Honda and Mercedes-Benz Potentially Violating State Warranty Reimbursement Provisions 

American Honda Motor Company has a policy that if a dealership’s 12 month average gross profit as a percentage of warranty sales is above 80%, it may not seek a warranty labor rate increase.  Mercedes-Benz has a policy that it will only pay 30% markup on parts used in warranty repairs which Mercedes labels as “major assembly” parts such as engines and transmissions.

It is important for dealers across the country to know that your state franchise law provisions governing the establishment of a warranty labor rate, parts markup and, in some cases, labor time, overrule any contradictory policy the OEM has issued.    For example, most states allow a dealer to calculate and submit a labor rate once or twice a year with NO limitation related to the dealership’s financial performance.  Likewise, most states require the dealer’s approved parts markup to be applied to ALL parts used in warranty repairs without regard to how the part may be designated by the OEM.

Dealers should consult with their experienced motor vehicle franchise counsel to better understand their warranty reimbursement rights under state franchise laws.