Profit in warranty repairs

[bunyarra]

Just pondering the economics of warranty repairs for dealers.

Is there a reasonable profit in a dealer taking on warranty work - especially where the car was not sold by them? I have no clue about the process or commitment they have to make to the OEM. Would be very interested to know.

[Krikkit]

As I understand it they complete the work and invoice the manufacturer for the complete cost. They may reduce the rates and costs slightly, but the labour rates will still make them money.

[ModernAndy]

As above, they charge the manufacturer a set rate as dictated by the manufacturer.

[My Evil Twin]

A friend of the family, (sadly gone biking in the sky now after an off at Jehonville)
was a mechanic for a Toyota dealer down Basingrad way..
He said to us that warr' jobs were also time allocated, I mean job X is stated to take Y hours to OEM will pay reduced rate A only for a max of YU hours.

Vik

[ralphrj]

Krikkit said:

As I understand it they complete the work and invoice the manufacturer for the complete cost. They may reduce the rates and costs slightly, but the labour rates will still make them money.

Usually the work is carried out after obtaining approval by the manufacturer. The garage will then invoice the manufacturer at a pre-set discounted rate.

Warranty work can be profitable for the garage as it brings in work for them that might otherwise have been idle time or would have to have been filled with discounted labour (cut price service deals).

However, large recalls can be a pain as the manufacturer will set a very tough labour time for the job and the scale of the recall can fill the workshop for weeks.

[Crafty_]

^ above post is correct. Warranty work can (IIRC) be as low as half retail rate, but its better than techs doing nothing.

[Superhoop]

Compared to retail work, it generates less profit, but still makes a dealer money in most instances, and warranty rates are normally something like 85-90% of retail recovery rate (which is not the same as the retail labour rate)

But, and it's a big one.... Very few manufacturers pay for diagnosis, only paying for the actual repair, and up to approx 1 hour in unscheduled time. Fine for common problems, easy to diagnose stuff, however, a long drawn out engine management problem can cost a dealer hours an hours in unpaid time.

So whilst it can generate profit, it can cost the dealers too - don't forget, if a technician spends 4 hours diagnosing a problem, not only is the dealer unlikely to get paid for all of those 4 hours, but that's also 4 hours of retail work that he can't do either