Digital Dealer - November 2017 - 25

By Joe Jankowski,
Managing Partner,
Armatus Dealer Uplift

Retail Warranty Reimbursement:
Leveling the Playing Field
The factory-dealer relationship is
anything but a level playing field,
and unfortunately the behaviors of
some manufacturers have
necessitated state laws to protect
dealers. These laws cover a myriad of
issues, but one that is critical to your
bottom line exists in 40 states, with
more on the way.
For years most dealers have
submitted for annual increases to
their warranty labor rate, but have
been stuck with an artificially low
parts mark-up stipulated in their
dealer agreements. This mark-up
is typically 40% over cost, although
some manufacturers will pay you list
or MSRP. By the way, don't be fooled
by the "list" claim you may hear;
you are not collecting 67%, which is
anecdotally thrown around by your
factory rep, or by your managers
- you are most likely being paid a
mark-up in the low to mid 50s.
Based on favorable state laws, you
are entitled to collect "retail" from
your manufacturer for parts used in
a warranty claim. No, retail is NOT
list price or MSRP; in most cases it is
clearly defined in the law. Basically,
retail is what your customers pay you
for a warranty-like repair. In a store
with typical pricing and discounting
practices, the mark-up normally
falls in the 75% to 85% range. For
dealers utilizing a list pricing model,
you should expect something in the
60% range. So even in a conservative
pricing environment, a dealer should
expect to improve his warranty gross
profit by 50%; however, something
on the order of doubling the gross
is very realistic. This is a one-time
process, and does not need to be
repeated, unless you materially
change your parts pricing strategy.
This is not to say that the
manufacturer will simply lie down

and grant you a 100% improvement
in your gross. First of all, the laws
mandate a submission, and detail
what is required of the dealer, but
that's just the beginning.
Several things need to be
considered in order to ensure the
best possible result:
Thorough understanding
of the law - Rest assured certain
manufacturers will read the statute
differently from you. Sometimes
the positions they take are rather
shocking, including those that will
simply refuse to follow the law, or
others that will attempt to include
non-warranty-like repairs in a
deliberate attempt to lower your
mark-up.
Following the manufacturer's
protocol - It's critical to
understand the factory's guidelines
for the inclusion or exclusion of
various aspects of the submission;
each of them have different rules,
and they typically won't disclose all
of them to you. If you can determine
what they are, you should follow
them within reason; do not be
combative, or send up "legal signals"
out of the gate.
Optimization - Absolutely key
to this process is achieving the best
possible result, and that can only be
done through the proper selection
of your submission sample - this is
something that should not be left
to chance or inferior technologies.
Missing your mark-up by even a
few points can cost you thousands
every year, perpetually. Do yourself
a favor, and explore this aspect with
some attention to detail - it will be
worth it to you in the long run.
Warranty Auditors - Beyond
technology, however, is the need
for a thorough audit process. Your
declaration will be scrutinized by

factory auditors that know every
nook and cranny of countering
retail warranty submissions, and
you should have someone familiar
with their techniques, in order to
preempt or refute their sometimesquestionable positions. Here again,
it is better to get along with these
folks, and in many cases, this is not a
problem; however, without naming
any specific manufacturers, some are
extremely difficult.
Factory Responses - In
many cases your approval will not
be smooth, and the manufacturer
may rebut your calculations, or in
some instances, summarily reject
your submission. Responding in
the proper manner is critically
important, since it could be the
difference between achieving a
substantial increase in your warranty
parts gross, or obtaining nothing
at all. There are many dealers that
have re-submitted two, three or four
times over the course of a year or
two, costing themselves multiple six
figures in lost profit.
The bottom line is that you have
an extraordinary opportunity to
receive a fair reimbursement for
the parts utilized in the warranty
work you perform. If this process
is approached in a judicious and
professional manner, you can quite
possibly double your warranty parts
gross profit. There are many pitfalls
for the uninformed, but tremendous
upside for those that perform the
submission process properly.
JOE JANKOWSKI is Managing Partner
with Armatus Dealer Uplift, which has
performed over 3,000 successful retail
warranty parts submissions to 24
manufacturers in 40 states. For more
information, contact Armatus at 888-2594471 or EMAIL: info@dealeruplift.com.

D I G I TA L D E A L E R . C O M

NOVEMBER 2017

25
http://www.DIGITALDEALER.COM
Table of Contents for the Digital Edition of Digital Dealer - November 2017
