Do you feel like the manufacturer-dealer relationship is working against you? You may be able to get a much fairer deal with QB Business Solutions’ roadmap to success.
In the automotive industry it’s well known that state laws protect dealers from their manufacturer counterparts. Unnamed manufactures behaved unfavorably in the past, and states showed they noticed by taking action. In fact, more states continue to enact protective legislation for dealers, and the number should pass 45 in the coming future.
Out of all these laws, there’s one law you should get familiar with today:
Retail Warranty Reimbursement
Dealer agreements can leave you stuck with painstakingly low parts mark-up, and it looks even worse if your warranty labor rate isn’t great. This mark-up typically hovers around 40%, and some manufacturers will instead offer to pay you list or MSRP. But be weary… this “list” claim isn’t all that it seems. Instead, you most likely are being paid a mark-up in the 50-55% range instead of 67%. Therefore, things could get better.
This is why favorable state laws are there to help you. By law in 45 states, you are entitled to be reimbursed by your manufacturer for warranty work at “retail.” This does not mean list or MSRP. In fact, in most states the law defines “retail” as the dealer’s customer “repair” rate (or what a customer pays you for a warranty repair).
That means you could be entitled to a significant increase in warranty gross profit if you take proper precautions and action.
Why This Matters To You
Even dealers with the most conservative pricing can improve their warranty gross profit by as much as 50%, and, best of all, it’s a one-time process.
Now before we get into specific ways you can get the best possible results (warranty gross profit), we want to give you a full disclosure that this process takes time and patience – but in the end, it’s entirely worth it.
If you’re serious about increasing your warranty gross profit, it’s best practice to consider the following before sending in a submission:
Best Practice #1: Know The Law
Based on previous experiences, you can be sure that certain manufacturers will read the law in an entirely different manner than you, and try to wiggle out of following the law altogether. The only way you can combat this is by being prepared. We know some manufacturers try to squeeze non-warranty repairs in to hurt your mark-up and others deliberately refuse to follow the law, so it’s crucial you know the statutes in your state.
Best Practice #2: Follow The Manufacturer’s Protocol ‘To A T’
This is where things get a little tricky. You see, manufacturers try to shield you from knowing the rules you have to follow before sending in your submission. There are guidelines for the inclusion or exclusion of various aspects that make up the submission, so if you can figure out what they are, we suggest following them. It’s better to follow them ‘to a t’ (or pretty dang close to it) than to cause red flags right away. Save yourself a headache and thank yourself later by doing this from the beginning.
Best Practice #3: Optimize For The Long Run
When you optimize anything, you’re setting it up for success in the long run. There are no “quick-fixes” that last, and we both know that. That’s why it’s critical you select the proper submission sample. If you don’t invest in quality technology, you may cost yourself a few mark-up points, and that means losing thousands of dollars in warranty gross profit per year. Please take this point seriously, and give your submission some serious attention to detail and consideration. You don’t want to look back in five years and think about the extra $20,000 you could’ve had.
Best Practice #4: Get Prepared For Warranty Auditors
Not only should you invest in quality technology to help you pick the proper submission sample, you should have your submission audited thoroughly. As soon as you send your submission in, factory auditors pounce on it in hopes to find errors – and errors delay the process. This is why you should have someone familiar with the way the auditors operate ready to serve as your last line of defense before you send your submission in. Remember: you don’t want to upset these auditors, so do your best to get along with them or they just might keep you up at night.
Best Practice #5: Get Ready To Handle Manufacturer Responses
As foreshadowed and in many cases, your submission approval process will have its ups and downs. The manufacturer may reject submission altogether, or refuse to accept certain parts of it. How you respond is what really matters. In fact, your response will determine whether you enjoy a mighty increase in your warranty gross profit, or leave with nothing to show for it. Regardless, you must be prepared to handle rejection because some dealers have sent in up to four re-submissions in two years. It is not fun when you know you’re losing thousands in profit, but it’s best to keep at it because the end-benefit is well worth it.
Wrapping This All Up
At the end of the day, dealers of all sizes have a massive opportunity to increase their warranty gross profit. Not only are you entitled to receive fair reimbursement for warranty work, you can potentially double the size of your current reimbursement. Tackling the submission-process should not be taken lightly, but if you do attack it judiciously and professionally, you can reap the benefits. By not taking action, you must know you’re causing yourself thousands of dollars per year. QB Business Solutions can only hope that you see the upside and take the necessary steps to execute the submission process accordingly.
If you have any questions or need help submitting, please feel free to contact QB Business Solutions at 561-323-4168.
Until next time!
Thomas Hall, Vice President of Sales and Operations at QB Business Solutions
