A quarter of dealers need to pay more into self funded warranty schemes

Warranty Solutions Group (WSG) has revealed that dealers using self-funded warranty admin schemes (Dealer Fund schemes) could be at risk of annual claims exceeding their fund allowance.

WSG analysed more than 50 of the admin schemes it administers on behalf of dealers. 22% of dealers had insufficient funds to pay for claims over a 12 month period (based on their average claim rates and average claim amounts).

John Colinswood, WSG’s CEO said: “While on the surface self-funded schemes promise to save dealers considerable spend on their warranty costs, our research highlights that the reality can be quite different.

“The funds we analysed span a broad cross-section of dealers ranging from small independents to multi-site franchises.

“The findings show that many dealers will face significant shortfalls in their claims funds over the coming months – a problem compounded by the increased cost of warranty claims over the last 12 months due to the global parts shortages and rocketing labour rates.

“In these instances, a stream of claims – or even one big claim – can quickly evaporate any chassis profit the dealer has made. It’s a huge financial risk which they have virtually no control over and one that can seriously impact cashflow.”

24.32% of all claims analysed were made within the first 30 days, with 9.31% within the first 10 days alone. This could be the result of insufficient standards of pre-sale vehicle preparation.

Colinswood added: “The cost analysis of admin schemes can be limited on statistical information, especially if dealers aren’t capturing detailed cost breakdowns of each claim, or the split of their fund. This adds weight to the term ‘running with an open cheque book.

“Without visibility of the key data, dealers often have little to no understanding of how their scheme is performing or what it will eventually cost.”