Forty-nine states, with others in process, now have legislation requiring manufacturers to reimburse dealers at retail rates for both parts and labor performed in warranty service.
In the past, dealers have been stuck with an artificially low parts mark-up as stipulated by dealer agreements. This mark-up is typically 40% over cost, although some manufacturers will claim to pay you list or MSRP.
Many dealers wind-up leaving a significant amount of money on the table by simply failing to consider a “true” retail reimbursement submission.
MSRP is sometimes used interchangeably with “retail,” which most dealers consider to be a 67% mark-up; it is not, we have found that the true blended reimbursement rate is in the low- to mid-50% range, well below true retail.
The retail rate that dealers are entitled to under favorable state statutes is the amount that their customers pay them for warranty-like work. “Customer Pay Retail,” upon which warranty reimbursement is calculated, when optimized for Armatus clients, is usually in the 75% to 85% range-far more equitable than the standard 40% mark-up paid by most factories.
To put it simply: the playing field was lopsided. Now, Retail Warranty Reimbursement laws level the playing field between the manufacturer and the dealer.
Historically, manufacturers have limited the parts mark-up dealers can receive on warranty work to about 40%. This is significantly lower than the going rate for their products and services, but factories dictated the terms and dealers had to accept them.
Because of favorable state laws, dealers are entitled to collect retail from their manufacturer for parts used in a warranty claim.
How is that fair? Warranty work is usually the hardest in the shop; it employs the highest paid technicians and requires the most training. On top of that, these jobs have the worst book times, often call for special tools, require a warranty clerk, and are subject to chargeback. Moreover, warranty work yields the lowest gross profit of any service repair.
Not anymore. State laws override that 40% stipulation and enable dealers to obtain “true retail,” which usually
averages between 75% and 85% over cost. Dealers can now realize fair market-rate compensation for their warranty claims and in most cases double their current warranty parts mark-up.
Of course, some laws are stronger than others, and no two states have identical statutes. It’s also important to note that none of these laws are self-effectuating, meaning the law itself does not entitle the dealer to retail reimbursement; instead, you must perform a submission to the factory. Manufacturers also have their own rules that are not always in compliance with the various laws, adding confusion to the process. But not to worry—a knowledgeable Retail Warranty Reimbursement provider understands the laws and can cut through the stipulations and nuances to produce optimal results.
The fact of the matter is this: some of the dealers in your area, large and small, have most likely taken advantage of Retail Warranty Reimbursement. At Armatus, we have worked with over 6,000 dealerships in the past ten plus years, and they range in size from large public groups to single point dealers. We’ve also done work with virtually every brand. Nevertheless, there is a surprising lack of awareness in the market regarding this opportunity, but as more and more states strengthen their laws, dealers are catching on
Within the past ten years, we have worked with over 6,000 dealerships, ranging from large public groups to single point dealers, and virtually every car brand.
Today, 49 states in all have a law in place, and 45 of those states have very detailed processes. As more and more dealers join the retailcompensation ranks, information is spreading through Dealer Associations, 20 groups, and simple word-of-mouth.
Make no mistake: Retail Warranty Reimbursement is building a huge presence in the marketplace. If you have not heard about it yet, it is only a matter of time until someone will be discussing with you how they were able to double their warranty parts mark-up by performing a submission to their manufacturer.
Because many dealerships already do Factory Labor Submissions, they believe they can use the same approach to do a Statutory Parts Submission. However, most find out quickly that they made that assumption at their own peril.
In Factory Labor Submissions, you typically follow written factory protocols— and adhere to their rules. For Parts Submissions, however, doing it on your own is very challenging because of the nuances in the law and the written (and unwritten) rules imposed by manufacturers.
Doing a submission on your own can be very challenging because of the nuances in the law and the written (and unwritten) rules imposed by manufacturers.
Also, it is virtually impossible to guarantee an optimal result if you perform the submission in-house. Dealers that utilize various 3rd party service data analysis tools are working with less than perfect science; they are reliant on the precise usage of op codes by the advisors to determine the best Retail Warranty Reimbursement rate. Nothing but detailed analytics on the underlying data, combined with a full audit, can yield the best possible result.
That said, the safe bet is to choose an outsourced solution that can allow you to tap into dedicated professionals, including accounting, legal, technical, and automotive operational personnel, who are dedicated to a single mission: Retail Warranty Reimbursement.
Factory retribution is a widespread concern, and we understand why; most of our staff have worked in dealerships and are fully aware of the importance of maintaining a healthy dealer/manufacturer relationship.
To our knowledge, none of our clients have experienced any form of retribution. In fact, many state laws specifically prohibit retribution. Industry legal professionals have talked about this publicly in various conferences, and they all concur:
Industry legal professionals concur that retribution is largely a myth that is perpetrated to dissuade dealers from requesting a retail mark-up for their warranty claims.
retribution is largely a myth that is perpetrated in order to dissuade dealers from requesting a retail mark-up for their warranty claims. If your submission is performed honestly and with respect for your manufacturer’s warranty audit staff, there should be no issues.
One last word on factory behaviors: a few manufacturers have established patterns of resistance, by making the process difficult, but an experienced and highly-prepared uplift firm is equipped not only to neutralize many of such franchisors’ oppositional tactics, but to also anticipate them before a dealer even submits.
Most dealers currently obtain a 40% parts mark-up. By submitting for Retail Warranty Reimbursement, though, a store with typical pricing and discounting practices could expect to achieve a markup in the 75% to 85% range, and dealers utilizing a list pricing model could expect something in the 60% range. Even taking into consideration a conservative pricing environment, a dealer should expect to improve their warranty gross profit by a minimum of 50%; however, doubling the gross is very realistic.
A dealer should expect to improve his warranty gross profit by a minimum of 50%; however, doubling the gross is very realistic.
Keep in mind that you will be receiving this mark-up year after year after year-it’s like an annuity. You do the same work you do today, but your gross profit doubles. Think about it; if you achieve an average gross increase of over $100,000 annually; it is costing you about $8,000 to $9,000 for each month you delay.
Notably, your specific results will vary depending on volume, brand, and pricing and discounting policies. A no-obligation projection can provide you an estimate of what you might achieve, although nothing short of a full data analysis and audit can provide you with a precise uplift opportunity.
Now that you better understand the process, where do you begin? By simply providing Armatus with three numbers, we can use our sophisticated software and knowledge of the laws and the manufacturers’ rules to provide you with a projection of how much money you could expect to get.
You can generate significant bottom-line results without any up-front investment, risk, or significant time commitment by letting Armatus perform a retail submission on your behalf.
Think about it: What else could you do to generate as much profit as you would by doubling your warranty parts mark-up? Same work, double the gross.
We are happy to perform a no-obligation projection for you.
Contact us at 888-259-4471or [email protected] to get started.
For more info visit www.dealeruplift.com
