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Repair Order Parts AnalysisFlorida Motorcycle Dealers Association
Warranty Parts Mark-Up Update
Three Options for Request
• 50 Repair Order Sample
• Current Suggested Retail Price
• Average Gross Profit as a Percent of Cost
Repair Order Sample
• 50 customer pay repair orders within the previous 3 months
• 10 day request to the manufacturer
• Exclusions for fleet or group work, government work, or third party pay
• Exclusions for factory discounts, engines, transmissions, tires and maintenance parts
Why Look at Customer Pay Repair Orders?
• Find your parts mark-up percentage
• Analyze your repair order parts discounting
• Confirm your dollar$ per repair order
• Evaluate your parts mark-up matrix
• Compare customer pay vs.warranty parts mark-ups
Compare Customer Pay vs. Warranty Parts Mark-up
• Example - annual figures for warranty work
• Parts cost = $89,500
• Sales = $125,000
• Mark-up is 40 percent
• Gross profit = $35,500 (28.4 percent)
Compare Customer Pay vs. Warranty Mark-up Order
• Example - annual figures for customer pay
• Parts cost = $300,000
• Sales = $500,000
• Mark-up is 66.6 percent (list?)
• Gross profit = $200,000 (40 percent)
Is a Higher Warranty Mark-up Percentage Worthwhile
• Lost warranty gross, as compared to customer pay gross, equals $24,000 – a two thirds increase over current warranty gross
• Every repair dollar ($1.00) cost allocated to a warranty part loses $0.26 compared to being allocated to a customer pay part
What’s Required to Do a Customer Pay Parts Analysis
• Sample 150 repair orders
• Select 50 customer pay repair orders
• Select part(s) and display cost, net price (after any discount) and mark-up
• Highlight part(s) used on repair order
Next Step – Manufacture Should Pay Retail Rate
• Dealerships should submit to manufacture for an increase in warranty rate
• Manufacturers should pay retail rate in order to avoid misallocation of resources
• Use repair order sample to submit mark-up analysis to manufacture
Why Are Dealerships Reluctant to Submit for an Increase
• Too difficult to calculate (hundreds done)
• The Florida Franchise Law may not clear on methodology (not anymore)
• Dealerships fear losing favor with manufacturer
• Fear of warranty audit
