As the automotive industry braces for the financial ripple effect of U.S. tariffs on Chinese goods, Len Bellavia, founding partner of Bellavia Blatt and a prominent attorney for dealers, is urging retailers to shift focus from inventory constraints to long-term operations profitability and legal preparedness. During the latest episode of Inside Automotive, Bellavia outlines the growing list of manufacturer tactics, intentional or otherwise, that could cost individual dealers hundreds of thousands, if not millions, in annual gross profit.
According to Bellavia, one issue taking root involves the short payment of dealer reimbursements for warranty repairs and no-cost battery replacements. Although these occurrences may seem isolated, Bellavia emphasizes that the cumulative loss in gross profit can reach $100,000 to $125,000 per store annually. These patterns, he suggests, are not random. “Manufacturers are always thinking three to six months ahead,” he said. “There’s going to be an increase in fixed ops, and dealers are going to become smart about this. So they’re pushing back early by underpaying dealers and hoping it slips under the radar.”
Rather than pursuing manufacturers individually, Bellavia recommends that dealers work through state associations to identify common issues and act collectively. He estimates the industrywide impact could be as much as $1 million per rooftop each year. With retail reimbursement alone, Bellavia argues that many dealers are leaving an additional $250,000 annually on the table due to flawed processes and improper discounting on the customer-pay side, which negatively impacts reimbursement submissions.
Bellavia also addressed the broader fallout from lost vehicle sales due to tariffs. He urged dealers to quantify potential damages using litigation-style modeling that takes into account cascading losses such as F&I, trade-ins, warranty work, and future referrals.
These projections can then be used in negotiations with OEMs. If a manufacturer demands a costly facility upgrade or dealership separation, a scientifically backed damages model gives the dealer leverage. “You need more than just a newspaper article. You need a business case,” Bellavia stressed.
He also weighed in on the direct-to-consumer strategy of Scout Motors, a Volkswagen-backed EV brand. While state dealer associations in Florida and California are already suing to block the move, Bellavia underlined that winning such a lawsuit outright may not be the optimal outcome. Instead, he advocated using legal leverage to negotiate terms that preserve dealer involvement, such as service stipends, F&I participation, warranty rights, and access to trade-ins, without absorbing the full cost of sales.
“This is high-stakes negotiation... the goal is to stop the long-term plan to bypass the dealer network while structuring a middle ground that benefits both sides.” – Len Bellavia
Finally, Bellavia provided an update on the class action settlements involving CDK and Reynolds & Reynolds. Dealers who filed claims for the $29.5 million settlement can expect to receive checks by August or September 2025, based on how long they used the systems during the ten-year qualifying period.
For now, Bellavia says the most important action dealers can take is to organize their internal teams—including controllers, CPAs, and legal counsel—to assess risks and reclaim profits already slipping through the cracks. As the economic climate shifts, fixed ops, legal strategies, and dealer advocacy may prove more critical than ever to dealership survival.
