Payment for warranty work has been a point of contention in the dealer-factory relationship for decades. But changes are being made around the country, in favor of the dealer. 40 states now have laws mandating that automakers reimburse dealers for warranty-related labor and parts at the same rates that the dealerships charge for retail repair work.
Traditionally, the auto manufacturers have limited the parts and labor markup for warranty work to 40 percent. Typical dealership markups on customer-paid repairs reach somewhere between 60 and 80 percent, which really equates to the “going-rate” for the typical repair work.
Understanding your state’s laws in this area is crucial, but even more critical is understanding how the manufacturer’s application process works: how to navigate the exclusions, what documentation is needed, how to deal with a rebuttal and how often applications can be submitted. You do not need to enlist the services of a consultant or attorney in this area, however, due to the array of legal issues and the layers of OEM policy, there are benefits to employing an expert to help you maximize the reimbursement opportunities.
Both Ohio and Indiana have strong statutes supporting the initiative. Statutes in these two states provide a specific formula to use to calculate their retail rates and the detailed process on how to apply for warranty reimbursement. The Kentucky statute is worded more vaguely, but is still considered to be a favorable statute on warranty reimbursement. If you have dealerships in these states, the process is absolutely worth doing.
So why aren’t more dealerships taking advantage of higher reimbursements? The answer is two-fold: They either don’t know they can, or they know they can but are weary of retaliation by the manufacturers or the substantial red tape to deal with. While it is true that automakers sometimes question submissions, at the end of the day, they must obey the law, so retaliation should not be a concern. To navigate the red-tape, you can employ a dealership consultant and legal counsel with experience in submitting reimbursement applications in your state(s). They will handle it so that all you as the dealer need to do is focus on running the business and then collecting the reimbursement from your manufacturer.
Some questions that we often get are: How lucrative is this reimbursement program? Is it worth the effort?
Even a small dealership can receive more than $140,000 a year. Yes, annually. For relatively low effort made by the dealer, the potential reward can add significantly to the bottom line and be the difference between a bad year and a great year.
For more information or answers to any questions, please contact Nick Brunotte from Brady Ware Dealership Advisors. Nbrunotte@bradyware.com or at 614.551.4615.