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Dealerships cannot afford to treat these losses lightly, or to exceed their warranty repair budget every month. This is big business, and dealers make an average of 11-12 percent of their net profits on service repairs. But they still have to sell the products the manufacturer sends them, even if they are defective.
Secret Warranties
What happens when defects in certain vehicle models become known? For safety-related defects, the National Highway Traffic Safety Administration can order what is called a recall. Many times, manufacturers will conduct a recall voluntarily-sometimes even before NHTSA gets involved. Whether a recall is voluntary or compulsory, the manufacturer must do several things: |
1. The manufacturer must arrange to repair the defect at no charge, or, if the manufacturer chooses, to replace or repurchase the vehicle or defective component.
2. The manufacturer must file a public report, which must contain the following information:
• The defect
• The types of vehicles or equipment affected
• The major events that led to the recall
• The remedy the manufacturer will provide
• The schedule for the recall
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