Warranty Reimbursement Concentration for Fourth Quarter 2020

As many are aware, California was able to pass legislation last fall that allowed dealers to request warranty reimbursement at retail value, which created hundreds of thousands of dollars in added gross profit for California dealers. Many dealers positioned themselves to submit for these increases at the beginning of 2020 and have been realizing the benefits of those increases ever since. 

It is important to know that the statute allows for these increase requests every calendar year; therefore, January 2021 will be the time to submit again for even higher reimbursement rates.[1] It is important to note that other states within the U.S. have similar “calendar” year statutes as well. 

In an effort to improve your dealership’s next requests for increase, it is best practice to evaluate your current reimbursement rates, pricing matrices and discounting practices. Dialing in these items during the fourth quarter will provide the strongest repair order data set for any upcoming submissions for 2021. DHG’s Digital Solutions is prepared to assist in the evaluation of your current reimbursement environment and help in implementing pricing matrices as well as performing the upcoming submissions in 2021. For more information, reach out to us at dealerships@dhg.com.

Reference

[1] The legislation California AB 179 3065.2 states: “(a) A franchisee seeking to establish or modify its retail labor rate, retail parts rate, or both, to determine a reasonable warranty reimbursement schedule shall, no more frequently than once per calendar year, complete the following requirements….”

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