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Thread: How are car dealerships paid for warranty work?

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    How are car dealerships paid for warranty work?

    obviously, they dont do the repairs for free

    but i cant imagine they get paid by the manufacturer at their standard parts and labor rates, otherwise so many dealers wouldnt be stingy on getting warranty issues acknowledged

    so does the manufacturer pay them at some negotiated rate that varies from dealership to dealership? or is it at some calculated break-even point to the dealership? or do they pay them normal rates, but with some auditing process so that the dealerships can't rip off the manufacturers (like they do to their customers) ??

    curious

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    It's paid on a flat rate, warranty work pays the dealer for a pre-determined rate based on tenth of hour increments. So if they determined it should take you 1.25 hours to fix something then that's it no matter how long it takes. That's also how all other rates go, straight commission for the tech. Job pays 4.0 hours and you finish it in 2 oh yeah, pays 4.0 and takes you 8.0, yeah.

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    so basically , its as if a customer brings in a car for service

    then basically the service department should welcome warranty work with open arms then?

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    Quote Originally Posted by 5280 View Post
    so basically , its as if a customer brings in a car for service

    then basically the service department should welcome warranty work with open arms then?

    The parts and service department are the biggest profit makers in a dealership

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    Quote Originally Posted by Sparky View Post
    It's paid on a flat rate, warranty work pays the dealer for a pre-determined rate based on tenth of hour increments. So if they determined it should take you 1.25 hours to fix something then that's it no matter how long it takes. That's also how all other rates go, straight commission for the tech. Job pays 4.0 hours and you finish it in 2 oh yeah, pays 4.0 and takes you 8.0, yeah.
    Yeah, every job has a book time. So say replacing a cylinder head pays 6 hours out of warranty, it might only pay 3 under warranty. Dealerships don't pay for it though, warranty time is set and paid for by the car manufacturer (at least when I worked at a Ford dealer it was).

  6. #6
    Quote Originally Posted by 5280 View Post
    so basically , its as if a customer brings in a car for service

    then basically the service department should welcome warranty work with open arms then?
    This is the logical assumption. It is wrong though because the flat rate book times for particular jobs are not the same for customer pay work as they are for warranty work (like RottenBananas said). Also, there is considerable more paper work, auditing controls, and hoops to jump through for the dealer in order to get paid from the manufacturer. They have to store the old parts too.

    Quote Originally Posted by juz View Post
    The parts and service department are the biggest profit makers in a dealership
    They make a good margin on customer pay work, not so much on warranty work. Also, customers are usually asked to rate the warranty work via a follow-up from the manufacturer. This determines part of the CSI index (Customer Satisfaction Index). This number is used to favor dealers later on with respect to all kinds of treatment from the manufacturers (like maybe who gets hot selling cars and trucks)......The used car department from a dealership is where the easy money is made. They don't pay very much for trade-ins and they sell them for a retail plus price with a near usurious in-house financing.

    Anybody else wish to add input??
    Last edited by LimaDelta6; 12-28-2011 at 07:42 AM.

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    Quote Originally Posted by LimaDelta6 View Post


    They make a good margin on customer pay work, not so much on warranty work. Also, customers are usually asked to rate the warranty work via a follow-up from the manufacturer. This determines part of the CSI index (Customer Satisfaction Index). This number is used to favor dealers later on with respect to all kinds of treatment from the manufacturers (like maybe who gets hot selling cars and trucks)......The used car department from a dealership is where the easy money is made. They don't pay very much for trade-ins and they sell them for a retail plus price with a near usurious in-house financing.

    Anybody else wish to add input??

    I spent close to a decade in that business, I'm well aware of how it works

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    Quote Originally Posted by 5280 View Post
    so basically , its as if a customer brings in a car for service

    then basically the service department should welcome warranty work with open arms then?
    Its unlikely that a dealership would ever not welcome warranty work. They might upsell you on customer paid work. And they also might get your future business with service/parts/sales. Its keep their overall service utilization rate up. I suppose if they had a line of higher revenue customer paid work already in line, they may not want the warranty work on that day. But why wouldn't they want it tomorrow?

    Now if you're talking about non-manufacturer warranties, I can understand why that might be a pain for the dealership.

    The clerks that manage the warranty submissions are an important part of the service dept. When they book the work, they need to understand what can and cannot be billed to the manufacturer. It's not as simple as saying Replace XXXX $500. One repair could have 10 billable tasks. When I used to work in this industry, many dealerships would put idiots at this role, and they never understood how much money they might be losing.

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