Parts Mark-Up at Independent Repair Shops

[The Critic]

Earlier this morning, I came across a sample "parts pricing matrix" that is recommended by business coaches for independent auto repair shops.

Independent Shops rely on parts markup as part of their revenue structure. Many shops use a "matrix" which marks up parts based on their cost. Without this, their labor rates would have to be substantially higher than they are today.

This is one reason why some independent shops prefer to use lower cost aftermarket parts instead of OEM; lower cost parts allow for greater mark-up while still allowing the quotes to be competitive with dealerships. Around here, dealerships generally charge 1/3 over MSRP for their parts, but they have slightly higher labor rates.

Link to the source: https://www.autotraining.net/articles/2007-08_MotorAge_Making Parts Profitable.pdf

 

[Nick1994]

I am so glad my mechanic doesn't mark up parts.

 

[SZR48207]

Is my understanding wrong that this markup is what allows a indie shop to actually make money? (and thus grow)

If they only charged actual cost for parts and "typical" labor rates then the shop would only recover its actual cost of doing business + some puny amount that might be profit. When you factor in advertising, benefits, overhead, and the cost of warranty work then the shop would easily be in the red.

 

[Food Scientist]

Originally Posted by Reddy45
Is my understanding wrong that this markup is what allows a indie shop to actually make money? (and thus grow)

If they only charged actual cost for parts and "typical" labor rates then the shop would only recover its actual cost of doing business + some puny amount that might be profit. When you factor in advertising, benefits, overhead, and the cost of warranty work then the shop would easily be in the red.


How many people shop on cost per hour? If I call around to price shop my concern is the total cost, not what the shop rate is or markup on parts. I prefer to take my parts to a shop and just let them do the work because I know they aren't trying to sell me cheap parts because it has a better markup.

 

[urrlord]

Years ago I had the displeasure of dealing with a shop that actually different labor rates posted .IIRC the lowest rate applied if they furnished the parts needed.The medium rate was if you wanted parts from someone other than their supplier.The highest rate was for you bringing in your own parts.So if you were picky and like in my case wanted a specific timing belt and water pump brand you paid the most.

Never went back there or recommended them to any one.

I later asked my usual shop if they charged a markup on parts.The owner laughed and said only if I'm trying to fornicate you.We make good money without doing that.He was a second generation auto shop owner.I WISH HE HAD NEVER RETIRED..lol

 

[Andrew1972]

Shops deserve to make money to stay afloat. They can sell you parts at cost however they can simply jack up the labor rate. I gladly pay the likely markup you show to my indy mechanic for my 07 Acura MDX, why? He only charges $60/hr labor.

They do not pay online prices because they don't typically wait for the delivery truck or mail to arrive, they call a parts supplier and they run the part over.

 

[SZR48207]

Originally Posted by SVTCobra
Originally Posted by Reddy45
Is my understanding wrong that this markup is what allows a indie shop to actually make money? (and thus grow)

If they only charged actual cost for parts and "typical" labor rates then the shop would only recover its actual cost of doing business + some puny amount that might be profit. When you factor in advertising, benefits, overhead, and the cost of warranty work then the shop would easily be in the red.


How many people shop on cost per hour? If I call around to price shop my concern is the total cost, not what the shop rate is or markup on parts. I prefer to take my parts to a shop and just let them do the work because I know they aren't trying to sell me cheap parts because it has a better markup.


The argument being made in this thread (not by you) is that a shop shouldn't be marking up parts. But the labor rate for the mechanic is usually not negotiable, so then how would the shop make a profit?

If you go to an indie garage and ask for a water pump replacement, but demand that the shop match the price of RockAuto and only charge the typical labor rate, then how is the shop actually making any money?

 

[Andrew1972]

Carrying in parts the job should turn into time and expense if wrong or defective part is provided. The markup of mechanic obtained part covers the wrong or defective parts.

You willing to foot the bill for if your provided water pump is found defective after startup??

 

[Silverado12]

Shops have always made money on parts. The body shop I worked at made 25% flat across the cost spectrum.

 

[JeffKeryk]

Just part of the business. If you have a shop that takes care of your car and you, you should stick with them and be happy they are there for you.
Their knowledge, tools and expertise is worth a lot.

 

[Garak]

It's fair enough to me. The odd time, I've supplied parts, but that's when the shop and I have discussed ahead of time and they already know that the parts are going to be a pain in the butt for them to get in the first place.

 

[2010Civic]

Don't care what shops charge. I never have and never will take my car to someone to fix it. There is nothing my dad and I can't do. Including body and paint work.

 

[Rick505]

I always thought when the repair place bought parts at NAPA or dealership, they got the "wholesale" price and marked them up to retail. When I walked into NAPA or dealership I may see a "discount" on the receipt but was actually paying the retail price everyone else paid.

 

[demarpaint]

Most guys around here that I know double the price of the parts, and if a customer insists of providing their own parts they don't guarantee the job.

 

[eljefino]

Originally Posted by urrlord
Years ago I had the displeasure of dealing with a shop that actually different labor rates posted .IIRC the lowest rate applied if they furnished the parts needed.The medium rate was if you wanted parts from someone other than their supplier.The highest rate was for you bringing in your own parts.So if you were picky and like in my case wanted a specific timing belt and water pump brand you paid the most.


This is awkward and a turn off because it's basically advertising that someone else is getting a better deal than you.

It's like a tire shop saying they give 10% discounts to veterans and senior citizens. Well, I'm not one of those, so there's an extra 10% markup on top of it all.

If I were to offer "surge pricing" I'd whisper it to the customer "as a personal favor for a good customer". If they don't bite, they can leave.

 

[CT8]

You want the shop to make enough money to have the resources to be able to do the warranty work. Also the reputation of the shop is so important . The main branch of where i used to work [ which
I will add treated me like gold] for example did an engine on a huge fork lift that had to be taken apart to be trucked in. I know the reason rebuild the engine 3 times . I actually know why . I talked,to one of the owners and mentioned we would never ever make enough money to break even on this job and his reply was,,,,we have a reputation to uphold. !

 

[Silk]

In NZ, when we buy parts, the sales docket shows our buy price, and recommended retail, which is what Joe Public pays, matching that we won't get any complaints about mark up. Our discount varies, at most, the more parts you get from them, the better our buy price, and the better percentage markup. We twiddle around sometimes on prices...we could cut back the price, add more labour to recover on some difficulty on the job, add more on the parts, cut back on the labour. We don't work flat rate like in the US, you pay the shop for how long the mechanic works on your car. Your car is in good condition, the job goes easy, and you get a good deal. Your car is poorly maintained and we run into problems, the job takes longer...you pay more.

 

[ZZman]

How can a shop not make money on labor alone? They may charge 100.00 an hour for labor and the mechanics get 20-25. 00 an hour.

 

[Hall]

Originally Posted by Rick505
I always thought when the repair place bought parts at NAPA or dealership, they got the "wholesale" price and marked them up to retail.

Reality is, no one pays "retail" prices or rarely ever does. Almost all stores sell items at below retail and then you can have items "on sale".

 

[Hall]

Originally Posted by ZZman
How can a shop not make money on labor alone? They may charge 100.00 an hour for labor and the mechanics get 20-25. 00 an hour.

They don't work in the dark - lights need electricity and that costs money. In the summer, they will have air-conditioning or fans and in the winter they'll have heat. Those aren't free. The building they're in will likely have rent payments or mortgage payments. The shop likely buys/owns many pieces of equipment or tools and the Snap On, Mac, etc guys aren't donating them for free.

You also realize that benefits, especially things like medical insurance, cost A LOT of money. Employees typically pay a pretty low % of the medical insurance amount. Their pay may be $20-25/hour but the company's 'cost' could easily be closer to $40/hour.