extended warranties

[gordyw]

Hi,
Has anyone had problems with extended warranty companies not wanting to pay the full list price for parts?What I mean is that I don't think they are getting updated price books but I can't be sure.I've had my service manager call but to no avail.Any suggestions?

[Doug]

Yeah, some of them are real stinkers about parts pricing....and everything else.

We accept any extended warranty which will pay by credit card (most do) and have picked up quite a bit of business by doing so. Many dealers won't work with them at all and the job ends up going to other shops in town who WILL give them the price they are looking for. I'd rather keep the job.

Our philosophy is "a little bit of something is better than a whole lot of nothing" and, if their pricing requests are within reason, we'll comply. I won't say that I like it, but I do it.

Often times they'll want to send parts from their own network of providers. We usually try to meet the price using factory parts....I'd rather move OUR inventory than somebody else's ! Plus, from a customer relations standpoint, using factory parts is much better if there is a warranty issue down the road.

Doug

[joe r]

We will give these companies suggested list. If they try to send us a part from their own supplier, we generally won't do the job.
Why should our techs be working for labour only? If they are not selling the associated ratio of parts per labour the job should be sent elsewhere.
About a year ago we were shipped three used transmissions before we received one that was acceptable. We were paid the labour three times but our tranny tech didn't sell any parts in a day and a half.
Plus someone at the dealership had to handle transmissions six times for no profit.


------------------

[Doug]

I guess we'll have to agree to disagree !

Labor-to-parts ratios and other measurements have their place but I've always felt it was important to add gross profit to the bottom line rather than be a slave to percentages and ratios.

Let's say you had a job which, ideally, the dealership would make $500 gross profit on. An extended warranty company wanted to negotiate pricing to reduce the dealership profit to $400. You refuse the job and it goes to another shop down the road.

Please explain to me how allowing this to happen would benefit your dealership ! I know my own dealer would want to know why the hell I let $400 profit walk out the door !

Of course, if your shop is *so* busy that it can afford to turn away work because the perecentages or ratios are not "ideal" then....my hat is off to you !!

Cheers and regards,

Doug

[tjsmith]

You might think this sounds crazy, but I have noticed if I double list price or mark list up, I normally will get the warranty company to pay alot closer to what actual list really is, than if I quote them regular list pricing. This may not work all the time, but it has worked sometimes.Also, for me in the past, and on occasion, I have gottten LUCKY and got the price I quoted!(but that is rare!)

Plus there are somethings you could do if you wanted, like for instance use aftermarket parts, hell if they take it a Garage or chain like Firestone, they are going to use aftermarket parts. But I would only do for a warranty your franchise did NOT sell or on a car that you sells dept. did NOT sell. I say if the warranty co. want to cut corners then maybe I should do the same?

[Doug]

Here's an option that's works for us quite often: just tell the customer "Here's the deal. The service contract company is allowing $XXX for this job using aftermarket parts. For just $YY more, we can use the factory part which has a warranty including labor if there's a problem." Many times they'll say "yes". If they say "no", just tell 'em that if a problem comes up the labor won't be covered. A little straight talk can go a long way.

Although labor is not included, many aftermarket parts (from NAPA, for instance) do carry s good warranty...sometimes longer than factory parts. And anyone who believes that ALL aftermarket parts are sub-stndard quality has their head in the sand. Many are quite high quality.

Hey, I like full mark-up and factory parts as much as anyone else...believe me ! But, when we all gather around and ask why "our share" of the auto repair business is going down the street....well... sometimes we don't have to look any furhter than our own stubborness or mindless adherence to tradtional practices for the answer ! Been there, done that.

Thanks for the good discussion, guys !

Doug

[rick]

we find that most want list pricing we have a pricing computor that raises some of these items above list the warranty co. are only looking at the major parts. if aftermarket parts are suggested by warranty co. we leave that decsion to the customer after we explain the warranty on replacement parts. a wonderful chose the dealership can make is to sell factory extented warranty, makes life somuch easier.

[warr_wiz]

I agree with Doug here... "Our philosophy is "a little bit of something is better than a whole lot of nothing" and, if their pricing requests are within reason, we'll comply. I won't say that I like it, but I do it." If I let $400 GP walk out the door, I'm sure it won't be long until I follow it right out that same door. Percentages, NADA guidelines, etc., are all nice. The bottom line is the bottom line. If I show good profit every month, then percentages are not the top priority, within reason. As long as the department is profitable, the percentages will generally be right in line. Enough said..back to work.