The Impact of Warranty Lifts on Your Dealership
Getting Approved For a Warranty Lift
The process of getting approved for a warranty lift is complex, but when done correctly, you can be in control of your warranty reimbursement rates.
Often, dealers often do not understand the process of getting approved for a warranty lift. Although it can be a complex process, when done correctly, you can be in control of your warranty reimbursement rates. Here’s what you need to know about the process:
Your parts and service operations contribute a significant amount to the overall profitability of your dealership. Manufacturer’s warranty claims are a large contributor to your fixed operations gross profit.
Let’s look at the basics for a moment. Manufacturers determine your labor rate, labor time allowance and parts markup for the warranty work that you perform. In the mid-1980s, states began enacting legislation that entitles dealers to receive retail pricing for their warranty claims. Today, all 50 states have some version of warranty reimbursement at retail. This has been a slow process and many of these statutes have just been recently enacted.
Getting approved
In many cases, when a dealer is approved for parts and labor increases under state law, warranty parts gross profit increases by 100% and labor by 30-50% or more. This contributes significantly to your current and future profitability..
Getting approved for a warranty lift is a complex, legal process that requires extensive knowledge of fixed operations. You want to work with a firm that has the right expertise. It takes 40-60 hours of uninterrupted and distraction-free focus to go through the process, and one single error can be cause for rejection.. It’s also likely that your interpretation of your state’s statute will not be as accurate as an expert’s and result in a failed submission attempt. Additionally, you must be aware of what repairs are defined as “warranty like” and are qualified to be included in the calculation that establishes your warranty rate.
Notably, many dealers fail to file for regular increases when they increase their retail rates, resulting in lost revenue and gross profit. This is not a one-and-done process as retail pricing tends to be very dynamic with frequent changes, entitling you to regular increases in your warranty reimbursement rates.
Let’s not fail to mention the positive, though, when the process is done correctly, you will receive retail pricing for warranty claims. When approved, you are now in control of your warranty reimbursement rates, not the manufacturer.
What your team should know
Your sales team needs to be aware that they need to adhere to the retail pricing strategy that the management team has put in place- because the net price that retail customers pay will directly impact the results of the analysis that will be submitted to the manufacturer for a warranty increase. Also, the number of billed hours for retail repairs must be accurate as this will affect the final retail labor rate that determines the potential warranty rate. A team effort will optimize results.
There are many other potential roadblocks on this path- but the gains are worth it. It’s further reason to retain a firm that has the legal and fixed ops expertise that will give you the best possible result and increase the profitability of your business now and in the future.
