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Procedure for dealing with extended warranties
Posted to Shop Management Forum on 5/21/2017 20 Replies

This is what I used when I was dealing with this companies on a regular basis.

Step 1. Explain to the customer what the process is going to be. The two biggest things that you want to clarify to them is that they will be responsible for anything the warranty company doesn't pay and that because of the warranty company it will probably take longer to repair the car. In other words, auto repair is still going to take time and cost money. If possible get the paperwork for the warranty from the customer at this time.

Step 2. Get approval from the customer for diagnostic time. The warranty company (with few exceptions) is not going to pay for this.

Step 3. Diagnose the vehicle

Step 3.5 Read the warranty paperwork if you haven't already (and if you have it). Make sure that what you are about to call for approval on is a covered repair, if it isn't, then don't bother calling the company, call the customer. Often the paperwork will tell you how to explain the repair to the warranty company, some things will only be covered if they failed due to another part failing.

Step 4. Write a proper estimate. When you are dealing with a warranty company they will want to know what labor guide you are using, what your labor rate is, what the tax rate is in your state, is labor taxed or just parts? All parts need to be itemized, including hose clamps, how much coolant you need, every detail. Most of these companies will not pay for shop supplies, so if you want to get paid for using a hose clamp, write it down. Parts have to have part numbers and you have to note if they are aftermarket or dealer parts. Use all of your normal mark-ups, just as you would for a regular customer.

Step 5. Make sure you have the vin number/mileage on the work order.

Step 6. Call the warranty company. Yes, you may have to wait on hold for a little while or leave a message and wait for a call back. Once you are talking to a real, live human, give them the information that the want. They are just doing a job, and the easier you make their job, the easier it is for them to say "yes, that's covered and we will pay $XXX" Write down what they will pay, don't take it personally when they say that they will only pay half your normal labor rate and won't pay more than $XX for a part. Maybe they don't pay for gaskets, or fluids, or a million other possibilities. Just write it down. Whatever the company doesn't cover, then the customer will. Once you get to know the individual warranty companies you can figure out the best way to write the estimates. Some companies will pay up to dealer list on any part, so if you can quote the dealer list price for a part, then buy the part for less through worldpac, so be it. Make sure you ask the warranty company how they pay. Do they need a signed invoice faxed to them? Will they send you a credit card number within 24 hours? Is there a number to call if their is a problem?

Step 7. Call the customer. Let them know what the warranty company will pay, and what their share of the costs are. Get their approval.

Step 8. Fix the car

Step 9. Collect the money. This may depend on shop to shop, I never had a problem with collecting the customer's share of the repair then waiting a day or two for the warranty company to pay theirs. If it's a company you never dealt with before, or you got a bad feeling for their professionalism you may want to keep the car until you get paid by both the warranty company and the customer. To me, this would be a case by case decision.

Once you get used to their processes, and learn which companies are good and which are not, these warranties can be good for the shop. If it doesn't work for your shop to jump through their hoops, then simply don't take them.

The biggest problem that I ever had was with the customers who didn't have any money. If you take a customer who bought a car they can't afford then give them a warranty, they are still a customer who can't afford the car. If the customer owns a decent car, has some money, and bought a good warranty because they preferred to even out the costs by paying for a warranty over a few months instead of having a big repair cost at a bad time, then it will probably be a good situation for everybody.

Nathan from Colorado

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