DON’T SETTLE FOR AUTOMATIC WARRANTY LABOR RATE INCREASES A Smarter, More Profitable Alternative As inflation continues to impact every corner of the retail automotive industry, many manufacturers continue to offer dealers CPI-based (Consumer Price Index) programs to automatically increase their warranty labor reimbursement rates each year. At first glance, these CPI programs seem like an enticing offer. After all, the programs offer annual increases tied to inflation and relieve the burden of having to submit a warranty labor rate increase each year. However, most of the time, these programs will result in a much lower warranty labor rate than your customer pay rate. Before you sign on the dotted line, it’s important to understand the real cost of settling for CPI — and how state law may entitle you too much more. THE CATCH WITH CPI‑BASED PROGRAMS CPI-based programs give the manufacturer full control over the rate increase calculation. Historically, these programs yield only 2-3% increases annually — a modest adjustment that rarely keeps pace with the real-world cost of parts, technician wages and service department overhead. Even more concerning: Once you agree to participate in a CPI program, you may be locked out of pursuing a statutory labor rate submission for a period of time, some programs require as much as a three-year commitment. Signing up is effectively waiving your right to pursue a more lucrative, data-driven rate under state law. WHAT’S THE ALTERNATIVE? STATUTORY LABOR RATE SUBMISSIONS Thanks to retail warranty reimbursement laws across the country, franchised dealers have the ability to submit for warranty labor rate increases based on their actual customer-pay rates. These statutory submissions consistently outperform CPI programs, and they put control back where it belongs, in the hands of the dealer. Every dealer should be evaluating whether it is advantageous to complete a factory or statutory labor rate submission annually; in nearly every case, a statutory submission is the dealer’s best bet to get compensated at its retail rate. On average, dealers see increases in their labor rate that translate into tens — or often hundreds — of thousands of dollars in additional annual gross profit by submitting a statutory submission. These gains are available to dealers across virtually all major brands and are typically unattainable when enrolled in a CPI Program. By Jordan Jankowski Chief Operating Officer, Armatus Dealer Uplift 18 Arkansas Auto Dealer
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