An industry insiders perspective. What is your labor rate? How the automotive repair industry manipulates what you pay.
The single most asked question by my potential customers when they call me on the phone or stop in for the first time is “What is your hourly labor rate?”
Sadly many people allow the answer to their question to be the only deciding factor in choosing where they have their vehicle repaired.
What they are not aware of is how our industry is able to manipulate the hourly labor rate we charge to repair your vehicle.
In this article I will uncover the mystery surrounding how and why we charge what we charge to repair your vehicle so you will have a better understanding of our industry.
Listed below are topics we will discuss in greater detail.
Flat rate labor system-done
Cost of tools and equipment, training, updating- done
Rust corrosion age wear and tear-done
Experience number of years in business and expertise on specific make and model or repair, possibility of going out of business or going bankrupt
Shop overhead determines price not shop down the street
You get what you pay for-done
Would you choose the cheapest least experienced doctor, surgeon, teacher, builder, etc
Warranty, reliability, peace of mind, done right the first time,
Bait and switch coupons and mailers that do not apply to your vehicle
Price we quote is the price you pay
Menu pricing or group pricing
Most shops charge a flat labor rate per hour.
Flat rate is determined on a national average of how long it takes a mechanic to replace a specific part on your vehicle. The national average is based on a new vehicle not a 5-20 year old vehicle! This rate is the fairest rate they can come up with but it’s not perfect. Most of the mechanics involved with the invention of the flat rate system are dealership mechanics that only service one manufacture line of vehicle which means they become very efficient at whichever repairs they are being timed for.
Charging by the half hour or quarter hour instead of full hour
Very few repair shops charge their customers in this manner. The benefit to this system is that the customer perceives they are being charged less than the posted hourly rate or that the shop is more fair and does not just charge an hour minimum for a repair that is performed. The only problem with this system is that perception and reality can be completely different from each other.
Todays vehicle have become so complicated that setting a specific price to repair is difficult. The vehicle manufactures offer so many variations and options on your vehicle which makes finding the correct part virtually impossible without knowing your vehicle identification number. Even with your VIN number we still have to locate the body codes on the vehicle to determine part was originally installed on your vehicle.
Rust and Corrosion
On top of that once the vehicle is 5 years or older our lovely weather in Michigan reeks havoc on various metallic components thus extending the repair process and increasing the cost of the repair. This is why it is so difficult to provide an estimate for repairs whiteout even seeing the vehicle let alone taking it apart to see how things are going to come apart.
Cost of Tools, Equipment, Training, Updating
Labor rates and diagnostic or testing fees are directly related to the cost of what we pay for tools and equipment as well as the training to use those tools and equipment to correctly repair your vehicle. On top of that any electrical tools and equipment have to be updated quarterly or annually. The equipment alone cost tens of thousands of dollars not counting the thousands of dollars spent to maintain, upgrade and update that equipment.
Think about it you would never want to buy all those tools needed or required to repair the vehicle this time around. Also how would you gain 20 years of experience and knowledge needed to perform the repairs needed? What about all the taxes and insurance, employee payroll, tool loans, and building fees, maintenance and etc?
Think of it this way… When you bring your vehicle to a repair shop you are basically renting our tools, equipment, shop space and years of experience to perform the repairs on your vehicle. The longer the repair takes, tools needed and level of experience required to do the job the more you pay for the repair.
How to manipulate what you pay….
Alright so here it is… Don’t forget most repair shops have a trained sales person at their front counter. They are trained to help you make decisions about the repairs you are about to have made. Some of these sales people are highly motivated by money not you or your vehicles best interest. They have been trained to read you and have a rebuttal for every objection you may have.
They are aware of your price sensitivity. What this means is some people are price sensitive when it comes to labor rates, others are price sensitive to parts cost.
So lets say you call the shop and you ask for the labor rate first then for a price quote. They would now know to tell you a lower labor rate than the guy down the street but to instead raise the price of parts on the estimate. In the end they could be the same price as the shop down the street or possibly way more. All that matters to you is the cheapest labor rate quoted over the phone, after all that must mean the cheapest price in town right? NOT!
And that’s not all…
Dealerships have two different labor rates one for warranty work and one for customer pay repairs. I can tell you from past experience customer pay is 2 to 2.5 times the cost of warranty labor rates. So lets say an oil pan replacement pays 1.0 hrs or $90 of labor under warranty then customer pay labor rate would be 2.5 hrs of labor or $225! That is quite a big difference between the two but what did not change is the length of time it took to actually do the repair 1.0 hrs.
More on flat rate…
Lets say flat rate book time says a repair should take 1.0 hrs to perform and the shop labor rate is $90 per hour. What many shops do not want you to know is how many book hours a job is supposed to take because they will bump up the book hours by an automatic 10-50%. What this means is when you call and ask for a shop labor rate they could honesty tell you $60 per hour but if they mark up flat rate book time 10-50% that means there actual shop labor rate is $66-$90 per hour! Now imagine if their labor rate was $90-$100 or more!
Lets talk part quality. I cannot believe how many people still think they can get something for nothing. You will get what you pay for in most instances. I say this because people go to discount part stores a buy their parts from them and wonder why they are cheaper than the brand stores like Napa or Carquest.Apparently the general public is blind to the fact of QUALITY CONTROL. Quality control is when a product has to meet certain quality standards to pass required inspection or usability. Now if you are a million dollar parts supplier and 10% or so of your manufactured products don’t meet the quality standard of the branded stores you have a choice throw them a way or sell them at a discounted price.
In walks the discount parts stores in fact they actually offer to buy even more than what the manufacture has to sell from the 10% quality control standards so instead the manufacture strikes a deal with the discount stores to produce a product with a lower standard of quality for a cheaper price thus saving them money and creating a whole new market for them to manufacture to.
If for one minute you do not think this is true go buy a Bosch platinum +4 spark plug from the big “AZ” discount store for .99 and then go to the dealer and buy theirs for $12 and see what the difference is!
I remember when I worked at Kmart Auto Center and half of the A/C Deco spark plugs we installed were faulty out of the new package!
Don’t even get me started on tires…..
We diagnose more crank no starts in the winter months caused from Bosch Platinum +4 spark plugs then we do any other spark plug. The sad thing is most of the time they were just installed a few months prior by the customer.
We just tell “AZ” thank you every winter time.
After all we the public don’t care what country our parts are made in or what quality control standards are in place or if they have a warranty or not, all that matters is the cheapest price.
I really hope in the future Americans will begin to care about the quality of the products they buy and where they are made not just the cost of them.
Good news is there are a few parts stores left that will not sell a part unless it is backed by a minimum parts and LABOR warranty of one year.
What about those coupons and mailers you get from those same repair shops over and over again?
Ever heard the term bait and switch? Look at the fine print on the coupons or mailers and read them carefully. They all say “most vehicles” or something similar to that. What they don’t tell you is that your vehicle is not most vehicles. Their coupons will give you the price for a vehicle from the 1980’s that was a 4 cylinder and the cheapest easiest vehicle in the world to repair like a Chevy Chevette or Cavalier. Then when you get the phone call you find out your vehicle uses synthetic fluids and platinum spark plugs and the list goes on. Many times the repair
shops will just raise the price of other services or repairs to compensate for the money lost from the coupon or mailers.
Remember there are no free rides or shuttle services. Everything cost money and the price you pay for repairs pays for those fringe benefits. Just because they are not itemized on your bill does not mean you did not pay for them.