaces tyres and pads, and puts it right cosmetically before it goes on the used lot. The used vehicle department is charged.
- Pre-delivery inspection (PDI): preparing a new vehicle for handover, charged to the new vehicle department, often with a factory allowance behind it.
- Accessory fitting: tow bars, mats, protection packs, films, fitted as part of a sold deal and charged to the selling department.
- Lot damage: a kerbed alloy or a trolley dent picked up on site, which the store absorbs.
- Courtesy and demonstrator fleet: servicing and repairing the vehicles the dealership owns and lends out.
- Comebacks and rework: a job redone at the store's cost, though many dealers deliberately code these to policy instead so they stay visible as a quality problem rather than disappearing into internal.
How internal work is priced
Internal jobs are an internal transfer, so the store chooses the rate. Most dealerships bill internal labour at a discount to the retail rate and internal parts at a markup over cost that sits below counter retail. The workshop books the gross, the receiving department books the cost, and the group's consolidated accounts net most of it out.
That choice matters more than it looks. Set the internal rate high and the service department looks profitable while the used car department's reconditioning cost balloons and margins on retail units disappear. Set it too low and the workshop is subsidising vehicle sales with technician time it could have sold at retail. Neither version shows up in total hours, which is why the pay type mix is read separately in every serious fixed operations review.
Internal work in practice: a worked example
A three-year-old hatchback is taken in part exchange. The workshop spends 2.8 hours on a service, brake pads and an alignment, plus $380 in parts, and the bodyshop refinishes a scuffed bumper. That whole job is coded internal and charged to the used vehicle department, so it lands in the reconditioning cost of that unit and comes straight out of the front-end gross when the car is sold. The technician was busy all afternoon. The dealership's consolidated profit moved very little.
When does internal work become a problem?
- It flatters productivity: technician hours look healthy, but hours sold at an internal rate produce less gross than the same hours sold at retail.
- It competes for bays: a workshop full of recon on a Friday is a workshop turning away paying customers, and those customers do not always come back.
- It hides quality issues: rework buried in internal stops looking like rework.
- It moves profit between departments: an internal rate change can make one manager's numbers and break another's without a single extra car through the door.
The usual controls are simple enough: an internal rate agreed at group level rather than negotiated store by store, reconditioning approved against a per-unit cap before the work starts, and a monthly read of internal hours as a share of total hours sold. Sharp appraisal discipline upstream helps too, since a realistic online trade-in appraisal is what stops a car arriving with $2,000 of recon nobody priced in.
What internal work is confused with
- Policy or goodwill work: policy is a repair the store or the manufacturer covers to keep a customer happy. Internal is work the store does for its own vehicles and its own departments.
- Sublet: sublet is work sent to an outside supplier, then billed on. It can be charged to any of the three pay types, so it describes who does the work, not who pays.
- Free or complimentary work: a free first service is being paid for by someone, usually through a service plan or a marketing budget. Internal has a specific account behind it.
Whichever name your market uses for the department, aftersales or fixed operations, the internal line is the one people look at last and misread most often.
