Labor rates seem to be top of mind for most dealers as they embark down the Warranty Reimbursement path – due in large part to the fact that labor rates typically increase annually and therefore yield the most room for improvement year over year. But most state statutes also include provisions for parts rates to be submitted annually (or semiannually in some cases), and while some dealers assume that a parts submission won’t be worth the effort, that simply isn’t the case. Relying on that assumption could lead to dealers leaving a lot of money on the table.

Ok, So How Do We Maximize Our Parts Rate Submissions?

While it is true that it’s not as easy to increase parts rates annually, with targeted effort and strategy, a parts rates increase can yield some substantial results.  Using a qualified vendor to perform annual checkups is the most efficient way to maximize your rates submissions each year. Your vendor will review parts matrix pricing, review best practices to ensure your rates and maximized and discounts are in check. Depending on volume, even increasing the parts rate but a few percentage points can equate to substantial revenue. And if you’re legally entitled to it, for work that you’ve already done, why not?

It really boils down to the parts matrix and discounts. Many dealers are still selling parts at MSRP, and not using a custom parts matrix. The use of a custom-tailored matrix is essential in increasing parts markup. Along with a new parts matrix, discount amounts and discount procedures within the dealership should be reviewed each year. It is also advisable to limit the amount of discounts and place a cap, whether it’s a dollar amount or percentage.  A worthwhile vendor will also report spot checking and maintaining margins as well. The vendor will then make recommendations for internal changes as a means to help increase your rate – failure to implement these changes can lead to stagnant or even a reduction to your parts rate in the future.

What’s At Stake?

There are hundreds of thousands of dollars at stake — even millions for large dealer groups – between parts and labor reimbursement. Warranty work comprises a significant portion of most franchised dealership service departments’ repair orders.

…

Read the full article at AutoSuccess.

Warranty Reimbursement Done Better