Warranty Reimbursement Rate and Reasonable Compensation

Apr 10, 2022 by

What is the difference between a warranty reimbursement rate and a reasonable compensation rate? To answer this question, we will look at customer-paid repair orders and 90 consecutive days of repair order receipts. In addition, we will examine the standard warranty reimbursement rate used by GM. In this article, we will discuss how GM calculates its Retail warranty reimbursement rate. Finally, we will examine how reasonable compensation is determined under par. Let’s move on to some common scenarios that trigger a warranty reimbursement rate claim.

Customer-paid repair orders

The rate at which warranty compensation is calculated for customer-paid repair orders is changing in January 2022. Until that date, warranty compensation is calculated by the average retail price of the same parts and labor as the repair labor time provided to the customer. This change applies to both recall and “stop-sale” repairs. Manufacturers will no longer pay for warranty labor time, but instead will base their reimbursement on the retail price.

To calculate the average repair cost per warranty order, dealers must consider the number of customer-paid repair orders for a particular make and model. The amount of each repair must be reasonable in relation to the cost of the parts. Using average repair costs for a hundred sequential nonwarranty service repair orders will provide an average markup that the dealer can use to calculate its reimbursement rate. If a repair is less than reasonable, the dealer is required to pay a lower markup.

90 consecutive days of customer-paid repair orders

Under the Fair Labor Standards Act (FLSA), a new motor vehicle dealer may declare its retail rates for labor and parts. To do so, the dealer must submit a minimum of 100 customer-paid repair orders for warranty-like repairs within 90 days of purchase. To calculate the retail labor rate, the dealer must divide its total labor sales by the number of customer-paid repair orders received. The dealer’s labor rate must not be less than the dealer’s wholesale rate.

In addition to submitting customer-paid repair orders, a new motor vehicle dealer can also submit a substantiated claim for reimbursement through a third party company. A private attorney or third-party company can assist in the process. However, the IADA does not endorse any third-party company or legal counsel. These companies can help you maximize your reimbursement. When submitting repair orders, you should be sure to retain a copy of the original repair order to prove your repair costs and submit it to the dealer.

GM’s standard warranty reimbursement rate

GM’s warranty program reimburses authorized dealers for repairs to vehicles under warranty. Claims can be submitted by dealers at any time through the centralized system, WINS. GM processes 48 million claims annually. In 2003, New York dealerships submitted 1.9 million Warranty Parts reimbursement claims, totaling $183 million. Approximately 90% of warranty claims were approved immediately after initial submission and were paid within ten days. Dealers can resubmit a claim if they are not satisfied with the initial decision. Dealers can also invoke the dispute resolution procedures in their franchise agreement with GM.

One complaint against GM was dismissed by a federal judge. Dealers in Wisconsin had been abusing state law to claim warranty reimbursement. They had been using third-party time guides, allowing them to claim more time than GM requires for repairs under warranty. This was a violation of GM’s standard reimbursement structure. Additionally, GM requires dealerships to markup parts at least 40 percent in order to be eligible for warranty reimbursement.

Reasonable compensation under par

Motor vehicle dealers must receive reasonable compensation for warranty work, diagnostic work, and repair services. Time allowances for warranty and diagnostic work must be adequate to complete the work. Reasonable compensation for warranty work is based primarily on prevailing wage rates. Warranty compensation for motor vehicle dealers cannot be less than the rates that retail customers are charged for similar services. If you are a motor vehicle dealer, you should consider using a time guide that is set by the manufacturer.

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