Issue No. 3 | April 21, 2026

For warranty administrators who manage loss ratios, reinsurance, and contract performance.

This Week: The Compounding Repair Cost Base

THE CURVE

Service and parts sales per warranty repair order at franchised dealerships have grown from $343 in 2018 to $551 in 2025. That is a 60% increase over seven years, compounding at 7.01% annually (NADA Data). The growth has been steady. Per-repair-order spend moved from $396 in 2020 to $440 in 2022, $512 in 2024, and $551 in 2025. There has been no reversal and no plateau.

That progression sits inside a much larger cost base. Franchised dealerships booked $75.81 billion in service labor and $93.42 billion in parts in 2025, or $169 billion flowing through the service drive. At the store level, that runs through 16 technicians and 16,252 repair orders per year.

Every VSC claim settles against that system, at a per-repair-order severity level that continues to rise.

THE ADMINISTRATIVE ANGLE

Two implications follow.

First is earnings curve calibration. If your severity assumption is built on a three-year trailing average and updated annually, it is effectively anchored to 2022 through 2024 per-repair-order severity. That range runs from $440 to $512. Against a current run rate of $551, and assuming continued compounding at a similar pace, the embedded severity in the current book may sit 10 to 15 percent below where claims are actually settling.

Second is reserve and reinsurance alignment. A book priced at $440 to $512 severity is earning premium against a claims environment that has already moved beyond it. Loss development will trend adverse on more recent cohorts, and the gap widens each quarter the assumption remains unchanged.

Joel Kansanback’s 2026 Agent Summit keynote framed the broader shift. The next five years in F&I will compress decades of change. For administrators, the 7.01% per-repair-order compounding is a measurable expression of that shift. It is not a forecast. It is a trend already in motion.

If your methodology surfaces severity divergence only at the annual actuarial review, the lag is measured in quarters that your reserves are absorbing.

FROM THE BLOG

The Agency of the Future: F&I’s Next Five Years Are Twenty-Five Years of Change

Kansanback’s keynote outlines a structural shift in F&I, driven by affordability pressure, rising regulatory scrutiny, and the growing role of technology. This week’s post connects those forces to the operating model, from $1,975 per car in F&I income to rising negative equity and extended loan terms that are reshaping deal economics.

QUICK HIT

7.01% CAGR on per-warranty repair order spend since 2018. If an earnings curve is built below that rate, the book will trend underpriced, and the gap widens each quarter the assumption is not rebased.

Until next Tuesday —

If you’re reviewing Q1 severity or reserve adequacy and want a second set of eyes on the methodology, contact us here.