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Warranty Reimbursement

Take Advantage of New Warranty Reimbursement Requirement

During the 2011 Idaho Legislative session, the Idaho Automobile Dealers Association worked tirelessly to obtain passage of several critical franchise protections for dealers in the State. One of those protections, which can have an immediate positive impact on every dealers bottom-line, is the requirement that manufacturers reimburse dealers for warranty work at rates that are not less than the rates charged by the dealership to retail customers. In other states that have passed similar legislation, dealers have enjoyed a significant increase in warranty reimbursement amounting to thousands of dollars a month in additional profit. But, to obtain this additional profit, dealers must take affirmative action to request increases in parts markup and labor rate reimbursement.

That action involves making a formal request to the manufacturer for the increased reimbursement and attaching supporting documentation. Under the new Idaho motor vehicle franchise law, dealers are required to gather 100 sequential non-warranty, customer-paid service Repair Orders
from within the prior 180 days which include at least one qualifying repair. Using these Repair Orders, a calculation of the average markup on warranty-like parts and labor is made. If the dealership cannot string 100 Repair Orders together that contain qualifying repairs within the prior 180 days then the dealer is permitted to use all Repair Orders containing qualifying repairs within the prior 90 days.

Repair Orders containing qualifying repairs are those that do NOT include:

1.
Menu-priced parts or services;
2. Repairs for manufacturer special events;
3. Repairs covered by insurance or service contract;
4. Vehicle emission or safety inspections;
5. Parts sold at wholesale or repairs
performed at wholesale (includes fleet);
6. Engine and transmission assemblies;
7. Routine maintenance not covered under warranty, such as fluids, filters and belts;
8. Items (nuts, bolts, etc.) without a part #;
9. Tires; and
10. Vehicle reconditioning work.

Once the average retail parts markup and labor rate calculation is made, dealers must submit the calculation and supporting Repair Orders to the manufacturer. The manufacturer may make reasonable requests for additional information within 30 days of submission. Our experience in assisting dealers with submissions in other states is that most manufacturers seek some additional information from the dealer and a few ask that dealers input the Repair Order data on a spreadsheet designed by the manufacturer (Honda and Acura). Dealers should cooperate with any reasonable request but should avoid allowing the manufacturer to string them along in an attempt to avoid paying the increased warranty reimbursement rates. Reasonable requests do NOT include:

A different methodology for calculation of retail rates;
Information that is unduly burdensome or time consuming to gather; and
A part-by-part or transaction-by-transaction calculation.

Ultimately, new rates are required to go into effect 90 days from the date of the manufacturer's receipt of any reasonably requested additional information. Dealers we have assisted across the country in taking advantage of franchise laws requiring warranty reimbursement at retail rates have had no regrets in pursuing an increase in warranty payments. Most manufacturers are now familiar with the process and have accepted the fact that they are required to pay dealers at the equivalent of the dealers retail rates. Other than some grumbling and delay-tactics, no manufacturer has taken any action which could be considered retribution against dealers.

There is no reason to wait! Every month that goes by without a submission to your manufacturer is costing you significant lost revenues. If IADA can be of assistance to your dealership in making a warranty reimbursement submission, please do not hesitate to contact us directly at
twright@idahoada.org.

 




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