California auto dealers will be able to recoup costs for warranty and recall work at rates closer to what retail customers pay, after Gov. Gavin Newsom signed an update to the state's dealer franchise law.
Newsom on Saturday signed AB 179, changing the rate that automakers use to reimburse franchised dealers for recall and warranty parts and labor. The change was sought by the California New Car Dealers Association, which contends dealers generally can receive close to 40 percent less from automaker recall or warranty repairs than they can collect from retail customers.
Before Newsom's signature, California set warranty reimbursements generally on what was considered reasonable. The updated law will set manufacturers' reimbursement rate to dealerships for parts and labor on warranty and recall work at "rates equal to the franchisee's retail labor rate and retail parts rate," according to the bill language. Dealers will calculate those rates using a formula that draws on data from past retail repair jobs.