Every July, I look forward to reading the NADA Data report. The NADA Data report is a 21 page report NADA issues yearly to recap the impact dealerships have on the economy as a whole and summarizes their financial health.
The financial data tends to break down into departments and then compares the bottom lines of the departments to each other. The way I see it, it gives you a much better understanding of how important the service department is to the financial health of a dealership.
Of course the part of the service department we want to look at is warranty and how it has changed from the previous year. So let’s get to it.
Labor Sales
2000 Warranty – 5.76 billion dollars
2001 Warranty – 6.62 billion dollars
2002 Warranty – 6.77 billion dollars
2003 Warranty – 6.83 billion dollars
2004 Warranty – 6.70 billion dollars
2005 Warranty – 6.67 billion dollars
2006 Warranty – 5.99 billion dollars
2007 Warranty – 5.89 billion dollars
2008 Warranty – 5.42 billion dollars
2009 Warranty – 5.44 billion dollars
2010 Warranty – 6.29 billion dollars
2000 Total Labor Sales: 32.73 billion dollars
2001 Total Labor Sales: 35.66 billion dollars
2002 Total Labor Sales: 35.82 billion dollars
2003 Total Labor Sales: 37.25 billion dollars
2004 Total Labor Sales: 37.31 billion dollars
2005 Total Labor Sales: 38.23 billion dollars
2006 Total Labor Sales: 36.42 billion dollars
2007 Total Labor Sales: 37.60 billion dollars
2008 Total Labor Sales: 36.31 billion dollars
2009 Total Labor Sales: 33.58 billion dollars
2010 Total Labor Sales: 34.55 billion dollars
Parts Sales
2000 Warranty – 7.70 billion dollars
2001 Warranty – 9.48 billion dollars
2002 Warranty – 9.20 billion dollars
2003 Warranty – 8.87 billion dollars
2004 Warranty – 9.05 billion dollars
2005 Warranty – 8.77 billion dollars
2006 Warranty – 7.84 billion dollars
2007 Warranty – 7.69 billion dollars
2008 Warranty – 7.03 billion dollars
2009 Warranty – 7.27 billion dollars
2010 Warranty – 7.45 billion dollars
2000 Total Parts Sales: 41.10 billion dollars
2001 Total Parts Sales: 44.44 billion dollars
2002 Total Parts Sales: 47.28 billion dollars
2003 Total Parts Sales: 48.10 billion dollars
2004 Total Parts Sales: 48.18 billion dollars
2005 Total Parts Sales: 46.93 billion dollars
2006 Total Parts Sales: 44.03 billion dollars
2007 Total Parts Sales: 45.75 billion dollars
2008 Total Parts Sales: 45.53 billion dollars
2009 Total Parts Sales: 42.63 billion dollars
2010 Total Parts Sales: 43.08 billion dollars
Total Service and Parts Sales Per Warranty Repair Order:
2000 – $207
2001 – $222
2002 – $222
2003 – $213
2004 – $198
2005 – $214
2006 – $232
2007 – $235
2008 – $242
2009 – $273
2010 – $258
From the numbers, we can make estimates on additional warranty information.
Total Warranty Expenditures
2000 – 13.46 billion dollars
2001 – 16.10 billion dollars
2002 – 15.97 billion dollars
2003 – 15.70 billion dollars
2004 – 15.75 billion dollars
2005 – 15.44 billion dollars
2006 – 13.83 billion dollars
2007 – 13.58 billion dollars
2008 – 12.61 billion dollars
2009 – 12.71 billion dollars
2010 – 13.74 billion dollars
- Warranty repair order sales for 2010 were 17.70% (up from 16.68% from last year) of total service/parts sales.
-Total warranty repair orders for 2010 were 53.25 million (up from 46.55 million from last year)
- Average number of warranty repair orders per dealership for 2009 – 2,945 (up from 2,524 last year)
- Average warranty repair order sales per dealership for 2009 – $759,955 (up from $689,337 from last year)
The NADA Data numbers for 2010 are telling quite a tale about what an impact warranty sales has on the service and parts department as a whole.
85% of the increase in labor from 2009 to 2010 came from warranty claims while 40% of the increase in parts sales came from warranty. Warranty helped lift up the back end of the dealership.
Total warranty expenditures increased 8.1% from the previous year. Most of that increase came in the form of labor. There are potentially a few reasons for that but it certainly can’t be traced to an increasing number of states giving dealerships the option to seek out higher parts markups. Considering the number of states that has become an option in, I would have thought warranty parts expense would have been higher but perhaps manufacturers are driving down the price of parts that most often would be used in warranty repairs to compensate for it.
The dwindling dealership population is having a big impact on some of the numbers. The average dollar amount of warranty repair order sales per dealership and average number of warranty repair orders is up 10.2% and 17% respectively.
The warranty dollars coming into the dealership is having more and more of an impact on profitability and will for a long time to come. If a dealership ignores good claims processing procedures, claim documentation, training and proper warranty expense controls, they do so at the peril of a healthy financial future.
