Manufacturers face new rules on dealer compensation and warranty parts pricing

On January 24, 2025, the Nebraska State Legislature introduced Legislature Bill 667, a significant piece of legislation aimed at reforming the relationship between automobile dealers and manufacturers. This bill seeks to address longstanding concerns regarding compensation practices for warranty repairs and parts, which have been a contentious issue for many dealers across the state.

The primary purpose of LB 667 is to establish clearer guidelines for how manufacturers must compensate dealers for parts used in warranty work. Currently, dealers often face challenges in receiving fair compensation, particularly when it comes to the markup on parts. The bill stipulates that only retail sales not involving warranty repairs or routine maintenance should be considered when calculating average percentage markup. This change aims to simplify the compensation process and reduce the administrative burden on dealers, who often find themselves navigating complex and time-consuming methodologies imposed by manufacturers.

Key provisions of the bill include a requirement that manufacturers compensate dealers for parts provided at no cost or reduced cost for warranty work, ensuring that dealers receive fair reimbursement based on their costs and the fair wholesale value of the parts. This is a crucial step in protecting the financial interests of local dealers, who have argued that current practices often leave them at a disadvantage.

The introduction of LB 667 has sparked notable debates among lawmakers, with some expressing concerns about the potential impact on manufacturers and the automotive market. Critics argue that the bill could lead to increased costs for manufacturers, which may ultimately be passed on to consumers. Supporters, however, emphasize the need for fairness and transparency in dealer-manufacturer relationships, highlighting the importance of supporting local businesses in Nebraska.

The implications of this legislation extend beyond the automotive industry. By ensuring that dealers are fairly compensated, LB 667 could help stabilize local economies, particularly in rural areas where dealerships play a vital role in community services. Additionally, the bill may set a precedent for similar legislation in other states, potentially reshaping the landscape of dealer-manufacturer relations nationwide.

As the legislative process unfolds, stakeholders from both sides will be closely monitoring the discussions surrounding LB 667. The outcome of this bill could have lasting effects on the automotive industry in Nebraska, influencing how dealers operate and interact with manufacturers for years to come.