How to beat a car dealer on warranty - and win

Find out the real reason why too many car dealerships will refuse your legitimate warranty claims - and then you can smash them into submission

Video Transcript

Car dealers are all too often arseholes. This report is another brick in that wall - an illustration of just how fundamentally corrupt many car dealers are. Especially in the service department. And especially over warranty work.

Cars are complex machines - 10,000 components, millions of lines of computer code. Unsurprisingly, there are problems - but it’s the way the car dealers and manufacturers handle them that counts. If you spend $20, $30, $40 or $50 grand - or more - on a car, and if (in the immortal words of Jim Lovell) Houston we have a problem, then:

  1. you deserve to be taken seriously
  2. you deserve have the problem fixed as a priority
  3. you really deserve not have to fight the dealer for a warranty claim - when that warranty claim is both legally and ethically justified.

What is and what's not covered

If you damage the car, it’s not a warranty job. If you jam the wrong fuel down its throat, if you park it on the roof (or in the ocean) - it’s your problem. Wear and tear is not covered by warranty either. And if you elect not to get the car serviced - again: your problem. But if the car just up and has a heart attack - for no reason - if the engine dies with just 30,000 kilometres on the clock: that’s the manufacturer’s problem. 

And in this case, all too often, you do have to fight for it. The sword has to come out, and that’s not the kind of thing most of us do for kicks. It’s a big, fat, bitter pill labelled ‘resentment’. It’s actually a resentment-flavoured fragmentation grenade with a suddenly loose pin. 

See also: Save thousands on servicing - without hurting your warranty >>

Here's the fundamental speed hump

So a smooth, seamless fix is what you deserve. But all too often you have to pull on the gloves and step into the ring, just to get what’s right. It doesn’t seem fair, and it doesn’t make sense - until you realise there’s a hidden agenda. A monumentally corrupt hidden agenda. The car dealer - he’s likely to be focussed - obsessed is not too strong a word - on boosting his own bottom line. And that can be a real speed hump for you - because he’s not looking at solving your problem; he’s likely to be looking at boosting his profit. 

Case study

This story is inspired by a viewer who owns a diesel SUV - still under warranty - and it just stopped. Had the diesel engine equivalent of the bilateral tension pneumothorax. Went face-down into the lobster bisque at grandad’s 80th birthday bash. Went ‘poopy’ in its pants at the same time. Undignified. Everything was all good - then deafening silence from the engine bay.

So this SUV had a good service history. Dealer’s claiming a fuel pump failure arising from contaminated fuel. The insurance company’s claiming it’s a manufacturing defect - telling the owner  to take it up with the manufacturer. The arsehole dealer is not even prepared to investigate the problem without swiping the customer’s credit card - unbelievable. At least the insurer had the good grace to fund an independent laboratory to analyse the fuel. (The finding - no contamination.)

We’re four weeks down the track. Customer’s got no car. The dealership quotes him $20,000 to fix the problem. Twenty grand. He looks down the tunnel. Double check: No light. Not a glimmer. So he reaches out to me. (Car companies really hate that.)

Here’s a quote from that original communication:

Where I come in

You can feel the desperation, right? We’ll get to what happened in a second - but this is a story that highlights the underlying deficiencies in the dealership sales model. It demonstrates how Dickensian the whole dealership setup can be, and why car dealers enjoy such stellar reputations among merchants. Here’s what’s really going on behind the scenes.

Car companies - not dealers, manufacturers - spend a river of gold getting you across the line. It’s a kind of high priced seduction. They make you fall in love with their car using the hi-tech miracle of bullshit marketing. For example, Hyundai’s currently got a hot chick whipping a snake with a belt to help you decide to buy a Tucson, here in Australia. I don’t know why. All that ad is designed to do is make you enquire. Ultimately its purpose is to get you into a dealership. The dealership then gets you across the line; takes your cash. Ultimately makes the sale. But the dealership is not the car company.

See also: Top 20 ways to beat a car dealer >>

And: How to test drive like a pro >>

Carmakers and dealers are different entities

Ninety-nine times out of 100 the dealership is a separately owned business that owns the franchise. Your Toyota dealer is not Toyota - it’s a business which Toyota allows to sell its vehicles. They’re completely separate entities - with separate, and often conflicting - agendas. And that’s what’s really going on here. Carmakers abrogate all responsibility for customer interaction onto their dealers. Car companies don’t want to deal with you. If you buy a Honda - not that I generally recommend that - you’re not doing business with Honda. You’re doing business with a business that does business with Honda. Honda’s customers are its dealers - not you. Ditto when you get your car serviced.

The filthy lucre

So here’s the central problem: When you present yourself at a dealership with a warranty claim, the dealer knows he can make more money out of you than he can out of a warranty job - so it’s actually in his commercial best interests to deny your warranty claim … if he thinks you’ll cop it on the chin.

And here’s why:

Conflict of interest #1 - the labour rate

Warranty claims are a fact of life, and parent companies negotiate a labour rate for warranty work. Every time there’s a warranty job, the dealer sends the carmaker a bill - and you can bet the farm that this negotiated warranty rate is several thousand degrees Farenheit lower than the extortionate retail labour rate the dealer will attempt to charge you for the same job. So if the dealer convinces you it’s not covered, he gets to charge a lot more for the labour.

Conflict of interest #2 - the parts

The second obvious reason to convince you the problem is not a warranty job is: the parts. If you break or damage your car, the dealership figures out what parts are required, and orders them from the manufacturer … and then the dealership marks them up by the customary thirty-seven thousand per cent before they sell them to you in the repair, plus the extortionate labour rate. So, in a warranty job the parts just get supplied by the carmaker, and there’s no opportunity for the dealer to crunch a profit out of them. And in a warranty job, the ‘slave labour’ rate is all the dealer makes. And in a non-warranty repair, there’s the works burger of mark up on the parts PLUS the premium, two-girl massage - with happy ending - labour rate.

You can bet that the $20,000 repair quoted to the customer in this example is more like an $8000 repair - with a lot less margin - if it turns into a warranty job.

So, if you put ethics to one side - as so many car dealers seem able to do all-too easily - there’s a very clear conflict of interest: Make more money or do the right thing. And we’re not talking - statistically - about a group renowned for the precise calibration of its moral compass. We’re talking about car dealers. So you can guess which option they choose - not every time, but often enough. Many car dealers do the right thing. And many don’t.

Where the parent car company fits in

It goes without saying that the parent car company is often kept in the cone of silence over this. (One of the salient differences between car companies and dealers is: car companies are much longer term thinkers when it comes to customer satisfaction. Dealers can’t often look beyond the tips of their own noses when it comes to keeping you happy.)

This is definitely what happened in this case. When I contacted the carmaker, they had no idea there was even a problem with this car. And when they did, things moved swiftly and smoothly. They did the tests at their expense (paid for by the carmaker, not the dealer) and the problem got fixed. Under warranty. And that’s why I’m not naming them - because they jumped in and did the right thing - and I’m sure there was a closed-door conversation with the dealer about it.

When dissatisfaction and the service department collide

But here’s the rub: car salesmen are incentivised, right? The good ones get paid more. The service department is not like that. Their performance is measured exclusively by profit. Satisfaction is not a metric that ever gets analysed. And yet this is where your relationship with that brand gets broken - most of us can handle only a finite amount of getting bent over and violated without lubricant in a service department before we decide ‘never again’ a propos of a particular brand. In almost every case, the thermobaric bomb that breaks your relationship with the brand is handed to you by the service department.

Until dealerships and/or carmakers start to incentivise service departments by rewarding the ones that are excellent at customer service, relationships with brands will continue to get routinely torpedoed - and the second, third, and fourth new car sales to what could otherwise have been a happy customer, simply will not happen. (Unfortunately, there’s no reporting standard for sales that do not occur.)

This is incredibly short-term thinking on the part of dealers. Unfortunately, they’d have to decide that a short-term reduction in service department profit would more than be offset by the longer-term gain of new vehicle sales to the customers they manage to keep happy by doing the right thing. And let’s not forget that the easiest new car sale of all time is the one to a happy repeat customer - because they’re not shopping around. That hot chick can whip as many snakes as she wants - it’s not gunna be enough.

What you must do

So if you’re in this position - getting stonewalled at the service counter over a warranty claim: do not cave in. Stand your ground. Contact the carmaker direct, and involve consumer affairs. Threaten to go to the media - carmakers really hate that. Do whatever you have to, to make them comply - it’s a legal and ethical obligation. If this is a game, at least you now know the rules. Spell it out. Use the information in this report, calmly and rationally, to explain to the service guy that you know this game, and you’d appreciate him doing the right thing, up front. Because there’s no way you’re about to cop it on the chin, just to pump up the profit.


It’s absolutely galling to be a customer in this position. From the conversations I’ve had with manufacturers researching this report, it’s almost as frustrating to be a carmaker and have a dealer out there, burning customer for short-term gain. And I guess it’s galling to be a good dealer trying to do the right thing, and have an arsehole dealer just down the road (like the one in this story) torpedo the reputation of all dealers - by association.

This situation highlights how fundamentally flawed the dealership sales model is. Carmakers have given away - and therefore lost control of - the relationship between the customer and the brand.