Auto Repair Shop Estimates
Covers information about how repair shops generate estimates or quotes to provide an approximate dollar amount a customer can expect their vehicle’s repair work to cost
How do auto repair shops determine labor cost estimates for repair or maintenance quotes?
Most repair shops have a software guide that gives the estimated labor time it takes to complete a specific job. As an example, if the suggested labor time for a particular job is two hours, and the shop’s hourly rate for labor is $100 per hour, the charge for the labor component of the estimate would be $200.00
How do repair shops determine the price of parts used in repair or maintenance quotes?
Repair shops purchase parts at wholesale from local or online parts vendors. When a part is entered on a job estimate, the shop’s software marks up the wholesale price to reflect the amount you are charged on the estimate for the job. Generally the industry standard is around twice the amount they purchase the part for, giving them a 50% profit. (Example: The shop pays $50 for a part and the price you pay is $100)
Why do auto repair shops charge more for parts?
There are many factors that need to be considered when trying to answer this question. While the purchase price a shop pays for a given part may be very close to what you would pay at your local parts retailer for the same part, you wouldn’t think of expecting a retailer such as Target to sell you an item for the same price they purchased it for. They have to make a profit on products they sell to remain in business. The same holds true for an automotive repair shop.
To stay in business, a repair shop must make enough profit on the repair and maintenance work it sells (and the parts used in doing that work) to cover all of their operating expenses, i.e. rent, utilities, insurance, employee wages, tools, equipment, and taxes, to name a few. If they fail to do so, they cannot stay open to repair and service vehicles. And remember, it is a repair facility that provides the warranty on the repair work they do for a customer. While parts stores may selectively provide warranty coverage on parts they sell, it is the shop that provides most of the warranty on labor and parts.
Why are auto repair labor rates so high?
Auto repair shops only have two things they can sell to generate the profit they need to stay open for business. Those two things are 1) parts, and 2) labor hours. The parts question was addressed in the preceding paragraph. Labor rates center around the cost of having employees, mainly mechanics, to diagnose and perform the repair and maintenance of your vehicle. When a customer is charged for an hour of labor, the mechanic’s wage is deducted directly from that labor amount. The amount that is left over becomes profit which the shop uses to pay for the other operating expenses it has. If the percentage of profit falls below a rate of 50-60%, the repair shop will struggle or be unable to pay its bills.
Why do auto repair shops use labor guides?
The labor guide comes from the vehicle manufacturers. They are the ones who determine how much time is needed to repair and/or replace components on new cars and trucks still under warranty. The times are modified slightly to allow for the additional time required when dealing with road dirt, oil, rust, and seized components during repair work. This allows repair shops a reasonable but approximate time within which to complete a job.
There are pros and cons about the most reasonable way to provide quotes or estimates to consumers. If a shop charges you the actual time that it takes a mechanic to complete a job, they would not be able to give you an advanced quote before beginning the job. This means you would not know (in advance) how much the job would cost. Also, if one mechanic’s skill level differs from another, it may take him longer to do the job, meaning it would cost you more to have the job done simply because a particular mechanic is doing the work.
Hopefully, you can see that use of a guide allows the shop to give you an estimate beforehand and prevents you from carrying the burden of paying extra for a slower mechanic to work on your vehicle.