Warranty administration is a complex and often cumbersome process for many dealerships. The intricacies involved in claims submission, coupled with evolving state laws and manufacturer requirements, make it challenging to maintain accuracy and efficiency. One significant issue is the high rate of claim denials, which is often attributed to improper documentation, incorrect coding, or failure to comply with OEM standards.

For instance, the introduction of New Jersey's 'average retail labor-time allowance' rule, effective April 1, 2026, will necessitate adjustments in labor-time calculations across brands, adding another layer of complexity. Dealerships must now compute the multiplier from 100 sequential/90-day repair orders, which requires precise documentation and understanding of the new requirements.

Moreover, the increasing demand for post-warranty repairs, as highlighted by the average U.S. vehicle age reaching 12.8 years in 2025, adds pressure on service departments to handle a growing volume of warranty claims efficiently. This scenario is further complicated by a shortage of skilled warranty administrators, leading to backlogs and a higher risk of denials.

The financial impact of these challenges cannot be overstated. Warranty claim denials not only result in lost revenue but also strain cash flow, as dealerships must wait longer for reimbursement. According to industry reports, the average days-to-payment (DSO) for warranty receivables can be significantly reduced with streamlined processes, ultimately improving cash flow and operational efficiency.