The F&I Weekly Newsletter reports news of fraud allegations directed at a Texas-based Jaguar Land Rover dealer. The details, as outlined in the Wichita Falls Times Record News, aren’t that surprising in light of the incentives surrounding warranty claims.
For repairs or maintenance covered under standard manufacturer vehicle warranties, dealership service centers and car owners have every reason to approve all work that is plausibly required for safety. The service center is well compensated by the manufacturer for such repair work and the car owner gets repair work done “for free.”
In this Wichita Falls case, where dealer principal David Stephens is accused of passing through $6 million of warranty repairs that were unnecessary or unperformed, we can see these incentives taken to their logical conclusion. Stephens apparently hired a consultant to help determine the average volume of warranty repairs billed to Jaguar Land Rover corporate. Armed with this information, Stephens (allegedly) knew the extent to which he could fabricate warranty repair claims without triggering an audit.
ClearMechanic is not focused on authenticating warranty claims, a subject that relates to the mistrust between OEMs and dealers. Instead, we’re focused on the mistrust between dealers and end consumers, which rears its head during “customer pay” repairs rather than warranty items. Still, this news is relevant for CM, asthe likely consequence of this and other dealer-OEM disputes will be enhanced reporting requirements and documentation of the need for repairs. Consider that many third-party extended warranty firms already force service centers to justify repairs through pictures of worn-down parts. This helps to ensure the validity of the claim and is a precondition for reimbursement by the warranty administrator.
It’s only a matter of time before OEMs start inching toward this documentation and verification model to prevent Wichita Falls-esque fraud. And when that happens, having ClearMechanic’s software and digital image infrastructure in place (albeit designed to inform end consumers) will be helpful in complying with OEM requests as well.