SCOOP: New York sides with dealers over warranty reimbursements

Author

Colin Velez
September 06, 2024

New York Gov. Kathy Hochul just signed a new bill into law requiring automakers to cover all costs associated with warranty repair, plugging a major loophole causing headaches for dealers and consumers.

Driving the news: Bill A4066B, signed by New York Governor Kathy Hochul earlier this week, changes how manufacturers reimburse dealers in the state for warranty and recall work.

  • Previously, retailers were reimbursed for warranty repairs using pre-determined time allowances set by automakers.

  • This meant that service teams who took longer than the allowed time were left unpaid by the manufacturer for their work.

  • Now, automakers must reimburse dealers based on retail labor time guides for non-warranty work. This means service teams are more likely to be paid for the actual time spent on repairs.

"The biggest thing is the flat rate time guides from the manufacturer for warranty are generally half or a little bit less than half of what they would be in the retail market…So that bit of reduction of flat rate pay has always been a reduction in income for the dealership and also a reduction in income for our technicians," said Dave Rodgers, Fixed Ops Director at Piazza Auto Group, in an interview with CDG News.

Zooming in: The bill, which is already in effect, contains other interesting stipulations governing dealer reimbursements.

  • Manufacturers must now pay for warranty or recall-related diagnostics.

  • Automakers are no longer allowed to deny under-warranty claims when they run out of replacement components.

Why this matters: Rogers believes the bill could help boost technician employment at franchised dealerships, solving an ongoing shortage of skilled labor.

"There’s a lot of times when technicians come out of trade schools…one of the things that the instructors there will steer them away from is dealerships a lot of times with the warranty situation,” he said. Why deal with getting paid for 50% of the flat rate time when you can go to the aftermarket and make 100%? …I think that they can now let the techs know they'll get paid full retail on warranty as well as their internal and their customer pay work."

  • Since manufacturers are covering more hours, Rodgers adds that technicians are likely to benefit financially from the bill.

“So if you have a shop that's turning 1,000 hours warranty and now all of a sudden it turns into [1,500] or 1800, that's a big pickup where he got $30 an hour. That's a huge gain for them,” he explained.

  • Dealers can also leverage this opportunity to re-capture market share.

"I think it's going to make the dealerships a little more competitive and steal some of the thunder from the aftermarkets where they use it as a weapon against us," he added.

Bottom line: Warranty and recall work is a hotly contested issue in the car industry, with state laws often exploited at the expense of the consumer. With dealers and technicians emerging victorious in New York, it will be interesting to see if other regions follow suit.

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