US Auto Dealerships May Receive More Money for Warranty Parts

Washington DC August 21, 2006; The AIADA newsletter reported that should two recent federal court rulings spread across the nation, automakers may wind up paying dealerships an estimated $2 billion or more each year for parts used in warranty repairs.

The court decisions upheld laws in New Jersey and Maine which require automakers to pay the same rate as retail customers when they reimburse dealerships for warranty parts, according to Automotive News.

Several automakers add surcharges on new-vehicle invoice prices to offset the higher retail rates they are required to pay in most states.

The federal court ruling in Maine last November upheld the state law prohibiting automakers from using new-vehicle surcharges. In New Jersey, a federal court agreed back in March with 58 Ford, Lincoln, and Mercury dealers that Ford's surcharges to offset retail costs violates a state law which requires factories to pay dealerships their "prevailing retail price" for warranty parts.

Twenty-seven states already require manufacturers to repay dealerships for warranty parts at retail rates.