Can you bring parts to your mechanic?
Thinking about buying auto parts online so you can save on the shop’s markup? Or, are you upset because you priced out parts at your local auto parts store and think your mechanic is ripping your off. If you’re one of those penny pinchers think twice about it. If you bring parts to your mechanic, you’re literally asking the shop to earn less. Why would they do that—because of your good looks?
If you think your mechanic makes too much money on parts markup, you’ll quickly see how wrong you are.
What are the normal profit margins for different retail businesses?
Let’s take a look at gross profit margins of different retail businesses.
Women’s clothing 46%
Sporting goods 38%
Home furnishing 47%
auto parts store 37%
Now let’s relate that to auto repair shops. Shops typically mark up the parts by 50% to 100% and they mark up their technician’s labor cost by around 70%. But the average well-run auto repair shop has a gross profit margin of around 37%. That’s 37% profit margin is one of the lowest of all retail business listed above.
Bring parts to your mechanic and you’re basically asking them to give away profit
Now let’s get down to the real issue. You want to save money at the expense of the shop because you think they’re ripping you off on parts markup. How did you come to that conclusion? Probably by comparing the parts cost on the estimate to the same part cost from an online seller.
That’s not an apples to apples comparison. Auto parts manufacturers sell parts to a regional wholesaler who buys them by the truckload. Then they resell the parts in lower quantities to local parts stores. But most of those online sellers are actually wholesalers, so their cost is less than the local parts store and far less than the shop pays.
Let’s look at the cost of a strut for a 2011 Toyota Camry
Wholesaler Rockauto.com sells the strut for $63.78 including shipping.
A local major auto parts retailer sells the same strut to someone off the street for $82.99. But the shop gets a 20% discount from that same store, so they pay $66.39 and double the price to you, listing it at $132.78.
You find the rockautoprice of $63.78 and think the shop is ripping you off. But do you expect the shop to sell it to you for $66.39? No, you want them to sell it to you for $82.99 because that’s what you’d pay if you walked in the door and bought it over the counter.
If you bring parts to your mechanic and the shop accepts that strut and charges you just for labor, they’ll be sacrificing the $66.39 profit. If they did that on a regular basis, their overall profit margin would fall well below the industry average of 37%. Once again, I ask you…why would they do that? You’re simply not that good looking!
Why do auto repair shops have such low margins when they mark up parts and labor so much?
They have incredibly high overhead
You may think $100/hr is outrageous for labor until you run your own shop. Then you’ll think it’s a very fair price. First, repair shop owners have to pay rent and utilities like every other retail business. Electricians and plumbers charge close to the same $100/hr. They have expensive hand tools and trucks, and many have to pay rent for a retail space. But they don’t have to buy and maintain really expensive shop equipment like lifts, jacks, engine hoists, specialty tools, brake lathes, recycling machines, or monthly fees for online shop manual and service bulletin subscriptions. brake lathe, recycling machines, etc. etc.
So, when the shop sets an hourly labor rate it has to include all those costs PLUS the cost of repairing the equipment. Then there’s the license fees, insurance (which is mighty high), and regulatory inspections. According to salary.com, the national average wage for a senior automotive technician in 2014 was $52,879. Add in the cost of social security tax, unemployment and worker’s comp premiums, vacation and sick pay, and healthcare and you’ll find the shop pays out close to $75,000 for the technician. That comes to $37.50/hr based on 2,000 billable hours per year (working days minus holidays). But NO technician EVER consistently bills out a full eight hours per day. Six hours is more realistic. So really, the shop’s cost is closer to $48/hr.
And even $48 isn’t a realistic cost because the shop must also have a service writer and bookkeeper, as well as a car runner and cleanup crew. So the shop’s hourly cost is higher. Then, when you add in profit, return on investment and overhead expenses, you can see why a shop MUST charge $100/hr.
In addition to making money off of labor, auto repair shops must also make money off of parts—just like every other service business.
Now let’s talk about your parts
Every time a car or truck needs parts, the shop has a choice. They can call the dealer and buy OEM parts or they can call a parts jobber like NAPA and buy aftermarket parts. If they buy from the dealer, YOU’LL pay more. On the flip side, OEM parts are generally more reliable than aftermarket parts. So the technician can install the part and feel fairly confident the part will work the first time.
But customers don’t want to pay the high prices for dealer parts. You want the shop to order the part from the aftermarket. Great. The shop still has to make money on the part. After all, it takes their time to order the part (or did you want the shop to give you that time for free?). Then a bookkeeper has to deal with the invoices and pay the jobber. Again, somebody has to pay for that time.
So the shop makes the diagnosis, orders the parts, and installs them. The part fails. Guess who has to eat the cost of replacing the part? The shop. The parts manufacturer will warrant the part but they don’t reimburse the shop for their labor. So part of the profit on parts goes to pay for those times when parts fail and the shop has to eat the cost of labor.
Now you bring your own parts to you mechanic
Did the shop’s overhead go down the second you walked in the door? Nope. They still have someone on staff who orders parts (they didn’t get laid off because you walked in the door). They still have a bookkeeper to pay. But now they’re out the profit they would have made on the part.
Some shops won’t install customer parts
A busy shop will tell you to shove your parts where the sun doesn’t shine. And they’d be within their rights. However, if you’re a really good customer, they might make a one time exception to keep you as a customer.
Other auto repair shops increase their labor charge if your bring your own parts
A hungry shop may gladly accept your part because business is slow and they need the billing for the labor to keep the doors open. But if they’re that hungry for business, you should wonder why.
Then there are good shops that will accept customer parts, but they’ll accept the job with two caveats; First, they won’t warrant the part. Even some good parts are defective right out of the box. So if you bring parts to your mechanic and it fails fails or doesn’t fit, they won’t give you your money back and they won’t install the replacement part for free. Second, they’ll most likely charge you a higher hourly rate or a higher flat rate to compensate for the profit they lost by not selling you the part.
The truth is, you really don’t save money by providing your own parts, and you create far more problems for yourself if you bring the wrong part or the part fails.
You’re asking for trouble if you bring in an economy part
Finally, there are parts, and then there are GOOD parts. You can go online and find a part that’s much cheaper than the one the shop quoted. You think the shop is ripping you off. Nope. The part you found is most likely a Chinese made knock off, or it’s the same brand but “service grade” rather than “professional grade.” Most parts manufacturers offer two grades; an economy part for price shoppers and a professional grade for shops that value their reputation. Guess which part is junk? Do you know the difference? Because if you buy an economy part (which is what most of you penny pinchers buy) and then end up paying the shop the same price to install it, you’ll actually come out behind because the part will fail sooner.
Bottom line—every business has to make a profit
Everybody thinks the shop is ripping them off. But how many multimillionaire shop owners do YOU know? Probably none. Sure, they make a decent living. If they didn’t they’d close up shop and work for someone else. But getting rich? Nope.
So think twice about asking a shop to lose money on your next repair job because you want to bring your own parts.
©, 2015 Rick MuscoplatPosted on by Rick Muscoplat
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