How do dealers get paid for warranty work?

As we all try to get dealerships to fix many bugs and issues that our new trucks have, it's important to understand the MONEY aspect of it. Primarily, HOW DOES THE DEALERSHIP GETS PAID FOR WARRANTY WORK BY TOYOTA?

After all, dealerships are private businesses, and their service department goals are TO MAKE MORE MONEY, OPTIMIZE THEIR PROFITS, and to some extent, last but not least... Customer service.

I'll start with a few questions than I'm very curious about:

1. What rate does Toyota Corp pay dealer for resolving issues covered by warranty? How does that rate compare to what Toyota charges customers directly when out of warranty?

2. What does dealer gets paid on recalls? And ecu/software updates?

3. If dealer fixes a warranty issue such as a window seal, and it breaks again resulting in return visit, will the dealer be able to get paid once again from the Toyota Corp?

4. If I bring truck for service, for example wind noise, or other rattles, or throttle lag, but the dealer "can't replicate it", do they still get paid something by Toyota Corp for performing the initial basic diagnostics, test drives, etc?

5. If I bring truck for service, say for a "ticking transmission noise" and dealership replaces a transmission, but the noise remains (therefore the original issue was mis-diagnosed).

In such mis-diagnosed repair, would dealership get blamed for doing unnecessary work and not get paid? Or Toyota Corp would assume responsibility here because they approved the repair?

What I'm asking is does dealership take risk and won't get paid by warranty if their repair does not resolve the issue?

6. My dealership is very eager to document every single one of my concerns every time I bring truck for service, but for the "new and complicated issues" without resolution they usually comeback with "can't replicate" or "other Tundras have same thing so it's normal". It seems as if they can charge Toyota Corp for the initial diagnosis on each and every one of points that I mention to them. But actually try to fix these issue they don't bother with as it's probably challenging, time consuming, risky that it won't get fully fixed, won't be paid for all of the time they spend diagnosing and is generally not a good business practice for them. Am I guessing correctly here?

 

Yes 100% and it's T&M prorated by region/population.

 

I understand that the rates will vary... How about other questions.. To better understand how the rules for warranty work apply between dealer and Toyota Corp

 

I'm on Toyota material handling side (TMH) and I worked with the warranty manager. It's a very slow process mostly done online, everything must be photographed before and after, clearly documented. Then he has to do regular follow ups to check on the status of the claim and if not excepted has to file a dispute and keep at it.

If it's not excepted period the dealer eats it.
So basically the dealer does the warranty work before even being paid several weeks if not months.

We just ate (later discovered wiring manipulated) "operator damage" on a fork lift but the customer has it in writing they will not be so lucky next time.

*luckily I get paid my regular rate as I think mechanics on the automobile side may not*?

Good question for @ryanwgregg as he's on the automobile side on Toyota.

 

I can offer very old info to some of your Q's from my time as a service writer during college (20+ years ago). Take it with a grain of salt as things may have changed. Plus, I was just a pee-on service writer for 2 years at small(ish) volume dealer in a college town of about 70,000 people.

1) I recall the reimbursement rate on warranty was something like 70% or 80% of book time. I.E. If book time was 10 hours on a job, the dealership would get reimbursed for 7 or 8 hours of labor. It was not a 1:1 ratio.

1a) The rate charged to the customer when out of warranty is 100% book rate, plus anything else the dealer can get them to pay. The manufacturer isn't involved. It's between the customer and the dealership service dept. The manufacturer will only cover certain things as warranty claim when out of warranty only very special circumstances. The example being the member that (hopefully) had his engine rebuild covered as a warranty claim even though his was outside of the basic powertrain coverage. 95% of the time, the dealership won't even bother "asking" the manufacturer to consider a repair as a warranty claim if the vehicle is out of warranty.

2) Recalls are a different story, as memory serves. I believe the dealer gets paid 100% reimbursement. I.E. a 1:1 hour ratio on book time for recalls. However, that really only applies if the recall follows a standard procedure that is already documented in the book. In most cases, a recall will have a totally new procedure to follow that isn't documented previously. Example, the temporary fuel line protection kit repair currently available on the 3rd Gen. There would be no existing book procedure for that. So, Toyota will likely determine the "book time" on something like and would pay 1:1 for it in terms of reimbursement. I believe this applies equally to both NHTSA recalls and "voluntary" manufacturer recalls.

3) If the warranty repair fails and needs to be fixed again, it's treated the same as "first repair" when it comes to the manufacturer & dealership reimbursement agreement. I suppose there would exist a clause in the reimbursement agreement could withhold reimbursement if they found out that it was a technician labor issue vs the part failing again. I.E. If the local dealer tech installed a replacement window seal incorrectly vs the replacement window seal itself failing again. However, that never happened to my knowledge.

4) No. The dealership doesn't get paid. At least, back in my day they didn't. I'm assuming dealers still don't get paid on this at the rate the people complain about "diagnostic fees" for warranty work. I've seen several folks on the forum state their dealer wanted a $XXX fee to investigate the issue and if they found it to be a warranty issue, that fee would be refunded. My dealer didn't charge a diag fee for vehicles in warranty or still under an existing warranty but did for all other vehicles. That diag fee would always be credited to the repair, if the customer wanted to proceed with the repair for non-warranty situations.

 

I'm pretty sure they don't. When I was a service writer, I didn't get any commission pay for warranty work. I just got my normal, hourly rate. From my post above, if the manufacturer only reimburses 80% of the book rate, I'm pretty sure that applied to the technician pay for the job as well. But, again, I was never a tech so I could be wrong. However, knowing the amount of complaining I would hear from the master techs each time I would write a warranty ticket...they didn't get their full rates for the job.

 

My friend work as a tech at Nissan, he change dealer cause them service writers give him nothing but warranty work, he lose his ass with that BS. That’s why dealer usually said they can’t find anything wrong, til the warranty expires…lol

 

I work on Toyota fork lifts now so I do not have to deal with any warranty rates like the automotive side does. I have worked at a normal automotive service center and had an earful or two on warranty/comeback work.
*large amount of the techs I work with came from a dealership because of pay.