We are seeing a dramatic increase in manufacturers refusing warranty claims and customers using warranty as a reason not to pay invoices long after the warranty period is over. What can be done to reduce both of these problems?
— Michele Saxman, President, Rapid Rentals & Sales, Inc. (Carol Stream, IL)
Loren Swakow: Isn’t it a lifetime warranty? This problem will be plaguing dealers for the foreseeable future. Our initial step is to fight for the customer on the first turndown, in writing. Once all efforts have been exhausted, we invoice the customer supplying all our data demonstrating our attempts to collect on his behalf. This will work on most occasions. If the customer is still adamant that he feels it should be warranty, we will offer to settle for what we would have collected from the manufacturer explaining that this is our cost. Most customers will understand. That being said, warranty explanation is part of our delivery process. We cover what is drive train or covered by extended warranty in simple terms. We make sure the customer has received the warranty certificate and we have reviewed it with him. By over-communicating warranty coverage before the problem arises, we have eliminated most of the issues you raise. We have tried to make warranty a black and white issue, removing the gray area and, consequently, the issues you have raised.
As dealers get larger and larger, warranty administration is becoming an important and integral part of our businesses. Warranty can be removed from the expense side of the income statement and could even show a small profit. Our goal is to break even at the end of the year. Sadly, with new truck sales greatly reduced, this job function is becoming a shared task in many dealerships.
Ken MacDonald: Fortunately my manufacturers concern themselves with customer satisfaction in the same fashion as we do. They will visit a customer with a contested issue and review the claim. Be sure that warranty is clearly defined at the point of sale as to what is covered. At that time you should set up a PM program to protect the customer and their equipment. That way any operator abuse or misapplication of product is addressed before the warranty issue arises. If payment tactics are the reason your customer is stalling or claiming warranty, it is usually after accounts receivable has called. To prevent this, review AR and check your aging. If the reason is warranty, get the department supervisor to call and find out why the issue exists. The sooner a meeting takes place, the less it will cost both parties by accelerating payment or reducing the adjustment and more important, satisfying and retaining your customer.
Marla Cope: Warranty issues are becoming more and more difficult from both the customer and vendor side. We are finding that it’s very important to do your homework up front, get approval from the manufacturer, and be VERY specific in your description of what was done. We have trained our technicians to be up front with the customer who assumes a problem will be handled by warranty by informing them that we will have to bill them up front; if warranty is issued, then we’ll issue the credit. When we assume it will be covered by warranty and issue the credit first, then if it’s not covered, it becomes extremely difficult to collect.
Bob Weeks: The problem is a “sign of the times.” Since business conditions are difficult, lack of profit and cash flow become an issue. Customers and suppliers are struggling to meet goals and are therefore making it more difficult on us. The only solution is excellent record keeping and well-written reports to answer their claims in a professional manner.
Jim Ripkey: I have yet to see a manufacturer who is not more closely scrutinizing its warranties with their distributors. It’s a good business practice to do so. You are catching this for the same reason. The fact that you closely watch your warranty work is a statement itself. To reduce rejections by manufacturers, I would do several things. First, train a central person on the warranty guidelines and submission procedures for each manufacturer. I am sure the manufacturers you represent have a warranty policy manual which can be given to one person. Following their guidelines to the letter can reduce a great number of claims. When in doubt, have them call and ask. Up front communication by the distributor is greatly appreciated by the manufacturers. At the same time, a relationship based on partnering can be established between the warranty administrator at the factory and your own person. I would encourage you to bring your warranty person to the plant for a visit and a tour.
Next, get your regional service manager more involved with questionable claims and unique customer situations. Not only do they carry the power of the pen to authorize your claim, they can also greatly support you in front of your customer. Customers may appreciate the “factory” sending someone to see them on their concern. Remind your customers that the warranty is not a maintenance program. Planned maintenance and effective maintenance is needed in order to keep the warranty current.
Look for trends in warranties. Same truck, same series, same customer or even same model may allow you to forecast repairs for the factory or your customer. Also keep an eye on warranty receivables. Are they being stretched? Communicate regularly with the factory about any item that slips beyond acceptable terms. In the end, warranty is about peace of mind and fairness. Quality manufacturers in our industry undoubtedly stand behind their product and will not leave the distributor holding the bag.