Reasonable Parts Markup?

[Shane6377]

You already stated your friend has markup, many industries/trade do it if open your eyes, even my dentist does it, I know plumbers and electricians who markup parts they supply from trade accounts.
It fair practice and part of general business practice as long as cost still realistic retail and customer aware of cost prior to authorising work commencing .
It generally not as ridiculous or underhand as this thread is suggesting .

Have you read the posts in this thread? No one marks up parts in the way the auto repair industry does. It's perceived as a fair practice and part of general business by those in the auto repair industry... nowhere else.

The auto repair industry does not make its customers aware of costs/price but instead hides them by marking up parts and other superfluous fees.

That's why there are countless threads of people wondering if their bill was fair or if they got screwed.


Sent from my iPhone using The Garage Journal mobile app

 

[four.cycle]

The parts markup much beyond full retail at the most expensive parts place in town is what I dont agree with. We have places like Canadian Tire that sell parts and also has a service area. The parts are the same cost through the service area or bought from the parts department.

^ This is one of the places where there seems to be some confusion, and it's based on the assumption that the auto parts retailer is offering a huge discount to the installer.
That is an erroneous assumption.
Retailers such as O'Reillys do not sell parts to shops at a significant discount to their installer accounts. Their retail prices are already discounted from MSRP.

As has been pointed out several times here, the installer's markup on the parts is part of their business model, and it's always been that way.
The installer needs that markup to cover overhead costs (if and when the actual time performing that job exceeds "book time"), as well as something to cover their costs should a warranty issue arise due to a defective part.

I'm amazed at how little actual understanding of the industry there seems to be here.

 

[nadogail]

Having worked as a "Parts Chaser" when I was in High School, I have my 2 cents to add.

I was paid to drive to the parts house, stand in line, wait while my order was looked up and pulled, then I drove it to the shop.

There were the costs of operating the company truck, my employer paying for the part, and yes I occasionally took the "scenic route" in my travels.

All of the above added to the real cost of what ever part was involved. It only makes sense that my employer should recover all of the costs associated with getting the parts to make a customer happy.

 

[[memphis]]

I am from the other side of the counter but what I see daily from Warranty Claims and paperwork. Shops typically double their cost on parts and I have even seen triple.

Book time on a standard brake job is 1hr, most shops pad with 1.5hrs. The dumb shops are the ones whose parts mark up exceeds their labour hours billed over the course of the year.

 

[Mr_B]

Have you read the posts in this thread? No one marks up parts in the way the auto repair industry does. It's perceived as a fair practice and part of general business by those in the auto repair industry... nowhere else.

The auto repair industry does not make its customers aware of costs/price but instead hides them by marking up parts and other superfluous fees.

That's why there are countless threads of people wondering if their bill was fair or if they got screwed.


Sent from my iPhone using The Garage Journal mobile app

Really ! no other industry , half my family in construction trades and would beg to differ on that .
Seems to me everyone in this thread simply goes to same bad garage !
I know a lot of trades/professionals with bad practices , my dentist done it, I got a new dentist.
If customers want me deal with part sourcing and cover parts (besides retailer and manufacturer warranty we have own liability cover on parts) I have a right to some profit from time, effort and my experience in supplying decent quality at sensible price.
All prices are disclosed on quote and final invoice .
Nothing hidden.
If you go in Napa or your local dealer do moan at them when can find it online or at another parts store for 3rd the price .
I would of been out of business years ago if accusations in this thread half true, sure some mechanics are taking the piss but that the case across all professions .

 

[Shane6377]

I know a lot of trades/professionals with bad practices , my dentist done it, I got a new dentist.

So if your dentist did it and you didn't like it and got a new dentist why are you surprised when other don't like it?

You may run a great shop but charging big markups over retail is deceptive at best no matter how you look at it.



Sent from my iPhone using The Garage Journal mobile app

 

[Hiball]

I could care less how they get to the Estimate, I’m either going to allow them to do the job or not, that goes for Plumbers, HVAC and Any General Contractor, they’re all guilty. The Medical field is a entirely different ballgame, they all overcharge because they know Insurance companies/Medicare is only going to pay so much and beat them down.

 

[four.cycle]

No one marks up parts in the way the auto repair industry does.

Really?

There's a local hardware store about 1.5 miles from my driveway.

I was, for a time, able to make purchases through a close friend who was an employee and got their standard employee discount of store cost + 10%.
Tube of "Seal-All" glue: retail $5.99 - with employee discount (including 10.2% sales tax): $1.18
Package of 4 nylon chair glides: retail $4.99 - with employee discount (including 10.2% sales tax): $.82 (eighty-two cents.)

Your statement is simply misinformed.

 

[four.cycle]

The Medical field is a entirely different ballgame, they all overcharge because they know Insurance companies/Medicare is only going to pay so much and beat them down.

The independent automotive repair shop owner who's had his shingle hanging out for a few years knows that if and when a defective part causes a comeback, the odds of him recovering the labor costs to install the replacement part are slim to none, and even if he does receive monetary compensation for his hired man's time, he's still down because while his lead man was installing the second water pump on the same vehicle (at no charge to the vehicle owner, of course), he's not only got a potentially alienated client who may or may not return, but his mechanic could have easily completed a gravy brake job in that same time instead of spending half the afternoon horsing a water pump off a transverse-mounted V6 engine.

So of course he's going to establish a reasonable baseline for markup on parts and (if he's a good businessman) stick to it if he wants to stay in business.

 

[richfinn]

I,ve found it's a good idea to only install OE quality parts
(at the very least made by the same manufacturers who supply factory parts) and never charge more than the local dealers do for genuine parts, sometimes your mark up is only whatever trade discount you can squeeze out of the dealership and on other not made by the car manufacturer you can get away with much more.

The customer can then price check you against the dealer and the labour rate wins the job, I can't see 40% on every part you sell unless your fitting lower quality parts!!

 

[Mr_B]

So if your dentist did it and you didn't like it and got a new dentist why are you surprised when other don't like it?

You may run a great shop but charging big markups over retail is deceptive at best no matter how you look at it.



Sent from my iPhone using The Garage Journal mobile app

I didn't like it because my dentist charging huge markups so I used my due diligence and the free market find a better dentist.

Myself and many shops I know of are not charging 'silly' mark ups .
On suppliers we use I get from 40 to 10% better prices than average joe going get walk in, I also likely get parts in same day from out of town cross branch transfer or out of trading hours etc, I stock lot of common parts myself and consumables in bulk as keeps my prices competitive and my profit viable .
competitive is the key word here, no one holds a gun to your head, it a free market so don't use the bad apples and if you are getting overcharged confront them on it and move on .

If I was trying only half the suggested part prices and other increased charges suggested here on only half my customers I be spending my whole day fighting with customers and out of business in a month lol .
With the internet price checking easy within reason even for someone clueless on labour cost and part cost as is consumers rights .
I see just same amount of charge abuse in pretty much all professions that supply parts/labour at some level .
What you got realise is markup is not abuse or some form of hidden cost and separate that from obvious overcharging from some bad apples ...

 

[Shane6377]

What you got realise is markup is not abuse or some form of hidden cost and separate that from obvious overcharging from some bad apples ...

We'll have to agree to disagree.



Sent from my iPhone using The Garage Journal mobile app

 

[Skin]

The parts should have no markup above the acquisition cost, then to make their money they should charge appropriate labor and shop fees. Even if the bill is the same total price, at least be honest about where the expenses are.

Does this include dealers or exclude them? If it includes them a lot of auto manufacturers will go bust selling parts for repair at cost. If it excludes them then explain to us how an independent is going to look to the average clueless individual if they make no money on parts but charge more labor than the dealer to make it up on the back end?

What you're spouting is literally non-sensical.

Have you read the posts in this thread? No one marks up parts in the way the auto repair industry does.

Oh boy are you stunningly naïve. As I already pointed out movie theaters and sporting events rake the hell out of people for food and drinks.

Standard markup for basic retail is 60%-100% and quite often a lot more. As an example, Duracell/Energizer batteries are usually marked up 200-400%. Clothes are often massively marked up especially from the companies that have big brand recognition.

Since someone mentioned dentist, a night time bite guard costs about $500 (standard) and in the end you get 5 cents worth of plastic. Ever been to the ER? Ask them what they bill out for a bandage or a Tylenol. How about glasses? I could go for days.

 

[Bacon!]

Does this include dealers or exclude them? If it includes them a lot of auto manufacturers will go bust selling parts for repair at cost. If it excludes them then explain to us how an independent is going to look to the average clueless individual if they make no money on parts but charge more labor than the dealer to make it up on the back end?

What you're spouting is literally non-sensical.

Not at all. Auto manufacturers should be making their money on the vehicle, not the replacement parts. That just incentivizes them to make **** parts that barely outlast the factory warranty.

Plus, it depends on what you're calling a "dealer". If their primary purpose is selling parts, obviously there is markup there. The repair shop is not the dealer and their primary purpose is installing the parts. Big difference, and in fact, there is no justification for the installer to charge MORE overhead than the dealer itself. There are many dealers that charge no more than 20% markup while there are many shops that do.

How an independent shop is going to look is more honest and trustworthy and the customer will still see the bottom line on the bill, that the shop was no more expensive but more honest to get there.

Unless the independent shop is a bunch of Rock Stars, they're going to win business with this philosophy anyway, honesty, transparency, and lower prices, since we both know that the average clueless consumer is taking their vehicle to the dealer shop until they have a reason not to.

Do whatever you want, it's a free market for both shops and customers. Just realize, many customers are turned off by certain shops' practices and it motivates them to DIY more and more of their repairs which results in 0 profit for the shop. That's fine for the shop if it always has 100% of its bays full, but not so much a shop that doesn't.

 

[2ndGearRubber]

^ Many customers?



What portion of the general population do you believe are capable of filling up air in their own tires? I would be amazed if 50% could do so, as most can't figure out how to use the chuck itself, let alone go further. No youtube allowed, give them a car and compressed air, and tell them to fill the tires correctly.

I like DIY guys, as most pay me to do the PITA stuff anyways. They understand how terrible certain jobs can be, unlike Karen who believes any monkey can fix a car.

 

[Shane6377]

(null)
Again, we're not talking retail businesses. Retailers mark up prices because they add value to the consumer by bringing a wholesale product to a marketplace. That's an entirely different industry and an entirely different discussion.

The discussion is about service businesses marking up parts/materials a "reasonable" amount over retail.

Your movie theater analogy is probably the closest comparison but again, not a service business, it's entertainment. And purchasing soda and popcorn is not a requirement to see a movie. I do however think that the markup is excessive so I don't purchase that stuff at a theater.


Sent from my iPhone using The Garage Journal mobile app

 

[Skin]

Not at all. Auto manufacturers should be making their money on the vehicle, not the replacement parts.

That just incentivizes them to make **** parts that barely outlast the factory warranty.

Ok, in the real world its the opposite. Very little is generally made on the sale of a new vehicle by both dealers and manufacturers and that includes companies that offer very good warranties.

Plus, it depends on what you're calling a "dealer". If their primary purpose is selling parts, obviously there is markup there. The repair shop is not the dealer and their primary purpose is installing the parts. Big difference

Dealers are repair shops. They exist to sell new and used vehicles and create a consumer base to service in the future by selling and installing marked up parts. Again they don't make alot on selling the vehicle itself.

and in fact, there is no justification for the installer to charge MORE overhead than the dealer itself.

We're not talking about charging more overhead, we're talking about profit per repair. You're saying an independent has no right to charge for parts but should instead bloat their labor rate while a dealer can do both. Let me make it simple for you. You're saying an independent should charge $150/hr in labor, make no money on parts, while a dealer can charge $130/hr in labor and can make 60% on parts. Makes no sense and at face value just makes the independent look far less desirable.

There are many dealers that charge no more than 20% markup while there are many shops that do.

I can tell you with a certainty this is way off. In fact in the repair bay you generally get dinged full list even if that same dealer participates in selling at trade prices online as most do these days. 9/10 dealers I have experience with operate on a price matrix with a minimum markup of around 20-40% only for the most expensive components while cheap stuff (fasteners, fluids, wipers, etc...) can be marked up as much as 1000%. Yes, one thousand.

 

[Bacon!]

Ok, in the real world its the opposite. Very little is generally made on the sale of a new vehicle by both dealers and manufacturers and that includes companies that offer very good warranties.

Nor should they make very "much". If they try, they lose business. Competition 101.

Dealers are repair shops. They exist to sell new and used vehicles and create a consumer base to service in the future by selling and installing marked up parts. Again they don't make alot on selling the vehicle itself.

Nor sure where you get the idea that they can just insist that they're a gold mine and customers should bend over to accommodate this. If someone can't make it in an industry, it's time to find a new line of work.

We're not talking about charging more overhead, we're talking about profit per repair.

Wrong. I'm talking about lying and hiding profits instead of honest, transparent billing.

You're saying an independent has no right to charge for parts but should instead bloat their labor rate while a dealer can do both.

Wrong. I'm stating any shop should charge near their cost of the parts then a labor and shop rate appropriate to their expenses plus profit, is NOT a bloated rate. It's an honest rate instead of deceit and a shell game of shuffling around and hiding where the money goes.

Let me make it simple for you. You're saying an independent should charge $150/hr in labor, make no money on parts, while a dealer can charge $130/hr in labor and can make 60% on parts. Makes no sense and at face value just makes the independent look far less desirable.

Makes perfect sense except you're throwing out random numbers instead of market competitive numbers. There is no excuse for deceit and hidden profit. People make excuses to lie all the time and it's not tolerable in a business transaction.

Instead of nonsense it is real simple: Parts true cost, plus the labor rate needed to make ends meet. This is a far simpler way to be transparent and make just as much profit even if the total bill is the same.

Trust me, the customer cares about honesty, transparency, and the total bill, not your projected impression of the hourly rate.

I can tell you with a certainty this is way off. In fact in the repair bay you generally get dinged full list even if that same dealer participates in selling at trade prices online as most do these days. 9/10 dealers I have experience with operate on a price matrix with a minimum markup of around 20-40% only for the most expensive components while cheap stuff (fasteners, fluids, wipers, etc...) can be marked up as much as 1000%. Yes, one thousand.

Excuses for deceit and lack of transparency are intolerable to many people. Even if the total on the bill is the same, and the shop profit is the same, there should be no monkey business on the parts prices.

This topic wouldn't exist if that weren't true. No amount of arguing about it would ever make me go back to a shop that tried to pad their profit that much from parts markup. More and more customers feel the same today, now that they realize how much parts are marked up.

It's only going to get worse for shops that don't come to terms with this, but might just be a way for them to steal a lot of customers away from dealership shops.

 

[richfinn]

The reason mechanics get a trade account and discount from a parts supplier is so they can add some mark up to cover admin costs/time spent ordering parts/handling core returns/parts warranty

You have to remember when "flat rate" billing was first introduced, parts stores that would retail to the general public didn't exist!!!!

 

[mautotech]

I've been watching this thread with interest, because it's obvious how diverse the auto shop owner experience is based on where you are located and other lesser factors.
I say this because I have owned my own shop for the last 25+ years in the north suburbs of Detroit and can tell you, that at least where I am located, if a shop owner says they have to charge large margins on parts "to keep the lights on", they are either bad at business or their idea of, "keep the lights on", actually means, "I want to be able to buy me and my wife new Escalades every year with cash". I belong to a couple of shop owners groups in my area and can tell you that the latter is most always the case.
I routinely have good natured debates with my colleagues because of some the topics discussed in this thread, like flat rate, parts markup, BYOP, transparency, because my "business model" is so different from theirs.
First of all, flat rate is a way outdated pay mode. It promotes getting the job done as fast as humanly possible, and sacrifices quality in the process.
Second, parts markup is completely unnecessary to "keep the lights on". Huge parts margins are the result of shop owners wanting to **** every penny that they can out of customers; usually the result of a business planner whispering in a business owners' ear and always the result of greed. At my shop, I only charge for parts what it costs me to get them. As for others justifying huge margins on parts to pay for defective parts, do what I do. I always buy high quality parts and have agreements with my suppliers that if a warranted part legitimately fails, they replace the parts and pay for the replacement labor. My parts suppliers have always been great when the occasional bad part comes along.
As for customers bringing in their own parts, I will allow it as long as it's a new, high quality part; and we have a signed EXTREMELY explicit agreement that if the part goes bad for any reason other than an obvious defect with the installation, they have to pay again for the labor to replace it. This idea has worked great forever and the only way this would be a problem is if you are trying to **** people on parts margins.
My business model works. I've been in business for 25 years, with constant, non-stop work and customers and never had any of the problems some of the shop owners here complain of.
Something must be working right for me. And it definitely doesn't involve making money on parts. And my customers know it. It may be one of the reasons why I don't have to advertise to get new customers.....

 

[Shane6377]

I've been watching this thread with interest, because it's obvious how diverse the auto shop owner experience is based on where you are located and other lesser factors.
I say this because I have owned my own shop for the last 25+ years in the north suburbs of Detroit and can tell you, that at least where I am located, if a shop owner says they have to charge large margins on parts "to keep the lights on", they are either bad at business or their idea of, "keep the lights on", actually means, "I want to be able to buy me and my wife new Escalades every year with cash". I belong to a couple of shop owners groups in my area and can tell you that the latter is most always the case.
I routinely have good natured debates with my colleagues because of some the topics discussed in this thread, like flat rate, parts markup, BYOP, transparency, because my "business model" is so different from theirs.
First of all, flat rate is a way outdated pay mode. It promotes getting the job done as fast as humanly possible, and sacrifices quality in the process.
Second, parts markup is completely unnecessary to "keep the lights on". Huge parts margins are the result of shop owners wanting to **** every penny that they can out of customers; usually the result of a business planner whispering in a business owners' ear and always the result of greed. At my shop, I only charge for parts what it costs me to get them. As for others justifying huge margins on parts to pay for defective parts, do what I do. I always buy high quality parts and have agreements with my suppliers that if a warranted part legitimately fails, they replace the parts and pay for the replacement labor. My parts suppliers have always been great when the occasional bad part comes along.
As for customers bringing in their own parts, I will allow it as long as it's a new, high quality part; and we have a signed EXTREMELY explicit agreement that if the part goes bad for any reason other than an obvious defect with the installation, they have to pay again for the labor to replace it. This idea has worked great forever and the only way this would be a problem is if you are trying to **** people on parts margins.
My business model works. I've been in business for 25 years, with constant, non-stop work and customers and never had any of the problems some of the shop owners here complain of.
Something must be working right for me. And it definitely doesn't involve making money on parts. And my customers know it. It may be one of the reasons why I don't have to advertise to get new customers.....

[emoji481] Wish you were located in my area.


Sent from my iPhone using The Garage Journal mobile app

 

[ScottsGT]

[emoji481] Wish you were located in my area.


Sent from my iPhone using The Garage Journal mobile app

Came here to say the same thing. Awesome post!

 

[kythri]

[emoji481] Wish you were located in my area.


Sent from my iPhone using The Garage Journal mobile app

Came here to say the same thing. Awesome post!

I'd like to express the same sentiment! May your business continue to prosper!

 

[RKA]

mautotech - you've got a good ethic and business philosophy. Like you said, the proof is in the pudding, you've got more work than you know what to do with.

As a DIYer, it's rare I bring the car to a shop...because it costs so damned much. But, when I do, I fully expect up to a ~50% mark up on the parts. I will allow for the warranty on the part, their time to obtain it, deal with wrong parts or mislabeled parts or even out of stock and harder to find parts (which is becoming more common on my oldest car). When they get to double the cost, that's where I start to raise an eyebrow. Depends on what it is though. A $50 part marked up to $100, I'm not going to argue over (the % margin is high, but the absolute $ value isn't terrible). A $900 part, yeah, that might garner some questions if it was marked up over 100%. But, I do spec OE quality parts and I'm not comparing to the chinese rebuilds available at your local auto parts store that almost comes with a 1 year self-destruct feature. I wouldn't even walk in the door of any shop that used questionable quality parts. But frequently, the problem is the person that googles, pulls up the cheapest **** they can find and expects their mechanic to provide a relatively comparable price. That person may only allow for $175 on a rebuilt axle they can buy for $125 down the block or on Amazon (where knock off parts are increasingly common). Meanwhile, my mechanic would quote me for an OE equivalent rebuild at $500. If I was truly obtaining a similar quality part for my car, I know it's going to cost me $400 with round trip shipping to get the core back. But the google king has determined they are getting ripped off to the tune of 3-4x.

 

[Downwindtracker 2]

One of the biggest mistakes I have made in my life outside of a couple of marriages is buying a Dodge pickup with a Daimler-Benz G-56 transmission. I'm too old and decrepit to do truck trannies on the driveway now. The last time it failed, the shop wanted $ 11,000 CDN for a rebuilt , I was able to buy a Mopar remanufactured for $3,500 US . I should have bought a CTD with the Toyota auto ******. Too late now. Sometimes it's worth it to look for your own parts

 

[Yarpo]

I've been watching this thread with interest, because it's obvious how diverse the auto shop owner experience is based on where you are located and other lesser factors.
I say this because I have owned my own shop for the last 25+ years in the north suburbs of Detroit and can tell you, that at least where I am located, if a shop owner says they have to charge large margins on parts "to keep the lights on", they are either bad at business or their idea of, "keep the lights on", actually means, "I want to be able to buy me and my wife new Escalades every year with cash". I belong to a couple of shop owners groups in my area and can tell you that the latter is most always the case.
I routinely have good natured debates with my colleagues because of some the topics discussed in this thread, like flat rate, parts markup, BYOP, transparency, because my "business model" is so different from theirs.
First of all, flat rate is a way outdated pay mode. It promotes getting the job done as fast as humanly possible, and sacrifices quality in the process.
Second, parts markup is completely unnecessary to "keep the lights on". Huge parts margins are the result of shop owners wanting to **** every penny that they can out of customers; usually the result of a business planner whispering in a business owners' ear and always the result of greed. At my shop, I only charge for parts what it costs me to get them. As for others justifying huge margins on parts to pay for defective parts, do what I do. I always buy high quality parts and have agreements with my suppliers that if a warranted part legitimately fails, they replace the parts and pay for the replacement labor. My parts suppliers have always been great when the occasional bad part comes along.
As for customers bringing in their own parts, I will allow it as long as it's a new, high quality part; and we have a signed EXTREMELY explicit agreement that if the part goes bad for any reason other than an obvious defect with the installation, they have to pay again for the labor to replace it. This idea has worked great forever and the only way this would be a problem is if you are trying to **** people on parts margins.
My business model works. I've been in business for 25 years, with constant, non-stop work and customers and never had any of the problems some of the shop owners here complain of.
Something must be working right for me. And it definitely doesn't involve making money on parts. And my customers know it. It may be one of the reasons why I don't have to advertise to get new customers.....

This is how it should be done!

But it I'm curious. Whats your labor rate, how do you pay your guys and how do you estimate labor times?

My last shop wasnt flat rate and I liked it and the work I was doing...but its plenty easy for the owner to be buying their wifes escalades with that business model too.

 

[M6erfan]

This is why I work on my own vehicles, as much as possible

 

[richfinn]

I've been watching this thread with interest, because it's obvious how diverse the auto shop owner experience is based on where you are located and other lesser factors.
I say this because I have owned my own shop for the last 25+ years in the north suburbs of Detroit and can tell you, that at least where I am located, if a shop owner says they have to charge large margins on parts "to keep the lights on", they are either bad at business or their idea of, "keep the lights on", actually means, "I want to be able to buy me and my wife new Escalades every year with cash". I belong to a couple of shop owners groups in my area and can tell you that the latter is most always the case.
I routinely have good natured debates with my colleagues because of some the topics discussed in this thread, like flat rate, parts markup, BYOP, transparency, because my "business model" is so different from theirs.
First of all, flat rate is a way outdated pay mode. It promotes getting the job done as fast as humanly possible, and sacrifices quality in the process.
Second, parts markup is completely unnecessary to "keep the lights on". Huge parts margins are the result of shop owners wanting to **** every penny that they can out of customers; usually the result of a business planner whispering in a business owners' ear and always the result of greed. At my shop, I only charge for parts what it costs me to get them. As for others justifying huge margins on parts to pay for defective parts, do what I do. I always buy high quality parts and have agreements with my suppliers that if a warranted part legitimately fails, they replace the parts and pay for the replacement labor. My parts suppliers have always been great when the occasional bad part comes along.
As for customers bringing in their own parts, I will allow it as long as it's a new, high quality part; and we have a signed EXTREMELY explicit agreement that if the part goes bad for any reason other than an obvious defect with the installation, they have to pay again for the labor to replace it. This idea has worked great forever and the only way this would be a problem is if you are trying to **** people on parts margins.
My business model works. I've been in business for 25 years, with constant, non-stop work and customers and never had any of the problems some of the shop owners here complain of.
Something must be working right for me. And it definitely doesn't involve making money on parts. And my customers know it. It may be one of the reasons why I don't have to advertise to get new customers.....

That's great, but there are other "honest" business models

Some include a parts mark up

Some include flat rate labour

I only like OE or genuine parts and the mark up on those parts tends to be small

A job takes as long as it takes to do it right, sometimes longer sometimes quicker

I think the cheap aftermarket **** available to the general public at 50% of the "real thing" is the biggest problem.

It just encourages the less skilled mechanics and DIYers to engage in firing the parts canon and ends up costing the consumer more money for somebody to take perfectly good parts off and replace them with **** making cars worth less and ultimately less reliable

 

[slackdaddy1]

I just got my new workers comp policy, it went up again.
I have NO (as in Zero) employees, and have never had a claim in 26 years of business.
But my industry requires that I have it,, cost me ~16K a year. Oh, and I am exempt from being covered.

Just another hidden cost of doing business that Mr/Mrs "public" has no clue about.

 

[Shane6377]

That's great, but there are other "honest" business models



Some include a parts mark up



Some include flat rate labour

Not in my opinion.



Sent from my iPhone using The Garage Journal mobile app

 

[jimindm]

What an interesting thread. I to run a shop in my garage at home. I too have many friends in the business, bigger and more commercialized locations.

To think that anything that is bought and sold is not marked up every step of the way, is just foolish thinking. From the manufacturer to the end user.

What makes the automotive business so different, is all of the ways that profit can be made. One thing for sure though, is if there is no profit there is no business open.

Some are mad because of a product mark up. Businesses do it, well to stay in business.

When in business, to think that the vendor price you paid, is the true cost, is just not so. You have to check each order, make sure you got what you ordered. Then sometimes deal with a core, or if you did not end up needing the part, make sure you can send it back in the same condition you got it.

Just accounting for the part adds a cost to you. Did you get it, did it get sold on an invoice, did the invoice get paid, pay sales tax on the sold part, and the list goes on. Why is this? You order 8 wipers, and the sack comes with seven. Sometimes it is someone that just charges something to you. A friend that has done it before, but did not tell you this time. Maybe an employee. Could the counter guy at the parts store. You just never know. Everything has to balance or guess who looses.

Mark up of goods is nothing new, and some companies have really figured it out. I would imagine Walmart actually makes less than 2% on their total sales. But how do they get there.

They buy something like Kleenex. Likely by truck fulls right from the manufacturer. How much perceived mark up would that be. A quarter, if that, per box and they sell them for $3

But that is just it, they do not have a quarter in the box. They have a fleet of trucks that transport them likely several times, to several different warehouses, and each time loaded and unloaded. Then dropped at the store, where someone actually cuts the box open and put them on them on the shelf. Think about how much Walmart paid for that box of kleenex and what they are selling it for.

You can bet they have bean counter that know exactly how much walmart spent to get it to the shelf. Buying and maintaining a fleet of trucks, and the operators of them. Huge distribution centers and stores that cost millions to build and maintain. Workers, fuel, machinery to move it all, it all add up. I would bet that one of Walmarts biggest expenses is theft.

Moving to the labor side, I actually hate the book time that everyone talks about. Unfortunately it is about the only standard in the industry. Imagine what kind of prices one could be charged if it was all about experience on that repair. I think many get caught up in it, but it really is just a guide.

Labor prices are what they are. Of course one could say they could be much lower, if the overhead was smaller. Unfortunately much of that goes for equipment and such. I would bet a lot of it goes towards equipment that is commercial based and not home use. Any one can fix a vehicle, but having the right equipment to do it, sure make it faster. Many times that is what beats book time.

I do not care what kind of business one owns, one has to make a profit. I would almost argue that there are many indy type ma and pa shops that will be going away. Folks have made a great living there for many years, but there is just no resale value in the business when they want to call it quits. While they have owned it a lived comfortably, there is not enough fruit left on the tree, for someone to want to buy it and keep going.

I go to a lot of auctions and this seems to be the case many times. A 40-60 year old business is closing, because the business is just not kept up with the times. Many times it is just an owner that has thought about retiring and has not kept current in any way. Of coarse their prices reflect that.

Last I would just say that I am glad that I do not have some of you for customers. I am not even sure how you find anyone that want to do anything for you. I would be the first to say there are bad apples in any service industry. But reading threads like this, sure paints us all with a very broad brush.

 

[signcrafter]

I just got my new workers comp policy, it went up again.
I have NO (as in Zero) employees, and have never had a claim in 26 years of business.
But my industry requires that I have it,, cost me ~16K a year. Oh, and I am exempt from being covered.

Just another hidden cost of doing business that Mr/Mrs "public" has no clue about.

What state are you in? Last time I checked if you run your own company and are exempt you don't have to have workers comp.

 

[Shane6377]

I just got my new workers comp policy, it went up again.

I have NO (as in Zero) employees, and have never had a claim in 26 years of business.

But my industry requires that I have it,, cost me ~16K a year. Oh, and I am exempt from being covered.



Just another hidden cost of doing business that Mr/Mrs "public" has no clue about.

You all act like no one else owns or runs a business. Everyone faces similar costs. Think of what doctors pay in malpractice insurance and most will never have a claim.

Aside from that, what type of business are you and what industry? I've never known of a situation that someone had to pay workers comp that didn't cover anyone. If you do contract work I'm sure a COI is required, but again there are plenty of ways to avoid a $16k insurance plan and be able to provide a COI. I'd be seeking some legal advice.


Sent from my iPhone using The Garage Journal mobile app

 

[signcrafter]

I've been watching this thread with interest, because it's obvious how diverse the auto shop owner experience is based on where you are located and other lesser factors.
I say this because I have owned my own shop for the last 25+ years in the north suburbs of Detroit and can tell you, that at least where I am located, if a shop owner says they have to charge large margins on parts "to keep the lights on", they are either bad at business or their idea of, "keep the lights on", actually means, "I want to be able to buy me and my wife new Escalades every year with cash". I belong to a couple of shop owners groups in my area and can tell you that the latter is most always the case.
I routinely have good natured debates with my colleagues because of some the topics discussed in this thread, like flat rate, parts markup, BYOP, transparency, because my "business model" is so different from theirs.
First of all, flat rate is a way outdated pay mode. It promotes getting the job done as fast as humanly possible, and sacrifices quality in the process.
Second, parts markup is completely unnecessary to "keep the lights on". Huge parts margins are the result of shop owners wanting to **** every penny that they can out of customers; usually the result of a business planner whispering in a business owners' ear and always the result of greed. At my shop, I only charge for parts what it costs me to get them. As for others justifying huge margins on parts to pay for defective parts, do what I do. I always buy high quality parts and have agreements with my suppliers that if a warranted part legitimately fails, they replace the parts and pay for the replacement labor. My parts suppliers have always been great when the occasional bad part comes along.
As for customers bringing in their own parts, I will allow it as long as it's a new, high quality part; and we have a signed EXTREMELY explicit agreement that if the part goes bad for any reason other than an obvious defect with the installation, they have to pay again for the labor to replace it. This idea has worked great forever and the only way this would be a problem is if you are trying to **** people on parts margins.
My business model works. I've been in business for 25 years, with constant, non-stop work and customers and never had any of the problems some of the shop owners here complain of.
Something must be working right for me. And it definitely doesn't involve making money on parts. And my customers know it. It may be one of the reasons why I don't have to advertise to get new customers.....

So, why do you think parts shouldn't be marked up? When you go to the grocery store do you think you pay the same price they pay on the food? When you go to the doctor do you think you pay the same price as the hospital does for all materials? When you go to home depot do you think you are paying the same price they do for items and tools? When you buy your tools from napa or snap on or amazon or wherever do you really think you are buying them at the same price they do? When you hire a contractor do you think he is passing his discounted price at the supply house onto you? Nope, they buy at discount and charge a markup.

A shop doesn't have to mark parts up to make a profit. But business principals are pretty simple, you have to make x amount of dollars to keep the doors open. How you make X amount of dollars is up to you. Weather you mark parts up or charge a higher hourly rate or find extra stuff to pad the bill. It's up to the shop owner how they write up the bills. But at the end of the day you have to have X amount of dollars to pay the bills. Yes, some shops pad the bills more then others in one way, shape, or form. But most shops the bill comes out around the same, just different ways to get the bill total. But to think parts mark up is dis honest isn't right because every business out there marks parts up, besides charities.

So what if I mark my parts up 50% but my hourly rate is lower then yours and my total bill is lower then yours? Are you the dis honest shop now screwing people over because you charge to much? The only thing that really matters is the total bill. Each shop will have their own way to get to that total. As the posts in this thread clearly show people tear into each line item on the bill and will always think one part or another is too much. Pretty sure that's why we have so many "why is my bill way to much" threads. If shops didn't do line itemization by parts and labor and shop fees and etc. then people would just get a total on the bill. Then can go to multiple shops and pick based on price and which shop they think will provide the best service. Kind of like how most construction companies are. Or for that matter, how almost all business' operate. In the end you are getting parts and a service for x amount of dollars and that is all that matters. Compare totals and pick a shop. But to nit pick about a part or price of this or that isn't realistic.

 

[richfinn]

Not in my opinion.



Sent from my iPhone using The Garage Journal mobile app

Which your 100% entitled to

Entitlement though doesn't necessarily mean something is true!!!

I would imagine there will be car dealerships somewhere in the USA that are essentially honest and employ decent mechanics who follow policy and dont rip customers off, following conventional motor industry practices

 

[kctyphoon]

IIRC he is a union linesman, or at least his previous avatar lead me to believe that.


Ah yes, the union employee. Master of all things business and an expert in minimizing costs.

Wanna know what the difference is?

I DONT SIT HERE AND PRETEND...

I love the comment "So I should be punished for finishing early?".. so being paid for the ACTUAL time you spent (ya know, "Killing yourself" in 3rd world country conditions, with somebody whipping you if u stop for a few minutes) is "punishment"? Why should the guy paying the bill be punished??

At the very least just own it, and stop pretending people aren't over charged..

 

[kctyphoon]

Yeah I don't know of many places marking up parts that high, and again I would encourage you and anyone else to avoid those places. I think a few people pointed out 40% seems to be typical. Thinking of this conversation and two of the most extreme parts I can think of. One as little as a dollar, and one as much as 80k, put the average right around 40%. I bought a clip from my dealership at cost because I work there, ~1.10, customer cost was ~1.65 per clip. (~55%) A tech was also working on replacing a brand new AMG motor in a GT63. Our cost ~60k, customer cost, 80k. (A little less than ~40%)



If a customer walks in and wants to be charged 750 dollars for an oil change...you know thats the customers choice, right? Nobody forced them to. That place obviously wouldn't be open long as nobody would go there but they can charge WHATEVER they want to be profitable.



I'm not defending doubling the prices, in fact in my first reply I even said I think 50 or 60% is to much, but it makes sense given they need to warranty the part and their work. Seems like we're in agreement that doubling the price of parts is ****** and I stand by that, I don't know how any of those shops stay busy regularly or stay open. Plenty of shops that are not doubling the price of parts.







Right...just like auto repair? You literally are defending it here with contracting but against it in auto repair. I'm not even sure if you see it.

So you bid the job. You get done early and your words, everyone would be HAPPY you finished before schedule. Yet in the automotive world, you finish early and people feel like they got robbed because again, your words, they can go onto another job while still being paid for the first. ???

I was a non union, new construction plumber for a year. If we finished early by a half day we went to the next house and layed out, dug ditch, or got started setting fixtures. Boss is being paid for the job we finished early on, while we're also getting a head start on the next job that he also bid "x" hours on. You bid based on what your guys can achieve, as you said, the job @ an average or good pace. Say it takes us 10 days to do a whole house on average. 3 ground work, 3 rough in, 3 finish, 1 for inspection or any **** ups. Boss knows what 10 days of labor costs him @ 100 an hour, its factored into his bid for the job. Yet we show up and bust *** and it takes us 8 days to do this house. Whats the difference, other than here the contractor/home owner is happy we're ahead of schedule, when I fix your car I'm a thief. - Hello?




???? I'm confused. This is exactly how the auto industry works...again. You pay for a finished job, a crankcase vent valve, not increments of time. Its my hustle, experience and performance level that rewards me the ability to fit more cars in within an 8 hour day and make more $$ then the next guy. Thanks, I couldn't have said it better myself.



You're not being charged by the hour in an auto shop, you're charged by the job, setup by booktime as pointed out above.

People go to mechanics to have a professional thats knows what they are doing perform a service on their cars, not a guy that doesn’t know what to do. they are paying over a $100 an hour for THAT service which is SOLD to them in HOURS of labor.

No, its sold to them by the JOB, same as contracting and same as a hair cut person. Their shop has a labor rate, which gets billed to the customer in respect to the completed job. They're billing it by the job, setup by book time, which is (In the simplest of terms: "book time" is the time it takes a factory trained journeyman mechanic to perform an assigned task in the automobile manufacturer's facility and having at his immediate disposal all of the specialized factory tools and equipment necessary to perform the task.) - as stated by four.cycle.

It's the exact same as my plumbing job. As you point out above, the bid is bid based on the job. 10 days of work @ 100 dollars an hour, is 10,000 dollars. Boss notes that along with the cost for materials + 15% markup and...there's his bid. Everyone has a labor rate and most everything is booked by the job.



But its not going to take 4 hours anymore, that's my point. Now instead of the customer getting charged 4 hours for the job, hes charged 6 or 8. Everyone loses. We're not paid hourly...and you're not charged hourly.



You didn't buy 4 hours of labor, you bought a completed job, a crankcase vent valve that takes 4 hours. With my hustle and experience, I completed it faster. Wait, who said that again?

I hope somebody reads this, because I feel like Im taking crazy pills and each and every one of your examples is pretty much standard for how the auto industry bills, somehow its only wrong in the auto industry.



That's somebody that's charging hourly. Similar to a lawyer who charges 200 dollars an HOUR for their time. We're charging you by the job. I think you're thoroghly confused on how you're billed, and this post is a gold mine. Thanks for the great examples, I love how respectable the hair cutter and contractor are, makes me have hope for the mechanic

Dude - a work 'contract' and an 'estimate' to get your car fixed when u bring it somewhere, is NOT the same thing.. lmao. That's WHY one is CALLED a contract, and the other is CALLED an estimate..

How many wrench turners in here will defend doubling the prices of the parts they sell, and book time - but ***** about their medical bills when a hospital charges you $30 or $50 for 2 aspirin?? Just curious??

YOU SHOULDA SHOPPED AROUND !!!
Which btw, "you shoulda shopped around" - is not an explanation or defense for doubling prices or overcharging on labor.

 

[kctyphoon]

I've been watching this thread with interest, because it's obvious how diverse the auto shop owner experience is based on where you are located and other lesser factors.
I say this because I have owned my own shop for the last 25+ years in the north suburbs of Detroit and can tell you, that at least where I am located, if a shop owner says they have to charge large margins on parts "to keep the lights on", they are either bad at business or their idea of, "keep the lights on", actually means, "I want to be able to buy me and my wife new Escalades every year with cash". I belong to a couple of shop owners groups in my area and can tell you that the latter is most always the case.
I routinely have good natured debates with my colleagues because of some the topics discussed in this thread, like flat rate, parts markup, BYOP, transparency, because my "business model" is so different from theirs.
First of all, flat rate is a way outdated pay mode. It promotes getting the job done as fast as humanly possible, and sacrifices quality in the process.
Second, parts markup is completely unnecessary to "keep the lights on". Huge parts margins are the result of shop owners wanting to **** every penny that they can out of customers; usually the result of a business planner whispering in a business owners' ear and always the result of greed. At my shop, I only charge for parts what it costs me to get them. As for others justifying huge margins on parts to pay for defective parts, do what I do. I always buy high quality parts and have agreements with my suppliers that if a warranted part legitimately fails, they replace the parts and pay for the replacement labor. My parts suppliers have always been great when the occasional bad part comes along.
As for customers bringing in their own parts, I will allow it as long as it's a new, high quality part; and we have a signed EXTREMELY explicit agreement that if the part goes bad for any reason other than an obvious defect with the installation, they have to pay again for the labor to replace it. This idea has worked great forever and the only way this would be a problem is if you are trying to **** people on parts margins.
My business model works. I've been in business for 25 years, with constant, non-stop work and customers and never had any of the problems some of the shop owners here complain of.
Something must be working right for me. And it definitely doesn't involve making money on parts. And my customers know it. It may be one of the reasons why I don't have to advertise to get new customers.....

Imagine that....
Thank you for not being scared to post your thoughts. I applaud your honesty given you're going against the grain of the majority.

 

[2ndGearRubber]

Wanna know what the difference is?

I DONT SIT HERE AND PRETEND...

I love the comment "So I should be punished for finishing early?".. so being paid for the ACTUAL time you spent (ya know, "Killing yourself" in 3rd world country conditions, with somebody whipping you if u stop for a few minutes) is "punishment"? Why should the guy paying the bill be punished??

At the very least just own it, and stop pretending people aren't over charged..

The "labor hours paid for" is more of a formality in billing consistency, than actually paying for hours on the clock.

You have two employees, person #1 can change spark plugs in 45 min, the other takes 75min, book time is one hour. Does the quoted price change based on who is available? Does #1 purchasing an M12 ratchet, and dropping 5min off his time (to 40min total) change what the quote should be? What about if you get stuck with guy #2? Are you happy paying for 15min over book time because that's how long it took?



IMO the worst of overcharging is from improper diagnosis and the parts cannon. That's a function of several issues, not just flat rate billing or mechanic pay.

 

[Shane6377]

There's a business model that allows shops to prosper without using tactics like parts markup that customers view as dishonest. If you're an honest shop why wouldn't you follow this business model?

... only one reason not to.


Sent from my iPhone using The Garage Journal mobile app