Don’t Let A Lack of Awareness Cost Your Dealership Additional Gross Profit

by Joe Jankowski | May 16, 2019

Auto dealerships have faced a persistent problem for decades now—despite their hard work, these dealerships have been forced by the industry to “discount” their warranty parts. Although they should receive fair market value for all warranty claims, these dealerships instead only receive a 40% mark-up or MSRP—neither of which reflects true retail value.

For years, this problem didn’t seem to have a solution. But over the last several years, 45 states and counting have enacted legislation that entitles affected dealers to be reimbursed for warranty work at retail (which is actually the dealer’s customer “repair” rate). While this is absolutely good news, a variety of issues, including simple lack of knowledge, continue to influence how retail warranty reimbursements are submitted—if they are at all.

Let’s take a closer look at the challenges auto dealers face when navigating the retail warranty reimbursement submission process.

 

Ignorance Is Not Bliss

When auto dealerships are trying to maintain their profit margins, ignorance is anything but bliss. In our many years of experience—both performing retail warranty reimbursement submissions and operating auto dealerships—we’ve seen a surprising number of dealerships that simply don’t know about the laws that benefit them. This absence of awareness ranges from a true lack of information—they didn’t even know the laws or that this submission process exists—to plain misinformation.

Either way, this lack of awareness results in lost profits—up to $400 a day or $8,000 a month on average. Although it’s hard to know what you don’t know, we recommend consulting with a third-party organization that can guide you through the retail warranty reimbursement submission process. You may not need to know the laws inside and out, but you do need to know how they work to your dealership’s advantage.

 

Complex State Laws

Although you don’t need to be a lawyer, you may find it difficult to read laws of any kind, let alone the ones pertaining to retail warranty reimbursement. To make things more challenging, these laws are only valid in the state in which they were written; so, if you do business in multiple states, you’ll need to adhere to potentially very different laws.

In this case, lack of information regarding retail warranty reimbursement is understandable. Instead of attempting to interpret the law on your own, you’re better off consulting with someone knowledgeable who can tell you exactly what you need to do in order to perform a submission.

However, keep in mind that the state law is not the only rule you need to confront—you’ll also need to work with the manufacturer’s specific and sometimes very rigid rules. With the unlevel relationship between manufacturers and dealerships and the number of rules you need to accurately follow, this process can quickly become overwhelming; this explains why many dealerships don’t submit their packages, or delay submitting them and at a potentially lower rate than is competitive.

 

Critical Submission Process

Even if you feel confident about interpreting complex laws and manufacturer rules, the submission process itself requires a myriad of steps, and if you misstep, the manufacturer may reject your package. As a result, you need to ensure that whoever is performing the retail warranty reimbursement submission is an expert in this process.

Expert-level comprehension cannot be understated—this is not a process that you want done “good enough.” It can be tempting to delegate this important task to a member of your team, since you are paying them anyway. But given the complexity of the submission, the best possible move is to consult with a third-party team of experts who have experience in retail warranty reimbursement submissions. Otherwise, you risk not earning what you should—and this is lost revenue until and if you can rectify it in the future. Once you receive an approved rate, that’s the rate you’re stuck with.

 

Rebuttals and/or Resubmissions

Once the retail warranty reimbursement package has been submitted, you may experience a rebuttal from the manufacturer. In this case, you’ll need to resubmit your retail warranty reimbursement package with details responsive to the manufacturer’s contentions. When this occurs, you’ll want to be absolutely certain of your decision as well as the inclusions and exclusions that led you to your choice. Without those things to back you up, you risk earning less than the fair market rate.  Without having a track record of response experience, you are truly “shooting arrows into the fog.”

Clearly, there are several ways that a lack of “insider” knowledge can influence the retail warranty reimbursement submission process. While educating yourself on the process is a great start, in order to earn the fairest and most optimal rate, you’ll want to consult with a third-party team that has been doing these submissions for years—and that will do the hard work for you at a fair price.


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Joe Jankowski is Managing Partner of Armatus Dealer Uplift, a Hunt Valley, Maryland-based firm specializing in retail warranty reimbursement submissions. Joe has been personally involved in consulting on 10 retail warranty statutes and is widely recognized as a subject matter expert in this highly technical arena. Previously, Joe spent more than 20 years as CFO, COO, and CEO of a large automotive group in Maryland.