Issue Date: Warranty Administrator for Dealers Feb 1, 2010, Posted On: 2/5/2010
Six ways dealerships try to control warranty costs Franchised car dealers are caught between the proverbial rock and a hard place when it comes to warranty claims. On the one hand, dealers need to control warranty claims, but on the other hand, the factory's warranty expenses are the dealer's service revenue. Dealers try to control warranty costs through a variety of methods. Here are the most popular ones and their consequences.
Consider this typical scenario - you have a warranty expense problem. Either your factory representative has been harassing you or your factory warranty report is showing areas of concern. Maybe you have even been warned that an audit is imminent.
The service manager pleads with the factory representative for some direction. After all, if dealership employees are doing something wrong, you would like to fix it without going through an audit. After some "helpful" suggestions lead to no improvements, the rep may say something like, "Well, I've had this problem with other dealers and they were able to fix their problems and their expense went down. Just watch everything on your claims and make it happen!"
Getting back to our sample situation, the dealership has some warranty issue - nearly everyone has at least one repair group that is showing an unusual trend - which the rep wants to somehow make magically disappear. What can you do to "just make it happen" to go away? Here is the progression of what you can do to correct a dealership's warranty expense - both the good and the bad controls.
Do nothing. Things happen. Trends in the shop and repairs come and go. There are shops that will see a spike in a certain set of repairs for a season. We may never know if it was something that was amiss in the dealership or simply a strange string of repairs. This will not be sufficient for every dealership, but there is a fair number with "just slightly out-of-line" conditions that might just see a reduction of their warranty costs with no action. However, anything that lasts more than three months is not a temporary trend.
Watch the technicians on specific repairs. This is often the first band-aid approach to claims management. If you are "high" in a specific repair group, require the technicians to obtain approval before completing repairs in that group. Sounds good in theory, but the practice is a little tougher. The main problem is that techs are very savvy and can quickly conform their written repair descriptions to what you are looking for.
Control the service advisors on specific repairs. Techs are easier to control if they don't get a questionable claim to begin with. The bigger bang for your buck is always to pay attention to what the service advisors are writing up. Once a line is written on a repair order, all the momentum shifts to completing the repair and/or warranty claim. That expectation is both from the technician (an expectation to repair something) and the vehicle owner (an expectation that something will be repaired.)
Actively manage your warranty submission trends. Many factory warranty reports allow stores to narrow down how far they are over standard. This has led to more than a fair share of managers who are literally counting their claims until the end of the month. Holding claims hoping to have a "slow month to put them through rarely works as a long-term solution. Claims have to paid within a limited time frame. Holding claims has a negative impact on dealership cash flow - it usually is not worth the effort.
Reduce the customer count. This never made sense to us. Warranty work is legitimate service and parts business, 40% or more in some dealerships. Why would a dealer consciously turn away warranty customers, regardless of where they bought the vehicle? Yet with dealership closures and orphan customers coming in, some dealers apparently still find it tempting to blame their problems on these warranty refugees. While it might not be as crude as the old "you-didn't-buy-it-here-now-get-out" treatment, it doesn't take much to tell a customer that you are booked solid for a few weeks. Since claim trends are usually divided by the number of vehicles, this is another solution that usually does not work well.
Trash the claim(s). While it is rarely said out loud, the clear implication from some service managers is that if all else fails reduce the amount you are claiming. If you have done all you can, that is the only solution left. Whether the rep meant for this to happen or not, this manual manipulation of the warranty measurement process hurts everyone. The problem with eliminating claims is that too often you are throwing out the baby with the bath water. Plus you are now seriously underwriting the factory's warranty obligation. If the claim is legitimate, you should never be afraid of an audit.
Out of these six methods, what is the answer for your shop? Sometimes it is a combination of many things. More often than not it comes down to the talent level you have at each position. Some people are just better at controlling and grasping the basics of warranty management; others need a little more direction.
