The Extended Oil Change Lie

How the factory quietly cut its warranty bill 0:00

Steve Shaw: Here we are again, Dave Rogers. Welcome back.

Dave Rogers: How are you doing today, Steve?

Steve Shaw: I'm a little travel-weary, but I'm doing well and excited for the future. This is the start of the second half of the year, coming right off a great Friday live. What'd you think about that?

Dave Rogers: I think that was awesome. I had a blast doing it. A lot more stuff to look at on the screen keeps it a little busier. And I love the interaction from the people in the audience. It's really cool.

Steve Shaw: Just so everybody knows, for the next 12 weeks we're going to be live on Fridays at four o'clock. That was crazy for me, because I don't really work that hard, so four o'clock on Friday, I was still at work. That was pretty interesting. So, back to normal here. What's on your mind tonight?

Dave Rogers: I was going to do this on the Friday show, and we had a topic of conversation that just never materialized, so I figured we'd bring it up here: basically, how the factory quietly cut its warranty bill in half over the years. I love your title on that, too.

Steve Shaw: "The factory quietly cut its warranty bill." That's pretty awesome. I know that plays right into your rant about scheduled maintenance and how we're maintaining our cars less and less. So tell us, how did the factory quietly cut its warranty bill?

Dave Rogers: Over the last twenty, twenty-five years, they've been stretching the maintenance intervals. A lot of them have gotten in and out of free maintenance programs, getting out when they realize there's no money in it or it costs them too much. But just basic facts: the U.S. auto warranty accrual rate went from 2.7 percent of sales in 2003 to 2007, down to 1.26 percent between 2015 and 2019. So in essence they've cut the amount they have to accrue to pay for warranty repairs in half. A full point off is a billion dollars that left the factory's books by doing this.

I love all the guys in the warranty business out there now telling you warranty's up, warranty's up. Yet everywhere else you look, it's down. Maybe domestics, maybe Ford, Chevy, Chrysler, Stellantis, but I don't see it. In the last year alone, from the stats you provided me, Hyundai was down five percent, Kia down eight percent and Ford down two percent. Which is pretty amazing if you think about it. So they're lightening their books, they're raising prices, and every chance they get they're blaming the dealers, which is probably the best PR move going.

The technician gets hurt the most 3:36

Steve Shaw: Some people who know me very well might use the term conspiracy theorist about me in my personal life. In my professional life, I usually don't go down that path until I know somebody pretty well. But it is fun to have those conversations at lunch. I don't know that you could make the argument this is a conspiracy, but it's certainly worth a discussion, and worth asking how the auto manufacturer is saving all of this money. I like that term, the accrual rate. In the past, you sell a car, they accrue money and put it into a warranty fund. Now, twenty-something years later, they're accruing less and less.

Is that a conspiracy? Maybe, maybe not. Maybe the cars are getting built better. Maybe they're shifting the burden to someone else. But it's certainly worth the investigation and the discussion. It's not my money, and we could even say it's the dealer's money, but there are other people in the game who get hurt by this as well. The unfortunate part is the technician gets hurt when it's all said and done. I hate to say it, but the lowest rung of the ladder, the technician, is the one ultimately getting hurt by all of these things. And you wonder why there's a technician shortage, and why nobody wants to work on cars these days. The money's just not there.

Dave Rogers: Think about it. If you have new technicians, young men and women joining the team, maybe you give them a 30-, 60- or 90-day guarantee, or you pay them hourly in the beginning. But there isn't that quick maintenance anymore, that easy service work for these guys and gals to cut their teeth on. It doesn't take them long to figure out, "I can't make 40 hours doing this," because everything is technically advanced and they don't have the training for it. An express technician in a Honda store, you're lucky to get 20, 25 hours a week out of that guy or gal. You're not going to make 40 hours, so you've got to pay them hourly or give them some kind of incentive. There are some young folks who want to stay in express, and they're okay with sixteen, twenty bucks an hour changing oil and rotating tires, which is fine. We need those folks in the business.

But it used to be an entry-level point, and then you could put them in the shop and bring them along. There are no timing belts anymore. They've extended oil changes from three thousand miles to ten thousand miles, spark plugs from thirty thousand miles to a hundred thousand. Lifetime fluid: "Whose lifetime?" is the running joke, because there's no such thing as lifetime fluid. They just pushed it off to a hundred thousand miles on transmissions and coolant. Now you don't get those four-hour, thirty-thousand-mile services you could give an entry-level C-rate tech, so they could learn how to do squeaks and rattles and all that other stuff and still go home with a 40-hour paycheck. You're right, the techs are the ones getting hurt the most. The dealerships are getting hurt. And I think ultimately the customers are the ones really suffering, because these cars aren't going to last two, three hundred thousand miles like they used to if they keep following the factory recommendations. It's ridiculous.

Planned obsolescence and the customer 7:13

Steve Shaw: Well, there you go. Then the lowest rung of the ladder would be the customer. The technician with his payments, the dealer up here. We know our dealers do well. They make a lot of money, but they invest a lot of money, and it trickles down to the technician who's struggling every day to make a paycheck. But there's a customer on the other side of that. In my world we'd call that planned obsolescence. I saw something about General Motors back in the fifties. Cars were expected to last a long time, and then the guy who took over decided there would be a new model every year, different colors, always a new bell and whistle, that new shiny object, because they want the customer to buy another car.

Fast-forward 50, 60, 75 years, and the customer is the one losing in the end. I'm driving my Wagoneer, and I've got more problems with it. I squeezed a hundred thousand miles out of my Wrangler, but that's because I do the maintenance to the letter of what the factory says, plus what I'd call best care, plus the fluid maintenance, plus whatever else I can do to make my car last a long, long time. And I don't think most customers in today's day and age are in a position to do maintenance-plus. A lot of customers just say, "Whatever the dealer says, I'll do." And then there's somebody out there, maybe it was Steve Shaw years ago, saying, "Watch what the dealer is selling you." The consumer advocates out there are giving the dealer a hard time because we add additional items. Certainly there's a financial aspect to that for us as an organization.

But ultimately, if the customer does the factory maintenance plus the fluid maintenance, or does the factory maintenance twice a year instead of once, or three times instead of twice, all of a sudden that car is going to last years and years. I think it all falls back on us in the industry. There's an education piece we've got to take on. I know it's been at least two years since I was up at your store when you did your first rant, where you were educating all your advisors, in an interesting way: "We do maintenance because of X. We're not doing it to rip the customer off. We're doing it because we want the customer's car to last a long, long time." It's a tough pill to swallow right now.

When the factory pays, the interval doubles 10:13

Dave Rogers: There are so many tentacles to this, but I'll give you a couple, and this is where anybody paying attention can say, "That's bullshit." In the early nineties, Hyundai came out with their Value Care maintenance. That was the first one I'd ever heard of where the factory would pay for oil changes. Back then we had conventional 10W-40 in the cars, and everybody on the planet knew you changed the oil four times a year, roughly every 3,500 miles. All of a sudden Hyundai comes out with a plan to pay for the 7,500, the 15,000 and the 22,500. That's all they were going to pay for.

Anybody who's 40 or 50 years old now remembers when you changed the oil every three to four thousand miles. So here's what started happening. I was in a Hyundai store at the time. Customers would come in for their first oil change, which we gave them for free at three to four thousand miles. You'd explain, "The next one's free because the factory pays for it. The one after that you pay for. It's just $19.95." They'd hear parts of that and not listen. When they came back in for the ten-thousand-mile oil change and you told them it was $19.95: "No, no, my maintenance is free." "Remember when I told you?" "No, I just want the free stuff."

All of a sudden they forgot it was four times a year, because their salesman and everyone else was telling them they didn't have to change the oil like that. Then once they got their 15,000, which they got for free, you never saw them again. It was almost like magic. They would disappear. I made the comment the other day about Hyundai customers not being loyal, and I think it started back then. Customers had this distrust for what we were telling them, even though in their heart they'd been doing it the other way over and over again. The oil didn't change. It was still conventional 10W-40. But when the factory started paying for it, they punted it out to only three changes.

A little bit later, BMW and Mercedes both used to have the same thing: six months, six thousand miles, oil change, tire rotation, check the car over. As soon as they started paying for it, guess what? It was a 12,000-mile or 15,000-mile service. AMGs were always five thousand miles. All of a sudden they became 10, because the factory started paying for it as part of their maintenance.

And unfortunately, dealerships did a terrible job. We were also bullied by the factory into not recommending the normal maintenance. Here's what happened in real life. Steve, you'd call me up and say, "I want to get an oil change." I'm in the Mercedes or BMW store, and I'd say, "How many miles are on your car?" You'd say, "Six thousand." And because I didn't want to piss you off or bury myself on the survey, I'd say, "Just so you know, Steve, the free service isn't until 10,000." You'd say, "But I want to change it anyway." And they'd say, "No, you can't."

They never said, "Well, if you pay for it, I can do it." There were some dealers that did, but everyone took the path of least resistance. So what did Steve do? Steve either drank the Kool-Aid or went somewhere else and had the oil changed, which is what I saw people do for years. And then we wonder why we lose customers. I watched this in the Honda world not too long ago. "I need an oil change." "Is your light on?" "What light?" "The one that says you have 15% to go before your maintenance is due." "No light's on. I just went four, five thousand miles and want to change the oil." "No, you've got to wait until the light comes on." No, you don't. You can come in.

But this is the way everyone's brainwashed, whether it's CSI or the factory rep, whatever the case may be. We've done this to ourselves by being weak about it. And obviously the press has been pushing not to change the oil for a year. Now, oil has gotten better since those days. I get that. You have full synthetic oil, 0W-20, 0W-16, 0W-8, whatever the hell it is. I was reading that the oil is good. It's not that it's bad. It's thin, thinner than your cooking oil. But this is stuff we've done to ourselves. And if you look at it, a lot of this stuff just makes no sense at all.

"Wait until the light comes on" 14:50

Steve Shaw: I remember being a kid writing service in the late eighties, early nineties at a Pontiac GMC store. The GMC Astro van, or whatever those little minivans were, came out with the maintenance minder. I wasn't in the Honda world, so I don't know when it came out there.

Dave Rogers: 2005.

Steve Shaw: Well, back in the 90s, GM had the maintenance minder, and it went from the 3,000-mile interval we were on in the 80s to all of a sudden 15,000. I was a technician, and I do have technical skills, at least back in the day. I have a technical degree and all that certification. But I wasn't smart enough to understand what was really happening, and I certainly wasn't in a position to question anybody. If my boss said, "Check if the light's on. That's when we change oil," I'm like, "Okay, I'm just doing what you say." I was very young, early 20s back then. My boss was Dick Blumenstock. I wasn't going to say, "Dick, why would I do that?" I'd say, "Okay, you're the boss. I'll do whatever you say, and I won't have the customer change their oil until the light's on."

So we did. We started running these cars longer and longer. At the time I probably didn't care, because I was working at a union shop getting basically a weekly pay, and it didn't matter what I sold or didn't, other than bragging rights, or making sure all my men had their time. We just went along with it. But I remember my first time as a manager, when we went from conventional oil to synthetic oil, the manufacturers still said, "Nope. If you put Castrol super synthetic oil in the car, which is supposed to last forever, the customer still must change their oil at the prescribed intervals." So in a sense they're talking out of both sides of their mouth: the oil's better, but you still have to do this. It seemed like a catch-22. No matter what you did, you were in the wrong.

Dave Rogers: Toyota had five-thousand-mile intervals with 0W-20, which was the semi-synthetic oil they were putting in the cars then. They said every five thousand miles, oil change and tire rotation. We changed our menus from four times a year to twice a year. Everybody was on board. It made sense. The oil's better. We get to see the customer every five or six thousand miles, five or six months. I think they based it on ten thousand miles of driving per year, so we'd see the guy every five thousand miles. That was probably the beginning of the semi-synthetic era. They told us the oil's better and goes a little longer. But the rumor was that the filters couldn't go much longer, so the oil would start bypassing the filter, which is useless.

And amazingly enough, and this is where the conspiracy theorists have their point, around 2010, when Toyota decided to start paying for the maintenance, the maintenance schedule with the same oil became 10,000-mile intervals. And that's what they've been doing ever since. They do it at ten thousand and at twenty thousand, with two years or twenty-five thousand miles of free maintenance. So when they're paying for it, it was extended out to ten thousand miles. That's where you have to say, "Aha." When the factory pays for it, it can go ten thousand. When the customer pays for it, it can only go five. How does that work?

Then around 2005, Mercedes got out of it. They bailed. They said the free maintenance thing wasn't working. Customers didn't like it. It didn't cover everything like BMW's did at the time. And our customer-pay numbers were dwindling in the Mercedes store. I think they used to have three years of maintenance, and if you came in to me, I couldn't get a dollar out of your pocket for three years, Steve. Your car needed tires and you didn't want to pay for them. Your car needed brakes, and you didn't want to pay for those either. I couldn't wrestle your wallet out of your back pocket, ever. Even at 50,000 miles, when you were so used to not paying anything, you wanted everything goodwilled under warranty.

It was the most amazing thing I've ever seen. I got to the Mercedes store and thought, "These guys are doctors and lawyers. They're going to spend money." I'd never seen anything like it. You couldn't get anybody to spend a dollar. It took a little time, but they finally got rid of it, and now customer pay is very healthy in the Mercedes stores. I just think all these things make you wonder. It's probably like you said, planned obsolescence, because they want people to buy cars more often. But unfortunately, this is a fifty-thousand-dollar Bic lighter, in essence. It's not supposed to be disposable.

Shifting the cost to dealer reinsurance 20:20

Steve Shaw: You're very eloquent in talking about this, certainly in our private conversations and in our training: the reinsurance side of the business. Think about it, going back to the manufacturer's dollars, the warranty, the extended intervals. Then you shift that burden. I wasn't an expert back then, but I can recall when we all sold Ford ESP. Having anything other than the manufacturer's plan was almost taboo. I see a lot less of that anymore. Every dealer has their own program, their own dealership-backed warranty program. Maybe you could speak to that.

Dave Rogers: I grew up in the Chevy world. GMPP, or MRP for used cars, were the only two warranties we honored. We didn't want to know about any Mickey Mouse outside warranty, and that's all we ever sold. My friends at the Ford dealer, same thing, ESP. I moved over to the Chrysler world, and we had the Chrysler service contracts. Before that, at the Nissan store, it was Nissan Security Plus. It was all in on the Nissan stuff.

Steve Shaw: I've got to interrupt. I can remember calling 1-800-GMPP and hitting the pound key, using the phone keypad. I could be working on three other things, hitting one through nine on my keypad, doing a warranty claim on GMPP.

Dave Rogers: It used to be great. Chrysler had that little slave terminal with the fax paper, and six months later the fax paper would be blank. You didn't have proof of what you'd called in. It used to crack me up.

Steve Shaw: I'm going to wake up in the middle of the night tonight with that 800 number in my head. I'll be filing claims tonight. Anyway, go ahead. Sorry.

Dave Rogers: For me, it was probably in the late nineties that the dealer group I was working for had their own reinsurance plan. I didn't understand reinsurance. I had no idea what it was. It was United Auto Care, from United Auto Group at the time, the predecessor to Penske. They had their self-insurance people. Fast-forward, and the public groups have gotten out of that business. I guess there was an issue with accounting and recognizing long-term gains that they couldn't figure out for the SEC, so they sold off the portfolio at one point. Now, with the new group, I've gotten more and more involved, because they've had me look at claims loss ratios and get into the VSC side.

You don't hear the manufacturers pushing their warranties anymore, because they've unloaded it onto the dealerships. I've been saying to my owners for a few years now that this is a really bad thing we've got going on. Listen, I'm not a partner. I don't share in this revenue. It doesn't affect me at all. But I'm looking out for my owners, because the more money they make, the better off we all are.

"Don't neglect your car, then sell it back to me" 23:30

Dave Rogers: Here's a ludicrous example I gave them. You have salespeople telling customers, "Here you go, Mr. Shaw. I'm going to lease or sell you this car. And here's what I want you to do: just bring the car in when the light comes on." So basically, "I want you to neglect this vehicle for the next two or three years. Don't put any money into this car. Change the oil only when the light comes on, and take your time making the appointment. No rush. That 15% is just an estimate." And then somewhere around 30,000 miles, I'm going to call you up and say, "Hey, Steve, I want that wonderful car you've been neglecting for three years. I really want that car, because I need cars just like that on my used car lot."

"I'm going to give you top dollar for the piece of shit you just neglected for three years." I run it through my shop. We have no way of knowing what's inside the engine. We don't have an X-ray machine. I put the car out there with 35,000, 40,000 miles. It still has some balance of factory warranty, and the factory's done the math: the chances of that engine going bad right now are slim to none, even with only three oil changes. Then I sell that car with a seven-year, 100,000-mile extended warranty, a wrap around it. That car hits 60,000 miles, and guess what? It starts falling apart. And guess whose insurance company pays for the repairs? The owner's reinsurance.

I had one the other day, not a reinsurance plan. I'll skip the brand, but it's a premium-ish brand. The guy had done all the oil changes since he bought it, once a year, every 10,000 miles. The car had 80,000 miles on it, and the check engine light came on. He was a little pissed because we couldn't get him right in, but we got him in, and his timing chain had jumped, at 80,000 miles. We took the car apart a little, and it was kind of sludgy. He got to me at corporate and complained. I looked at his history: "You changed the oil eight times. This is the reason." He said, "Well, I'm doing what the book says." "Well, don't ever do that again."

The guy had just bought a Nissan from us, and he'd bought other cars from us, so he was a good customer. We wound up trading him out of the car. It was a six-thousand-dollar repair, and he didn't have an extended warranty. That would have been cash for him. And this is not a once-in-a-while situation. It's happened in cars from the lower levels all the way up to luxury cars. It's the lack of maintenance. There's no other way around it. And the guy followed the book. That's the frustrating part.

Steve Shaw: When you follow the book, when I buy my car and do exactly what I was told by the salesperson and the manufacturer, I think most people's expectation is that the car should last a hundred thousand miles. That's nowhere near the manufacturer's expectation, which is about thirty-six thousand, maybe fifty on the outside. Then they wash their hands of it, and you're right, it falls back on the dealership. Like you said, we either buy the customer out and help them into a new car, but we still have that used car. Now we certify it, say it's a great truck or a great car and put it on the lot, and we're even more on the hook as the dealer selling the used car. The manufacturer gets to wash its hands one hundred percent, because it's a used car, or twice-used at this point. The dealer is on the hook.

I work with Zurich North America, the F&I company. I do all the fixed ops training for them. And a lot of the calls I get right now from the reps and dealer clients are about exactly what you're talking about: "How do we reduce our claims? Our claims are going through the roof." People are asking me about pay plans, how to pay people, how to control reinsurance costs. For it to get to my level, as a sales trainer and consultant, with people asking, "How do we fix this?" it's got to be getting way out of control.

Thin oil, CAFE and lifetime fluid 27:48

Dave Rogers: They say the average car on the road right now is 14 years old. It's gone up. We had five or six years of lower new car sales from post-COVID until recently. Last month was the first month the SAAR crept up to 16 million. And after COVID, people were buying out their own leases because there were no new cars, and those cars were having engine problems right after they bought them, and the customers were mad. I had a guy who bought at another store break down in front of me, and they were all pissed at me. I said, "I didn't neglect your car for three years. I've never even seen you before." That was the ludicrousness of what was happening.

You know me, I rant. I've told GMs and salespeople. One of our best sales guys, Frank Renetti, sells twelve, thirteen hundred cars a year. The guy's a beast. He listened to one of my rants one day and said, "I never thought of it like that. I'm not doing my customers a favor by telling them to follow the factory book." Everyone thinks it's bullshit. The oil in the cars now isn't bad, but it is thin. They keep thinning the oil out because of the CAFE requirements for fuel mileage. They say chopping down the viscosity adds half a mile per gallon or whatever it is, and the federal government has forced the manufacturers to do it.

But at the same time, the manufacturers should have smartened up and said, "Listen, since we have to put the thinner oil in to meet these CAFE requirements, you, Mr. Customer, have to change the oil twice a year." That's the honesty of it. But they've been talking out of both sides of their mouth, to steal your phrase. They're deferring the maintenance to the dealer's reinsurance plan, let's be honest, and reaping the rewards on CAFE with the cheaper oils.

Steve Shaw: Somewhere in the research I was doing, and I don't have it in front of me, it said that with the same car and the same engine outside the United States, it's a whole different story. It's one hundred percent different, because of the CAFE standards. In the United States we have to get to whatever that ridiculous number is as a fleet, fifty miles per gallon or whatever.

Dave Rogers: It's forty-nine miles a gallon in 2026. That's what they're trying to get to.

Steve Shaw: Go outside the United States, and that's totally different. Different oil, different everything.

Dave Rogers: They use the same engine and put in 5W-30 or 10W-40, the regular multi-viscosity synthetic. Because of pulling the trailer and the hot August summers down in Miami, you need the top end, the 40 viscosity, the thicker film strength when it gets hot. HTHS, whatever the term is. You don't have that with 0W-20, and it's getting worse with 0W-16 and 0W-8 now.

Steve Shaw: I don't know the answer to this, and I'm going to step out on a limb here: we should come up with the longevity oil change. You bring in your car with the thin oil, and we replace it with the thicker oil. Maybe it reduces your fuel economy by half a mile per gallon, but your engine will last much, much longer.

Dave Rogers: It'll last. And I'll tell you the other thing: change the spark plugs at thirty thousand miles, and you'll get better fuel economy too. If you go to a hundred thousand miles, the electrodes are all rounded. That could be a whole other discussion, because waiting a hundred thousand miles to change spark plugs is another bunch of crap. We've gone over thirty minutes, and I don't want to bore anybody with my rants. We could talk about multiple things on the car. But I do think the conspiracy theorists are right on this one.

GM tip: pay customers to maintain their cars 31:54

Steve Shaw: All right. I have a whiskey glass in my cabinet that says, "I need more conspiracy theories, because most of them have come true." So here's a new one. If you're out there listening, you can drink to it, do a little research and go down this path for yourself: the auto manufacturer conspiracy. Dave, give us a GM tip of the day and let's get out of here.

Dave Rogers: The GM tip of the day: stop telling people to stop maintaining their vehicles. I've recommended this to multiple general managers. Let's say the factory says once a year, and an oil change on a regular brand car is 100 or 150 bucks, whatever it is. Tell the customer to change the oil at six months, again at 18, in between the maintenance visits, and again at 30. That's three, four hundred bucks the customer spends. Tell them you'll give them an extra $500 on their trade-in when they trade that car in at 36 months or the end of their lease, if they do that. Throw them a bone. If it's a premium car, maybe it's $1,000 more. I guarantee you it's well worth the $500 to $1,000.

Steve Shaw: Everybody write this down. First time ever on this show, a Steve Shaw Training tip: the best care for your car. "This will be the best care for your car, Mr. Customer." Let's get out of here. I'll see you later on in the week.

Dave Rogers: I love it. All right, man. I'll talk to you.