Claim rates and the unreimbursed cost of warranty; revenue per bay and per job, bay utilisation, workshop break-even and adding a bay.
By Manoj Sahukar· October 2026 · 9 min read
How numbers are rounded on these pages. Calculations are done at full precision and rounded only at the end, half up. Rupee amounts are rounded to the nearest rupee unless shown with paise, in which case to the nearest paisa. Percentages are shown to two decimal places, days to one decimal place, and payback periods in years to two decimal places. Interest for a number of days uses a 365-day year (simple interest). Break-even job counts and units needed to cover a cost are rounded up to the next whole number. All examples and quiz questions are Hypothetical: they show the method, not real prices or rates.
Warranty and claims cost
When a product fails under warranty, the dealer usually inspects it, replaces it from his own stock, files a claim with the brand and waits for approval and a credit note. Not every cost comes back: handling time, claims the brand rejects, and the interest on stock given out before the credit arrives.
To see what warranty really costs, work out the claim rate and the unreimbursed cost per claim, then spread it over every unit sold.
The standard formulas
Claim rate % = Number of claimsUnits sold × 100
Expected unreimbursed cost per claim = Handling cost + (Rejection rate × Value of a rejected claim)
Spread over salesWarranty cost per unit sold = Claim rate × Unreimbursed cost per claim
Funding cost of pending claims = Value of replacements × Rate × Days until credit365
Terms used
Warranty claim
A request to the brand to replace or repair a product that failed within the warranty period, and to reimburse the dealer.
Claim rate
Claims as a percentage of units sold.
Rejection rate
Share of claims the brand refuses, for example for misuse or missing documents.
Unreimbursed cost
The part of a claim's cost the dealer bears himself.
Worked examples
HypotheticalBasicClaim rate on batteries
A battery dealer sold 2,000 batteries in a year and handled 60 warranty claims.
Claim rate = 60 ÷ 2,000 × 100 = 3.00%
HypotheticalIntermediateWhat each claim really costs
Each claim takes ₹150 of staff time and transport that the brand does not pay. The brand rejects 10% of claims, and a rejected claim costs the dealer the ₹3,000 battery he gave out. Each battery earns a margin of ₹400.
For many dealers, the workshop is the part of the business the brand cannot take away. Measure it in a few simple numbers: revenue per job, jobs per bay per day, how much of the available bay time is actually used (bay utilisation), and the contribution each job leaves after parts and consumables.
Technicians on fixed salaries are a fixed cost of the workshop; the break-even number of jobs is fixed costs divided by contribution per job, just as in the trader break-even page.
The standard formulas
Revenue per job = Service revenueNumber of jobs
Monthly revenue = Bays × Working days × Jobs per bay per day × Revenue per job
Bay utilisation % = Bay hours usedBay hours available × 100
Contribution and break-evenContribution per job = Revenue per job − Parts cost − Consumables (− any per-job pay)Break-even jobs = Workshop fixed costsContribution per job
Terms used
Bay
A service position (ramp or lift) where one vehicle or product is worked on.
Bay utilisation
Share of available bay hours actually used for paid work.
Revenue per job
Average labour plus parts billed per job card.
Contribution per job
Revenue per job minus the costs that come with that job.
Worked examples
HypotheticalBasicMonthly workshop revenue
A two-wheeler workshop has 4 bays, works 26 days a month, does 5 jobs per bay per day, and averages ₹800 per job.
Monthly revenue = 4 × 26 × 5 × ₹800 = ₹4,16,000
HypotheticalIntermediateContribution per job and break-even
An average job bills ₹700 labour and ₹500 parts; the parts cost ₹380 and consumables ₹50. Fixed costs: three technicians at ₹18,000 a month, rent share ₹30,000, power ₹10,000.
A 5th bay would add ₹25,000 a month of fixed costs. If it brings 80 extra jobs at ₹770 contribution: ₹61,600 − ₹25,000 = ₹36,600 a month extra profit.
With bays only about 72% used, first check whether the extra jobs could fit into the existing bays.
Quiz: warranty claims and workshop revenue
Pick an answer to see at once whether it is right, with a short explanation. Each question takes one try; your score appears at the end. No answers are sent anywhere. (Without JavaScript, open “Show answer” under each question.)