Pub. 12 2013-2014 Issue 3

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S 27 new jersey auto retailer W W W . N J C A R . O R G WARRANTY  continued on page 29 Dealers Have the Right to Prompt Warranty Reimbursement and Incentive Payments BY PATRICK F. COX, ESQ. There is a whole section of the New Jersey Franchise Practices Act devoted to protecting the rights of automotive retailers in connection with reimbursement for warranty repairs, and speci fi cally, reimbursement for parts used in performing warranty repairs. NJ CAR’s ceaseless advocacy on the part of its members has resulted in a strong law that gives dealerships the right to prompt (within 30 days), fair payment for warranty claims and, reimbursement for parts at the dealership’s regular retail markup. In addition, the 2011 revisions to the Franchise Practices Act added a general provision requiring payment of all incentive, bonus, sales, performance and other programs within 30 days, the same limit set for payment of warranty repairs. Finally, the Act sets forth a “statute of limitations,” prohibiting the manufacturer from auditing claims more than 12 months after the claim was paid. Reimbursement at the “Prevailing Retail Price” The Act requires manufacturers to pay franchisees for warranty repairs, including services and parts, at the “prevailing retail price,” so long as that price is not unreason- able (compared to other local franchisees in the same line). In the case of parts, the manufacturer must pay the cost of the parts, including shipping and other charges, plus the franchisee’s “average percentage markup.” Other important provisions in the law provide a method for setting the prevailing rate, require payment of all warranty repairs within 30 days, limit the manufacturer’s right to reject warranty repair claims, and provide a “statute of limitations” for audits, limiting manufacturers to a 12-month look-back from the date of any audit. The Right to Set the Retail Rate The warranty reimbursement provi- sions of the Act set forth a procedure dealerships can use to establish their “prevailing retail price” and make de- mand on the manufacturer to reimburse at that rate. • Establishing the “average percentage markup”: In the case of parts, the franchisee may establish the average percentage markup by submitting to the franchisor 100 sequential, custom- er-paid repair orders, or 90 days of customer repair orders, whichever is less, covering repairs made during the prior 180 days. No warranty repairs or routine maintenance repairs should be included. The rate established by this method must be put into effect by the manufacturer within 30 days after submission (subject to audit).