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Biggest No-Brainer in the H ISTO RY of the Automotive Industry!
Frank is a principal at O’Connor & Drew, P.C., a regional accounting firm that services approximately 300 automobile dealers.
He has been the Director of Internal Audit and Fraud Investigation at O’Connor and Drew, P.C. for the past 13 years and has serviced auto dealers for over 18 years.
Frank has successfully calculated, submitted, and obtained warranty rate increases for hundreds of dealerships in a variety of states across the country including Vermont, Massachusetts and New Hampshire.
First passed in the state of Florida in 2008
The Alliance of Auto Manufacturers filed two lawsuits: ◦ Connecticut – Dismissed by trial court in 2014 ◦ Florida – Alliance dropped suit
Approximately 38 states have favorable laws on the books
Approximately 24 state laws include the 100 repair order analysis
Signed into law several years ago
Strengthened language on warranty parts reimbursement law
Explicitly defines method of calculation (100 RO analysis)
Allows for two submissions per calendar year
Hundreds of dealers have been approved in various states including Vermont
1. Minimal bottom line impact
2. Manufacturer will seek retribution
3. MSRP is retail
4. Manufacturers refuse approval
5. Waiting is not costly
Results in thousands of additional gross per month
Will vary based on the following: ◦ Volume of warranty parts sales ◦ Approved retail rate
Maximizing rate by data analytics ◦ Avoid landmines
Time-sensitive nature of submission
A quick look inside the numbers:
Sales Gross Profit Cost Potential Additional Income
Warranty Sales
Currently @ 40% Mark-up
Warranty Cost
Dealers @ 60% Mark-up
Dealers @ 75% Mark-up
Dealers @ 90% Mark-up
$250,000 $71,429 $178,571
$35,714 $62,500 $89,285
$400,000 $114,286 $285,714
$57,142 $100,000 $142,857
$500,000 $142,857 $357,143
$71,429 $125,000 $178,571
$800,000 $228,571 $571,429
$114,286 $200,000 $285,715
Tactics of Manufacturers for Submission:
Inclusion of Non-Warranty Parts in Analysis ◦ BMW – Tires ◦ Ford – Body Shop Repairs ◦ Ford and Chrysler – Brakes and Wipers ◦ Chrysler - Maintenance Services
Requiring customer RO copy: ◦ Hyundai
No evidence of direct retribution
Tactics of Manufacturers after Approval:
Recoupment – Nissan & Infiniti
Failure to pay on all parts: ◦ BMW, Hyundai, Mazda, and Nissan
GM – Option A versus Option C
Manufacturers have found ways to manipulate the law to their benefit
Language the law should include: ◦ 100 RO and 60 day analysis ◦ Specify parts and repairs to be excluded: Maintenance services Tires Government fleet and body shop repairs Accessories ◦ Avoid the “reasonableness clause” ◦ Include a non-recoupment clause
Don’t be deceived: Manufacturer’s Suggested Retail Price is still a rate controlled by the Manufacturer
MSRP is commonly thought of as 67% Mark-Up, however ◦ Nissan: 49% - 55% ◦ Toyota: 56% - 59% ◦ Audi: 56% - 60% ◦ Volkswagen: 56% - 60% ◦ Mercedes*: 55% - 60%
*Pays MSRP on newer models
Approved Manufacturers
Manufacturers without Approvals
When you fail to submit for a warranty reimbursement you are losing:
Obtain downloaded report (in Excel) from your operating system containing required pertinent information
Run advanced data analytical software to determine your ideal range of repair orders which will provide the highest mark-up rate
Analyze and select the qualified parts
Trace the selection to the actual repair orders to account for discounts, non-factory parts, aftermarket warranties, goodwill adjustments, etc.
Calculate the mark-up percentage for the selected sample
Prepare package for submission to the factory
The Vermont law permits a dealer to submit for a parts rate increase twice per calendar year
Very few dealers take advantage of this stipulation
Beware of the “Reasonableness Clause”
fobrien@ocd.com
O’Connor & Drew, P.C. 25 Braintree Hill Office Park
Suite 102 Braintree, MA 02184
(617) 471-1120
Today’s slides will also be available for download at: http://www.ocd.com/vada-presentation/
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