March 20, 2024 Blog

Auto warranty repair system isn't broken, so don't try to fix it

Proposed legislation would mean millions of dollars of added costs for New York drivers.

By John Bozzella

Lawmakers in Albany are pushing a plan that will hike costs for automakers – and ultimately New York consumers – and direct millions of extra dollars to the state’s franchised auto dealers.

Let’s back up. If you’ve ever needed your vehicle repaired under warranty, your first thought might have been: How fast can I get an appointment? Second thought: I’m glad it’s covered.

Drivers don’t pay for vehicle warranty repairs. Or recalls either.

The vehicle manufacturer pays the cost of the repair, determined under a reimbursement formula known as a labor time guide, directly to an auto dealer.

Under state law, automakers are required to direct all warranty repair work to auto dealers and pay the hourly labor rate normally charged by that same dealer. It’s a system that generally works.

Automakers provide the dealers with a lengthy time guide that outlines how many hours are typically needed to complete a specific warranty repair.

Here’s where it gets tricky, and why two bills working their way through the Legislature threaten to disrupt the warranty repair system – and shift millions of dollars of added costs to New York drivers.

Senate Bill 5085C and its companion, Assembly Bill 4066B, requires auto dealers to get paid for vehicle warranty work under a new system using a different labor time guide, one originally produced for New York’s independent auto repairers.

So what? Well, the time guides for independent repairers are for all types of general auto repair work – not warranty repairs. This matters because these independent labor time guides (you might hear them called third-party time guides) make certain assumptions.

They assume, for example, it takes additional time and labor to complete a repair because an independent repairer might be less familiar with the vehicle system than a franchised dealer that works on the same make and model day after day.

The labor time guides for independent repairers also account for other variables like older-model vehicles and special tools.

Again, so what?

New York auto dealers made a 78 percent gross profit on warranty labor payments from automakers in 2023. According to estimates from the bills’ own supporters, passing these measures and switching the (unbroken) system will force automakers to reimburse New York auto dealers another $900 million annually.

That increase averages out to about $1,180 per vehicle sold in the state, or an additional $1 million for each of New York’s 858 new-car dealers. (That’s a windfall for the auto dealer, not the auto technicians, by the way.) That’s a lot money for New York dealers already earning record profits and with a monopoly on auto warranty repair work.

The current warranty labor time guides for New York dealers are accurate. And fair. And working. There’s no problem that needs fixing.

John Bozzella is president and CEO of Alliance for Automotive Innovation.

*Originally appeared in (Albany) Times Union (Auto warranty repair system isn't broken, so don't try to fix it; March 20, 2024)