Due to post-pandemic high-cost labor, combined with the lack of young people entering the automotive sector, there has never been a better time to consider outsourcing warranty administration. A record number of dealerships are making the switch every day, and why shouldn’t they? After all, a properly functioning warranty service will deliver a more reliable and consistent result for less.
Dealerships should see better returns, less audit liability, reduced receivables, improved cash flow and a liberation of service management. It certainly seems to be a no-brainer. However, many dealerships fail at the experience, due to misconceptions and mismanagement. The goal of this article is to help dealers know the mistakes and understand what it takes to implement an effective outside warranty system.
First up, don’t assume a warranty service will replace the in-house warranty administrator while everything else remains the same. The fact is, proximity matters. Many onsite admins spend a good deal of their day chasing down information that should have been entered or attached to the ROs during the repair procedures. An outside service relies upon the information that is provided to them. By its very nature, it has the advantage of creating daily accountability.
When looking for a warranty service, the dealership should evaluate each company to discover how their services help with this transition and how they communicate with the service department to prevent the manager from devolving into a warranty assistant. A good service will provide onsite training, helping the advisors and techs write better ROs while freeing up management.
Avoid adding an outside service if the local management is opposed to it. Some service managers rely on their admin for clerical and managerial assistance beyond warranty, or they might knowingly submit improper warranty claims and pursue secrecy. In those cases, the manager may resist the change and seek to derail the program before it starts.
Be sure to involve service management during the selection and sales process. If the manager is opposed to outsourcing warranty, find out the root of the opposition. If it is assistant-based, consider who else might support the service manager with the additional activities. If it’s something else, consider making changes before outsourcing. The fact is, no service will work effectively when service management is not supportive.
Don’t wait until there is an emergency. It’s not a matter of if, it’s a matter of when an in-house system will fail. Many dealerships find themselves in trouble when their admin turns in a notice or worse, suddenly walks out. It is frequently made worse when a new replacement fails. Warranties quickly fall behind, submissions pile up and a messy schedule develops. This results in lost payments and reduced cash flow.
Be proactive, start making plans early and consider services during a time when you are flexible. Time will allow you to select a company that guarantees OEM-specific skilled and certified warranty admins and check references. Be mindful, that with all skilled labor, there are limits. The best warranty administration companies protect you and their current customers by not overpromising. Sometimes start-up delays are necessary to protect claim quality.
Outsourcing your warranty administration is not audit insurance. A good company will carry errors and omissions coverage and will stand behind a claim if their action caused non-payment. However, this is seldom the case with chargebacks. It depends on the OEM and the auditor, but most chargebacks are for missed documentation intended to record policies and procedures that should have taken place during the repair. Make sure your service team practices quality assurance with warranty compliance on every RO. A good warranty administration company will train and bring attention to various items missing while helping the service manager improve claim quality.
Avoid lower-level service offerings. Some companies offer what appear to be lower-cost simple submission services. Your labor is valuable and if your team is required to book, close, post, adjust or reconcile, you are overpaying. Focus on your true ROI, a full-service solution will deliver a positive ROI in just the labor it offsets alone. Then improved claim quality is simply the icing on the cake. Hands down outsourcing with the right company is the best value, but for it to be the most effective and return the greatest ROI, dealership management must install the service as it would any other service fixture. The shop’s policies must be built around the proper completion of the RO and how effective its team is at following up on communications with the service provider. Everything depends upon it.
