Last Updated on September 12, 2023 by
Table of Contents
Considerations
Warranty reimbursement is a hot topic right now. Manufacturers, dealerships, and other government entities debate whether warranty reimbursement at retail rates is a wise expense and if price recoupment should apply? Is it better to have the dealer pay for the warranty, or should the vehicle owner take care of all the repairs themselves? Here’s some advice on this issue.
As you might imagine, car dealers hate warranty reimbursements. Why do they hate them? This issue has been bothering car dealers for some time now, but they’ve been able to escape unscathed from this dilemma until recently. Dealerships have enjoyed profit-making sales over the years, even as warranty reimbursement costs have mounted steadily. Now that dealer car sales have cratered, these expenses are being questioned seriously.
Why does retail reimbursement at retail prices make dealers so unhappy? The truth is that dealers are one of the last industries to realize the potential benefits of repairing their vehicles. Even with the new focus on keeping repair shops up to date, it’s not enough to keep them financially viable. Repair orders must be met, labor costs must be paid, and the shop must generate a profit to stay in business.
If these basics are not met, then what’s to happen? A service manager at a major automotive dealer could feel his or her way through the process and find a way to have the warranty reimbursement at retail rates. But how would the service manager do that? Most service managers have never repaired a car, much less planned to do so. They usually function as a manager’s office secretary and are rarely involved in the repair process.
How does Warranty claim Work?
Service managers could use an expert mechanic to take over this aspect of repairing cars for dealerships. They could get a technician specializing in refurbishing cars and learn how to apply a simple formula to figure warranty reimbursement at retail rates for every car they refurbish. The service manager could train his staff in this refinancing method so that the dealership is using only certified mechanical personnel to service cars and trucks. This would probably reduce labor costs since the repairs would be completed more quickly, even though the average repair time would probably be longer.
There might still be some parts of the service and parts store that would require labor costs to complete. Suppose a factory recertified technician trained in repairing cars performs an expensive service on a specific vehicle, which the warranty might not cover. What then? Would the dealership be subject to fines if it was found guilty of charging the customer more than necessary for the service? This would be a possibility if the warranty reimbursement at retail rates were too high.
Why don’t service managers just reduce labor costs to obtain this extra warranty rate? There are several reasons. One reason is that labor costs might increase even if the dealer’s labor costs were reduced because of the retail reimbursement policy. Another reason is that the labor costs could be lowered even if dealers do not offer special service discounts to their customers, as is sometimes done. If they lower their warranty reimbursement at retail rates without offering any special discount, some customers might be less likely to purchase a warranty.
How can this affect your dealership? Suppose you received a large number of warranty claims from one car dealer, and you were told that this was unacceptable. What would your dealership do? Some car dealers have policies against retailers accepting warranties from independent service technicians, and others have policies against retailers accepting retail price quotes for car warranties. You can see that the dealership may try to avoid retail reimbursement at all costs, even though the warranty costs the dealership nothing.
Car Dealerships and Warranties
Car dealerships and warranties go hand in hand. When you buy a new car, you may find out that you need a dealership or warranty if the dealership offers it. Whether the dealership or the carmaker offers a warranty depends on what the warranty is for. A general warranty will cover parts and labor for one year on most makes and models.
There is a used car buyers’ guide that can help buyers choose a dealership with a warranty. The car buyers’ guide will give details about the different types of warranties that are available. It will also show what type of warranty is right for a particular model year model. In general, manufacturers guarantee their vehicles against factory defaults, damages done to the vehicle from flood or fire, vandalism, accident, and defects in workmanship. However, some warranties go beyond these boundaries.
For example, some dealerships offer extended warranties to car buyers. These dealerships may also offer service plans that include on-site repairs. Some dealerships offer warranties on parts, engines, transmissions, brakes, and clutches. Some manufacturers offer warranties on the entire car or cover a specified mileage only.
Most car dealerships are legitimate businesses, but there are scams out there as well. Fraudulent dealers will tell you nice things about a warranty before you buy the vehicle. You should only buy from certified dealerships. Ask how long they have been in business. If they do not have a license to sell a car, they cannot give you a warranty.
Before buying a car, make sure you do your homework and determine how reputable the dealer is. A great warranty company should be able to provide you with plenty of reasons why you should purchase their warranty. You must get a warranty from a reputable dealer because you do not want to end up buying a bad warranty from a rogue warranty company. A rogue warranty company could try to scam you into paying more money for their service plan than you need to pay for your vehicle.
Final Word
Car dealerships offer warranties to help protect you and give you peace of mind. Dealerships offer warranty plans to entice you to buy a vehicle. They can also offer warranties because it makes good business sense. Car dealerships and experts often work with high-quality warranty companies such as Warranty Part to obtain special pricing arrangements.
