Dealer Insights - January/February 2013 - Running Your Warranty Program Effectively

January 01, 2013

Do you worry that your store may be missing out on thousands of dollars in warranty claims that should have been filed but never were? Do you get sweaty palms over the warranty audit that is scheduled with your manufacturer and what it might uncover? Wait a minute. If you’re assessing your warranty program regularly — and fixing whatever is broken — you shouldn’t have these concerns. Here are a few pointers about overseeing your warranty program and withstanding a warranty audit should one take place.

Give warranties priority 

No one likes dealing with warranty red tape. But pushing this administrative task to the lowest level of the priority totem pole might decrease the number of repairs that qualify as warrantable — and increase your chances of being audited. Assign an experienced technical individual to handle warranty claims from start to finish. Train this warranty administrator on how to effectively process claims using your manufacturer’s online warranty systems. These systems often are DOS-based and require the use of dozens of parts and labor codes. Your warranty administrator also should be familiar with all current technician service bulletins (TSBs), because they recommend service solutions for common customer complaints and address whether the fixes are warrantable. TSBs are available through each manufacturer’s service portal.

Train your techs, too 

Service technicians also require training in warranty protocol, including how to write a comprehensive customer concern description and how to split time between warranty and other repair work. You’re more likely to be audited if you submit more claims per vehicle serviced — or if your technicians spend more time completing the work — than other dealers do. Examples of paperwork blunders in protocol include missing customer signatures, mileage readings that end in “000” and ambiguous customer concern descriptions. Verbiage that implies wear and tear, such as “bent, cut, dented or torn,” also raises a red flag.

Be proactive — and pretest  

Proactive owners don’t wait for the dreaded “We’re coming . . .” letter. They mock-audit themselves each month by reviewing a random sample of warranty repair orders. Evaluate each claim as if you’re an outside auditor. Also check the repair backlog to ensure timely completion of warranty claims. Consider asking your manufacturer’s representative for an honest assessment of your warranty claims processing. If the rep spends hours each visit helping the warranty administrator code simple claims, pick a new administrator. Your rep is there to evaluate more complex claims that require the manufacturer’s approval. Routine fixes often can be self-authorized online with proper coding.

Ready your shop 

Organized dealers with dedicated warranty administrators have less to worry about when factory auditors arrive. They anticipate auditor requests, have paperwork and faulty parts ready to go, and set ground rules when factory personnel arrive. Keep in mind that most manufacturers require dealers to keep records for a minimum of 12 to 24 months. Auditors will tour the shop to look for obvious concerns — packaging from aftermarket parts in your trash, for example — and then sift through a sample of warranty claims, looking at the three C’s: complaint, cause and correction. In addition to incomplete descriptions and administrative omissions, common reasons for expensive chargebacks include nonwarrantable add-on repairs, repeat claims and improper handling of battery claims.

Follow up with your manufacturer 

A few weeks after your audit is over, your manufacturer’s rep will meet with you to discuss any proposed chargebacks and ways to improve your claims processing. Don’t be afraid to appeal unfair warranty audit findings, however. If there are chargebacks, consider them a wake-up call and learn from your mistakes. Sloppy claims processing hurts both you and the manufacturer. Prove to yourself and your manufacturer that you can be highly efficient in this area.

Assess your program 

Most manufacturers conduct warranty audits regularly, according to industry reports. Make sure your “i’s” are dotted and your “t’s” are crossed by assessing your dealership’s program now.

Dealer Insights - January/February 2013 Issue 

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