And why some state lawmakers want to make it more expensive
You drop your car off for a warranty repair. A few hours later, you pick it up. The dealer fixed the problem. The manufacturer covered it. You paid nothing out of pocket.
Simple, right?
It mostly is - until state legislators start tinkering with the system. Across the country, a wave of bills is quietly working its way through state capitols that would dramatically inflate what automakers pay dealers for warranty work. If those bills pass, the cost doesn’t disappear. It gets baked into the price of your next vehicle.
This is worth understanding, because it could hit your wallet.
When your car needs warranty work, federal and state franchise laws require that the manufacturer send all that repair work exclusively to franchised dealers - you can’t take it to the independent shop down the street. The manufacturer pays the dealer directly, at the same hourly rate the dealer charges any retail customer.
The number of hours billed for each repair is determined by something called a labor time guide - a manufacturer-developed document that specifies, repair by repair, exactly how long each job takes. These guides are built from actual, timed tests performed in a shop by qualified technicians using the right tools and training.
This is a reasonable system. And dealers aren’t exactly suffering under it. In states where these bills have surfaced, average dealers are earning gross profit margins of roughly 78 percent on warranty labor payments from automakers. That’s not a misprint.
So what’s the problem these bills are supposedly solving?
Dealers want to get paid using a different kind of time guide - one published by independent third-party companies and designed for general repair shops that work on all kinds of vehicles from all kinds of manufacturers. These shops don’t specialize in any one brand. They don’t have the factory-trained technicians, the proprietary diagnostic tools, or the same depth of experience with a specific vehicle system that a franchised dealer has every single day.
Because of those differences, third-party guides intentionally build in extra time for each repair. They assume the technician might be less familiar with the vehicle. They account for older cars with rust and worn-out parts. They assume the shop doesn’t have specialized equipment. They are estimates - not timed studies - and even the companies that publish them have acknowledged, under oath, that their guides are not intended for warranty work.
None of that applies to a franchised dealer. But if a bill passes requiring manufacturers to pay dealers under these inflated third-party guides, the extra hours get billed anyway.
One senior executive from a major aftermarket time guide publisher confirmed in a sworn affidavit that time estimates in aftermarket guides are simply that - estimates - and were never designed for manufacturer warranty repairs. The dealers’ own lobbyists are asking lawmakers to mandate a standard that even the standard’s creators say doesn’t apply here.
Automakers aren’t sitting on unlimited reserves. They have one real revenue source: selling cars. When warranty costs go up, vehicle prices go up. Estimates put the potential impact at a 50 percent increase in warranty costs if these bills become law broadly - translating to more than $5 billion in excess annual costs nationally, or roughly $323 per vehicle.
That’s not a rounding error. That’s a real hit to real buyers at a moment when vehicle affordability is already a top concern for American families.
And before anyone makes the case that this money flows down to the hardworking technicians doing the repairs - it doesn’t. None of these bills include any language requiring dealers to pass additional earnings on to their employees. Technicians are typically paid per job completed, not hourly. The extra money goes straight to dealer profit margins that are already at record highs.
The dealers pushing these bills aren’t shy about framing this as a fight for the working guy. That framing doesn’t hold up. If we’re serious about making American cars more affordable, here’s what that actually looks like:
1. Don’t mandate unnecessary cost increases. Inflating warranty reimbursement rates through state law adds costs that get passed directly to buyers. States should reject bills that serve dealer profit margins at consumer expense.
2. Protect the manufacturer-dealer relationship from legislative interference. The warranty reimbursement system is a private commercial arrangement that generally works. Legislatures that insert themselves into that relationship almost always do so at consumer expense.
3. Invest in technician training and certification - directly. If the actual concern is technician pay, address it directly. Workforce development programs, apprenticeship pipelines, and trade school investment are all more honest paths than mandating inflated billing rates and hoping some of the money trickles down.
4. Keep the regulatory environment competitive for American automakers. U.S. manufacturers are building some of the most advanced vehicles in the world. Loading them with state-by-state compliance costs and inflated dealer subsidy obligations makes it harder to compete - and harder to keep prices accessible for American buyers.
Your warranty repair system mostly works. Dealers are well-compensated. Automakers have rigorous, tested systems for setting fair labor times. The bills showing up in state legislatures right now would blow up that system - not because it’s broken, but because dealers want more margin than they already have.
When you hear a lawmaker say they’re fighting for your local dealership, ask a simple follow-up: what happens to the price of my next car?
That answer tells you everything.
RevUpAmerica advocates for policies that keep American vehicles accessible, competitive, and consumer-friendly. Follow our coverage of state-level automotive legislation at revupamerica.com.