-
Is it time for a new warranty model?
We are in a small town in northern Michigan, smaller than many. Customer retention is not a choice and part of our strategy is a strong warranty offering to our customers. Essentially, if it should not have happened, we take care of it with no charge to the customer. Our stated is 24/24 but we regularly go well beyond that. We are also not ones to hide behind our knowledge of the products. We don’t blame parts if it was tech or service adviser error. Last week we ate a CVT transmission, that we had done a service to 40k ago, used the wrong fluid and now it has a problem at 140k on the trans. We could have hidden it, blamed the mileage, but it’s not how we go to market and it’s not the culture i want in my shop. My manager made that decision himself, and it was exactly how i want my folks to think.
That said, if i am responsible I will take responsibility and if i am not, then i expect my supplier/manufacturer to take care of lost profits if it is obviously a parts issue with a failure outside my control. They usually do, to a point.
My problem is that I have come to realize that my profit model is not based on warranty repairs and my profits suffer substantially when I have to tie up a valuable technician, service bay and equipment on a service that “might” net me 1/2 the gross profit dollars per hour, if i get all that I ask for in a warranty claim.
The problem is time. I have none to give away(especially during our busiest week ytd, and this is exactly when this happened).
I have attached an explanation of the warranty claim I submitted recently. It was a problem with a hard part that had no moving parts and no electronics. It was a harmonic balancer that caused the car to quit after 10 or so minutes of running. Would only try to restart (like very bad timing), until it cooled down and then would start like nothing ever happened and then the whole process started again. This issue did not occur until two weeks after initial installation. Nothing fancy here, typical design with two tone rings for the non adjustable crank sensor.
This failure, along with many I have covered in the past, has caused me to realize that it is time for a new warranty model in my store. We have “sore spots” that seem to cause much of our warranty issues. They are either manufacturer driven, part type driven and/or automotive system driven. In most cases, these failures are related to aftermarket parts.
We are not the OE only guys, we are not specialists. We are general automotive repair in a small rural community. We try to use parts with a history of acceptable lifespan, and we frequently us components that are not OE or OE equivalent. We don’t use bottom of the barrel anything, we can’t afford to with our warranty. So we walk the line and hope for the best. Unfortunately, the line used to be fairly distinguishable and if you stayed with quality manufacturers, you were usually OK with aftermarket parts. Less and less so all the time, it appears.
What I have come to notice all to often, is that during the warranty process we are upgrading the parts we use to OE or OE equivalent, since we do not want a repeat failure. We do that at our cost, unless we absolutely know we had the conversation with the consumer about the parts quality and they have chosen that part to save money, and we have declined the quality part in writing on the repair order. We did not do that on the balancer in question. No moving parts, no electronics, no failures, right?
If we don’t have the conversation with the consumer, I believe it is fair to say that they assume(and rightfully so) we are using the best quality parts available on the initial installation.
It appears we can not assume anything anymore. We will be moving to a system where we more often have the conversation with the customer and we do decline oe quality parts on the work order. More importantly, we will be advising the customer that if any parts failure occurs outside of our control(where less than oe quality parts are chosen), we will be upgrading the parts to oe quality at additional expense to them. At least we should get paid for the upgrade.
Without the conversation and documentation at the initial install, I believe it causes more harm then good to try and up charge them during a warranty issue.
The truly valuable part (IMO) of the attached description for the balancer issue is not the technical part at the beginning, but the educational part for our suppliers and manufacturers towards the end. We have to get them to understand this. We need to understand it first, as an industry.
Thoughts?
-
5 Replies
-
What I heard was stated is 24/24 but we go beyond that. So if that’s the case then why don’t you move your stated to lifetime parts/48000 miles. I tell most of my clients to go to a minimum of 36/36000 whichever benefits the customer most. So if it’s 38 months but 30000 guess what, we are going to take care of it.
The other thing is you have to make sure your parts profit margin is high enough to support the occasional warranty issues. Minimum of 55% at the end of the month on your profit or loss statement. Track and measure your comebacks and see if they are training issues or truly parts related.
Vendor relationships, you have to have someone that has your back. They are out there don’t let one company lock you in and take advantage of you. Unless it’s that company that does whatever it takes to keep your business.
The other way to go is to have a warranty program that is almost like a good, better, best. The good parts have a 24/24 warranty whereas the best is a lifetime warranty. Inform the customer of what their options are and then stick with what you decide to do in your shop. You are the professionals after all. Invest in some service advisor training so that you know what they are telling your clients and what they are selling/offering them.
Just curious, what is your current parts margin??
-
Randy, I am seeing a different approach.
When a brand or quality level becomes an issue, future parts for this type of repair must go up a notch – different brand / quality level (maybe OE, maybe not – situations vary). Customer does not get the option – option decisions are often forgotten when the whole deal goes south.
That generally means higher cost, so the challenge for the shop is to become very, very good at communicating to the customer why the cost is higher. I believe that with the right approach most good customers will understand and go with it. A few won’t but in the big picture it usually works out.
Similarly for related parts. For many years we commonly transferred oxygen sensors when replacing exhaust parts. Recent policy changes at our shop makes it mandatory to replace any sensors that have to be removed if they appear to be the same age as the exhaust part.
We are pretty aggressive in our exhaust pricing, so the price is still pretty decent with the sensors. We simply had enough of being the bad guy when the CE light came on shortly after an exhaust repair one too many times for my tolerance level. 🙂
Consumers increasingly expect perfection. We are going to have to figure out how to best deal with that new reality.
-
first draft of new warranty policy attached
-
Randy I feel your pain. We take care of our customers as well often going beyond the warranty period. That is customer service the big box stores cannot and will not offer. Like you I treat customers the way I want to be treated and my busy shop shows it works. I agree with using quality parts its the first step in preventing comebacks. I always use parts I feel comfortable giving a warranty. We have had problems with certain brands of parts and will not use them for any reason. We also do not install any customer supplied parts. I do turn down work even with an empty bay. I am not affiliated with any parts store as none of them stock all the brands I want so they will only support me with a 90 day warranty on parts. I believe they need to go back to a 1 year warranty but they are trying to stop warranty payouts unless you are using them as your number 1. So that leaves us paying for parts and labor for any warranty over 90 days! I can pay one of the parts houses to have 24/24 warranty but they only cover their parts and labor paperwork is burdensome and only pays a small percentage.
Is their any warranty that will cover all parts and labor?
Nope so we will continue to be our own insurance policy.
What works for us is we charge enough to put money away each month and use that to draw on when we do a warranty job so your shop doesn’t feel the hit.
I like the new terms but OE’s don’t provide parts or labor warranties.
We sometimes even have a hard time returning dealer parts.
My main supplier called me the other day and said any part that has to be ordered is non returnable. Better get paid upfront for those parts.
The dealer parts are not always better.Jeffrey L. Doughman
-
I think that you guys are getting a little over-worked up about this. I think you are also more worked up than your customers are about this too. Here are my thoughts:
Warranty is an expense. Just like any expense, it needs to be tracked and managed. Just watch your warranty costs as a line item on your P&L. You will never get rid of it. You can only work to minimize it. It sounds like you already deliver a good warranty and great customer service. Keep doing that, apologize when something goes wrong, and take care of your customers. Train your people to sell and install good quality parts. Have a good relationship with your supplier, so that if something really bad happens, they can help. But dont major in the minor things. It will do you no good to focus on making every car perfect with OEM parts. OEM parts have failures too. And more every day as carmakers maximize profits and cut corners. Just run your business like a business and focus on taking care of people and making a profit.
Log in to reply.