Warranty Recovery Dollars Decrease After OEM Shutdown

There is an ongoing trend of OEMs becoming more stringent in terms of warranty recovery and support. This is being manifested in tighter enforcement of manufacturer recommended maintenance services and compliance with PM intervals to qualify for warranty coverage, when comparing warranty recovery dollars among commercial fleets in 2020 to 2019. 

“There has been a decrease in dollars allocated to these programs and as a result a decrease in recovery on behalf of the fleet client,” said Mark Ackerman, director, maintenance and repair for LeasePlan USA. “I believe this will continue into 2021. Given the negative impacts of the shutdowns that the manufacturers endured they will allocate funds to other business critical areas.” 

A new factor contributing to the decline has been a surge in the number of last-mile delivery vehicles in operation during the pandemic, which is impacting warranty recovery monies.

“The last-mile sector will continue to present unique opportunities and challenges to OEMs, as the extreme wear experienced by these vehicles tends to exceed the severe-duty application associated with traditional urban driving,” said George Albright, director, fleet maintenance for Merchants Fleet.

Another reason for a decrease in warranty recovery monies is due to the across-the-board higher vehicle build quality from all OEMs. Other factors contributing to a reduction in warranty recovery monies are extended emissions warranties and extended powertrain warranties. 

In addition, in 2020, there has been the decrease in overall maintenance volume due to the decline in business activity during the COVID-19 pandemic, according to Mark Lange, CAFM, technical services consultant for Element Fleet Management.

Longer base and extended powertrain warranties have led to a reduction in post-warranty recovery claims. Most warranty recovery is occurring during the term of the new-vehicle warranty. 

“Specifically, more warranty coverages extending comprehensive and powertrain coverages, as well as offering free maintenance for some period have all worked to impact warranty coverages and good will extended,” said John Wuich, vice president, strategic consulting services for Donlen. 

Maintenance History is Crucial

Post-warranty policy adjustment decisions are often being made at the dealership level and the timeframe in which dealers are completing warranty claims is increasing.

Accurate and complete maintenance history has become increasingly important to warranty recovery efforts. Vehicle manufacturers continue to place great emphasis on customer loyalty and complete maintenance history when considering post-warranty good-will assistance. It’s important to note that powertrain warranty coverage varies among brands, which can affect the level of assistance needed when fleets are made up of many vehicles from different brands.

Rental Recovery Under Scrutiny

It is critical to follow the manufacturers’ recommended PM schedules to maximize the chances of warranty being covered at the dealership. In today’s environment, it is critical that fleet managers be aware of OEM maintenance requirements and follow the manufacturer’s guidelines using a system to track when preventive maintenance is needed and providing alerts when it is missed.

“The warranties that the manufacturers offer have either gone up or remained the same for a few. With higher mileages on the warranties being offered, some of our partners have limited the warranty recovery available for certain repairs being done,” said Tony Hernandez – team lead, truck maintenance for Emkay. 

Rental costs for units that are down for lengthy periods of time due to warranty repairs have risen. Increased warranty rental recovery requests have been the norm as vehicles are in a shop awaiting back order parts or waiting to be diagnosed at backed up dealerships. However, OEMs have also started tightening their rules for recovering these rental costs, so fleets are feeling the impact even more. 

“Supply-chain delays related to the pandemic resulted in an increase of rental-related recovery requests. Goodwill warranty recovery opportunities have decreased in comparison to 2019.  We believe that continued tightening of restrictions by OEMs will result in a continuation of this trend in 2021,” said Albright of Merchants Fleet.

To help minimize rental vehicle expenses, fleets should proactively plan for replacement units in these cases. Whether it’s reassigning a pool unit or transporting a vehicle from another location, the cost of these alternative routes could be less than that of an extended rental. 

Eliminate PM Variability

In the final analysis, OEMs are looking for documentation to support warranty claims in an effort to ensure the units were properly maintained prior to failure. This underscores the importance of PM compliance. Adhering to consistent preventive maintenance schedules to minimize PM variability is something the OEMs are stressing across the board. During the warranty claims process, PM variability is closely scrutinized.

“Despite financial challenges created by the current economic conditions, vehicle manufacturers continue to recognize the importance of maintaining a loyal customer base. Ideal candidates for warranty recovery assistance are those vehicles that have been properly maintained, have complete maintenance history, and have technical details documented concerning the repair in question,” said Kelley Hatlee, senior service advisor for Enterprise Fleet Management.

All new vehicles are covered under a factory limited warranty program. Warranty recovery can help a fleet to manage its maintenance and downtime costs, especially with extended powertrain warranties, which cover most components during the service life of a fleet vehicle.