Warranty Parts and Labor Reimbursement

Starting in the mid 90’s, state laws started providing specific methodology for calculating the actual retail mark up percentages to be used for warranty parts reimbursement and labor rates to be used for warranty labor reimbursement. It has been just over 20 years since the new laws took effect. Over the years, many of the questions have been answered and various policies and procedures have been adopted by the manufacturers.

Today, most manufactures are responding to the requests for the increased reimbursement. In several cases, as long as the submissions are in the proper form, requests are being accepted. Several manufactures have very specific guidelines for submission. Ford, for example, will accept properly documented requests by individual dealers seeking reimbursement for parts used in warranty repairs, provided they follow the Ford procedures established as their submission requirements. These guidelines are available through Ford. Many manufacturers have specific worksheets or work papers that have to be filled out precisely for labor rates, or the submissions are rejected.

Some dealerships are still reluctant to submit a request. They fear an audit or other repercussions from their manufacturer. You should always have your warranty system and procedures in proper form. We have not yet seen increased audit action on dealerships that have applied. Dealerships are getting audited for reasons connected to warranty claims issues, mostly procedural process related.

As a side note, the completed sample is also an excellent training tool. If certain repair orders are marked up lower, investigate why your parts department is not getting the mark up they should be. Discounting and policy work for labor rates often comes as a surprise to the dealer. It is a great opportunity to see your parts and labor pricing in action.