Page 10 - Summer 2025

Continued from page 32.

Be Proactive - Don’t Wait for a Crisis
• Schedule Regular Audits: Don’t wait until margins are squeezed to review
your warranty submissions. Build quarterly or semi-annual audit cycles into your
calendar.
• Keep Processes in Check: Establish a recurring QC workflow to validate
documentation codes, claim completeness, and adherence to OEM guidelines.
10 • Align Rates with the Market: Periodically benchmark your average customer-

pay labor rates and parts markups against regional peers to ensure your OEM-
negotiated rates reflect true market levels.
• Monitor Regulatory Changes: State statutes governing rate-increase windows and
submission rules can shift. Assign a team member to track legal updates so you
never miss an eligibility window or newly imposed requirements.

Best Practices for Submission and Rate Optimization

1. Don’t Accept OEM Rate Letters at Face Value
o Annual CPI-based rate increases from OEMs are often set below true
retail inflation.
o Action: Compare your actual average customer-pay labor rate (from internal
repair-order data) to the proposed OEM rate before signing any agreement.
2. Perform a Rigorous Warranty Rate Analysis
o What It Entails: Reviewing thousands of repair-order line items to calculate
your true average labor rate and parts markup.
o Why It Pays: Identifies the gap between factory allowances and your
dealership’s retail pricing, revealing tens of thousands of dollars in potential
upside.
o Tip: If in-house resources are limited, consider partnering with a specialized
audit provider to automate data extraction and analysis.
3. Track Submission Windows Carefully
o Most state statutes permit rate-increase requests only within defined
annual windows.
o Best Practice: Maintain a shared calendar of all state deadlines, and assign a
dedicated coordinator to file immediately when you become eligible.

Key Analytical Audits to Unlock Additional Margin
• Retail Rate Audit: Confirms that every RO line reflects true customer-pay rates.
• Documentation Quality Review: Ensures coding accuracy so that claim
submissions aren’t rejected for simple errors.
• Program Impact Evaluation: Validates that OEM “special offers” (e.g., discounted
parts programs) don’t inadvertently reduce your reimbursable base.

Case in Point
A mid-sized dealer group that completed these audits saw a 15% lift in labor reimbursement and
a 16% gain in parts recovery—an 18% boost in total warranty gross profit. Yet the same review

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