If you want to build a successful auto repair business, you will need to strongly consider the length of the warranties you offer.
First of all, you need to know your failure rate. The top shops in America have extremely low failure rates in both parts and labor. I’ve also discovered that the overwhelming majority of those failures occur within the first 90 days of service, so regardless of whether your warranties are for 90 days or for years on end, you’re going to absorb all but a few of those failures within the first 90 days.
The second thing you need to consider is your level of exposure to risk. If you are using high quality parts, and if you have competent technicians, you’ll find your exposure to be surprisingly low. Consider this: If a repair makes it beyond the first 90 days, there is a high probability that the parts are sound, and that they were installed correctly. Outside of wear and maintenance items like brakes, tires, wiper blades and filters, I am sure you will agree that those replaced parts should last for a number of years. If a part makes it past 90 days and subsequently fails within the first year, even if your standard warranty is for only 90 days, you’ll more than likely cover the repair in order to satisfy the customer. This is the primary reason why most shop owners provide a 12 month, 12,000 mile warranty on the majority of their repairs.
The more important question for you as a businessperson is, what do you do when a part fails after the first year? Well, I can tell you that the best shops in America have a number of things in common, one of which is that they realize it’s a lot easier and more affordable to keep a customer than it is to replace a customer. So let’s examine the differences in the warranties offered by the average shop owners, and the warranties offered by the true industry leaders.
The average shop owner will typically warranty their repairs for one year or 12,000 miles, and if a part fails after that first year, they will tell their customers that they will do the repair at a discounted rate. Now here’s the problem with that approach. With every customer panel we have done at Elite, when asked how long they expect a repair to last, the customers all inevitably say, “forever.” When questioned further, they then tell us that they expect the repair to last at least as long as the original, which is typically four or more years. So if your repair fails after a year, and you offer to do it again at a discounted rate, you may very well have made a few dollars on that second go-around, but you’ll more than likely lose the customer.
At Elite we feel that in today’s competitive environment your base warranty should be 2 years, 24,000 miles. First of all, if you have the right part suppliers, and the right technicians, then the added risks are not only minimal, but after a couple of years a good percentage of those vehicles will be sold. Secondly, if you plan on keeping your customers as your customers, you will need to not only meet their expectations, but more importantly, you will need to exceed their expectations.
By offering a warranty of 2 years, 24,000 miles your team is going to have a lot more confidence in your services, and more pride in what they do. You’ll also find that a 2 year, 24,000 mile warranty will give you a competitive edge when marketing your services, it will be a great sales tool for your service advisors, and it will help take you out of the price-comparison game with your competitors. Now I realize that you may not be able to warranty some repairs for 2 years or 24,000 miles due to extreme weather conditions, the driving conditions in your community, commercial application, etc., but you can make sure you have the right parts and people, and you can talk to your part suppliers about your expectations. If you do, I am confident you will then do what the top shops in America have already done, and offer warranties that not only show your confidence in your repairs, but that allow you to be the hero with those rare failures that occur after the first year when you tell the customer … it’s no charge. Best of all, providing 2 year, 24,000 mile warranties shows your customers, and your entire community, that you truly do care … about people.