They pay the prevailing rate in the area. A dealer submits a request for a rate increase based upon surveying other dealers (not just Honda) in the area and an audit of the applying dealerships effective labor rate. From those figures and the actual warranty rate sought, the District Rep submits to national and a decision is rendered . I've worked in 3 Honda dealerships since 1973. My current (23 years) Service Dept's door rate is $99 per hour (we are on the lower side in our area) and our current warranty rate paid to us is $95 per warranty flat rate hour. As soon as we have enough time to produce an effective labor rate that would allow us to seek an increase we will seek that same $99 per hour. And like dozens of times in the past as rates have increased, Honda will grant that. Of course we need to know when the right time to apply is. You are partially correct in that Honda doesn't pay the "street" rate. That's because the customer labor rate rises first and the warranty labor rate increase application soon follows. That's why I stated they are usually
90-95 percent of customer rate. But there are plenty of times the rates are the same. A dealer who turns away warranty work is leaving up to 30% of his business on the table as well as eventually running out of customers after he pisses them all off. Yeah, there are alot of gouging, uncaring dealers out there, but they won't be there long. If they want to run their multimillion dollar business in to the ground, we don't I'm not bragging or advertising (no location given), just wish there were many more legitimate dealerships out there so the ones in business that are doing the right thing don't get judged by the rest.