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Fun and Games with Extended Warranty Companies
The final chapter of the last adventure here was a 90 minute phone call – mostly on hold – 4 days after we sent them all the stuff they requested. The 5th credit card number they gave us was not declined. Yippee! Ruined any profit that might have occurred on a $500 RO. Most of these companies are some kind of borderline legal scam. I’m trying to come up with a better system. What’s your preferred approach?
Just say no?
Let customer collect?
Add a fee?
Higher pricing?
Something else? -
14 Replies
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Hi Tom,
Not much to add here – you seem to know all the options you have with these companies. I am fortunate that I only see one a month or so of these “fly by night” companies. I usually only deal with two service contract companies and these are the best I have ever dealt with (door rate payments/pay diag time/prompt payment) so I know that I am lucky.
What I do for anyone that comes in with a contract from a company we don’t normally due business with is tell them their car does not leave until I am paid in full. They either pay me and then I will reimburse them once I get the check, or wait for the company to pay. Creates some difficult discussions, but at least I have not been stiffed for payment since I started doing this a few years ago.
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I am currently working with this situation right now with an extended policy company! They are quarreling with me over an outside vendor charge for a reprogramming fee. We paid the vendor, they charged what they charged, which was fair, but yet this extended warranty company wants to tell me it’s too high! We didn’t even mark-up the fee when we billed it to them, even sent a copy of the invoice from our outside vendor with an explanation from the vendor for the charge and they are STILL arguing with me! I’m calling the customer today and having them pay me and letting them deal with the warranty company.
It’s not often we get these in but we do every now and then. We’ve decided to not deal with extended service plans or warranty companies any longer. Any customer that wants a claim filed through an extended warranty will have to do it themselves if they want us to make the repairs. Like you said, any profit you may have made of the job goes right out the window when you have to deal with these folks! It’s definitely not worth it!
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We only work with two of these things. One is an in house company that treat us well and another one we inherited from the previous owner of this company for the same reason. Most of these aftermarket warranties I’ve dealt with over the years should be prosecuted for fraud. We had a customer show up once with a “lifetime” warranty. We had to break the news that it was a three month/ three thousand mile warranty from a company named “Lifetime Warranty”. I have little to add to this conversation but thanks for the chance to vent.
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I only deal with two aftermarket warranty companies. I have built a good relationship with them over the years. I turn work away on most newer companies because of the headaches. They try to drive margins down and collecting payment can be a nightmare at the best of time. I have to be diplomatic with the vehicle owner when dealing with their situation so as not to lose a potential customer. One possible way to deal with these companies is to get authorization and payment before the job is started.
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One possible way to deal with these companies is to get authorization and payment before the job is started.
Absolutely! I also make the customer approve in writing any diagnostic/tear-down time in case a claim is denied.
Just thought of one last thing: make sure your staff knows how to talk to these companies and ASK for additional/diagnostic time when needed. Unless they are truly scumbag companies, most will give .5 – 1.0 for basic diagnostic work in addition to labor guide time on the job.
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I have taken a different approach in the last few years that is really working well. I prepare a full estimate for the work needed, using parts that I would normally source, and a labor rate higher than normal (you know why). After calling the warranty company, I subtract what they will pay from my estimate, then tell the customer that the warranty company will pay X. They are responsible for the balance. Shall we proceed with the repair?
More often than not, they have a few words about their warranty being worth nothing. The bonus is that they know right away how much they’re on the hook for, and that we are not the bad guys.
I commonly state that very often, those warranties aren’t worth the paper they’re printed on, but at least they’re stepping up and paying $X, so that’s X not out of your pocket. I tell them the warranty company is only paying X because they want to use [insert substandard brand here], which we have found to be [insert substandard reason here].
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I appreciate all the input. I like the idea of setting the expectations to reality before we even start. While we always get authorization first we’ve never got paid up front. Some of you have actually been able to do that?
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Morning Tom:
Sorry to hear you’re being put through the wringer with the extended warranty company, it seems to be a recurring theme in our industry.
When I first started writing service in California, my service manager instructed us to always have an authorization for the entire job at our rates from the customer prior to any work or diagnosis being performed on the car.
As the owner of the car, and the person ultimately responsible for paying the bill, we had to have their permission to begin repairs. This took care of any unpleasant conversations up front as opposed to at the end of the visit when the repairs had already been performed, and kept us in good standing with the BAR, as the customer could not claim he/she hadn’t authorized the repairs.
Best of luck!
John Schindel
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Ollie’s 8 rules to having a 95% rate of success with warranty claims.
I have no idea why everyone has such problems with the warranty companies. We do 5-8 a week with an average ticket of $1,675 @ 65% GP.
Always call before and verify the total diagnosis time they will allow and the max labor rate. It’s BS that they pay a factory dealer more than an independent shop. DO NOT TELL THEM ANY FACTS ABOUT YOUR CLAIM. Just say you a checking coverage to see if the customer will pay the difference in rates. Tell them you do not accept parts. You might have to take a lower price and then charge the customer the difference. Make sure your highest labor rate is posted some place in your shop.
Exclusionary policies are the ones we go after. That means everything is covered but what one page says is excluded. These are the policies that mostly new car dealers sell when the car is still under factory warranty. Most aftermarket policies that used car dealers sell with cars over 50,000 miles are not too good.
Rule #1 If the car is to be inspected then ask the claims adjuster to send a note to the inspector to call 1 hour before so the car will be ready, and he will not have to wait for a lift or move 3 cars. A happy inspector is a good inspector. Most of the time you will have 4-5 guys you will get to know. They know if you are trying to scam them. All they care about is proving the issue as fast as possible to get to the next $50-$100 inspection.
Rule #2 Never call a claim in unless the customer gives you the full policy. We scan and OCR all 12-14 pages. Then use control F to find word. Saves a ton of time.
Rule# 3 A super unbelievable inspection must be done by your best tech. Find every issue. I don’t care how small. Use oil dye for any oil leaks.
Rule #4 Have exact very detailed diagnostic tests performed. Talk super techy. Say factory specs should be X to say what you found. Tell all values to the person on the phone. Just tell them P codes. Let them figure out what they mean. Talk super techy stuff like wave forms, timing #s, factory-scale. Say stuff like component X has power ground and signal. Don’t come off like you know everything, most likely they were a tech at one time. Use logic charts whenever possible.
Rule#5 Never ask for something that is not covered by the policy. If needed call a drier an accumulator. IE: Read.
Rule#6 Make sure the part is called the same thing when you look up the part #. IE: ooling fan motor. Lots of policies will say A/C condenser fans are not covered. Most German cars don’t have both.
Rule#7 Remember you are on a recorded line. The company will keep notes on your shop. Stay on their good side and they might pull cars from other shops and send them to you.
Rule # 8 Have every part # and labor time ready as per Mitchell or All Data ready before you call them. Do not argue with the claims adjuster until you finish. Say let’s work together, you know it takes 45 minutes to adapt a DSG transmission and it pays .2
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Good stuff Ollie! Thanks!
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In Michigan, and I assume in most states, the owner of the vehicle is the only person that can legally authorize any repairs. Warranty and Insurance companies can authorize payment, but they can not authorize repairs. We get the vehicle owners authorization to estimate what repairs are needed, then call their warranty company with an estimate to see what they may pay for, then report back to the vehicle owner what he/she will be on the hook for. The vehicle owner must then sign another authorization for the entire repair bill that they will be responsible for. The most important factor is to explain to the vehicle owner how most of these warranty companies operate before any work is started on their vehicle. Most of these companies pay by credit card over the phone or fax machine when the customer is picking up the vehicle. The vehicle does not leave until the balance is paid in full.
We advise our customers that the best warranty policies to buy are those offered by the “Manufacturer” of their vehicle, not the Dealers favorite “profit spiff” aftermarket company. Then we tell our customers they would be better off depositing their two to three thousand dollars in a separate bank in a separate account just for auto repairs. Nobody does it, but they should.
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Well there are both good and bad warranty companies. I have literally had a company call me up to provide an estimate for a repair, then want to haggle and nitpick every dime, BEFORE I even got the vehicle to the shop for an inspection. They even wanted to provide the part themselves. No thanks. Some will want you to use the cheapest parts, others will insist on OE I am 20 miles or more from the closest OEM dealer, gee thanks. You want me to use their part at their list price when I get squat for discount? and spend half my day fetching parts? NO THANKS. I am fully capable of selecting parts I trust. Others go quite smoothly, my only real gripe is the pittance they will reimburse for diagnosis. Still I welcome most extended warranty repairs, although my labor rate for them reflects what I think of their BS
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I had an aftermarket warranty company make me wait 3 weeks for a check and the check was short over $60. They found the part cheaper and said it was my responsibility to find the best price in the local market. They were from 800 miles away. Had to eat it, wasn’t worth the fight. I had a BMW needed a steering rack. They wanted to ship a used rack from a junk yard 1/2 way across the country. Customer didn’t want a used rack. They paid their cost for the used rack towards the claim and the customer had to pay the difference. I had a warranty refuse to pay anything because I didn’t call for approval before I diagnosed the car. The customer didn’t tell me about the warranty until after I diagnosed it. I was the only person available for the customer to vent on. I’m done with them.
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Ollie said it all.
I find them to be a pain in the A$$, due to the extra Administration time wasted as compared to a normal transaction, BUT we are trying to “help” our client save or at least use this “extended warranty that covers EVERYTHING” [or at least that’s the part they remember during the pitch] I always say we can help with the warranty coverage but it will take longer due to Authorization times, I will need a copy of your policy, not just the number, INSERT HERE Olies rule they are awesome. and I will be sending an authorization to you for the total amount – Less what the Warranty Company [WC] is covering example, WC covers the condenser and not the drier, seals, diag, and re charge, so total estimate is 1200 plus tax, the customer has to authorize this first, and then accept that the wc will cover 599.00 -100.00 so the Balance [except in Tom’s case] is 1200.00 -499.00 = $701.00 customer 499.00 WC , see simple right?? LOL, a lot of admin time that is in billable.
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