Dealers are urged to assert warranty rights during a time of rapid change.
October 3, 2024
By Barrie Charapp Beaty
Charapp & Weiss, LLP
bbeaty@cwattorneys.com
For over 50 years, VADA’s goal has been to ensure that the Virginia Motor Vehicle Franchise Act provides Virginia dealers with rights so to prevent improper actions by manufacturers.
Of late, there has been publicity on warranty reimbursement statutes passed by other states such as New York and Illinois. As with any laws, each state has different words that make up the law, but the end result in applying those law may be the same.
Many dealers have commented on the new law in New York for warranty reimbursement, as there have been recent articles in Automotive News. Prior to the recent changes enacted last month, the New York statute required that the dealer get “reasonable” compensation. The changes enacted now define reasonable compensation as the retail hours. As this statute has just been put in place, we do not know how manufacturers will react.
Illinois law was recently changed to provide either use of an agreed third-party time guide or 1 and ½ times the OEM hours for warranty work, which is the typical and default calculation utilized because most will not agree to a third-party time guide. However, as a result of a court case that contained an unfavorable interpretation of the law for dealers, at least one manufacturer is imposing surcharges on dealers in that state to recover the costs of the increased reimbursements. Additionally, the statute continues to leave within the control of the manufacturer the establishment of labor times, so those times can be reduced in the future.
Virginia dealers have been entitled to receive retail reimbursement for over 30 years. Our statute does not designate of a specific time guide. Rather, it states that a dealer shall be entitled to retail “amounts”. We would argue that VA achieves the same thing as these statutes – to get to retail “amount” you must necessarily adjust the hourly rate to account for the lower OEM time allowances.
We would also note that Virginia law has long protected dealers from surcharges to offset retail warranty reimbursement and offers significant protections to dealers facing rejected warranty claims and audits.
However, just because the General Assembly passes a law signed by the governor does not mean that manufacturers will abide by it. Dealers may find they have to contest a manufacturer’s action through the hearing process at DMV and state courts. Even in those states that have made changes related to labor hours, it is not clear how the new laws will work.
That means you may have to challenge your manufacturer. For instance, a manufacturer may refuse to pay your full retail labor rate because they claim other dealers charge less. So what? Your manufacturer has the burden of proving your rate is not reasonable. Just because another dealer charges less per hour does not automatically make your rate unreasonable.
We regularly review VA statutes, particularly in light of changes we see across the country. We will recommend changes to ensure VA dealers have the strongest protections in the law. We are considering changes to the warranty statutes now. But we also recommend you ensure you are taking full advantage of the rights you already have.
Please let us know how the VADA can be of further service to you and your business.