Road hazard warranty

Definition

A replacement promise sold with the tire, which books revenue now and owes work later.

Why It Matters

It is high-margin at the register and it is a liability you inherit, because the tires under those promises are on cars that will come back to your bays. Ask how many are in force, what the claim rate has been, and whether the money was ever set aside, since most shops book the whole fee as revenue in the month it is sold and carry no reserve at all against the replacements still owed.