Niagara Gazette

August 15, 2013

TOM'S CORNER: Determining the price of auto repair

By Tom Torbjornsen
Niagara Gazette

Niagara Gazette — People ask me all the time how the price of auto repair is determined? This is a good question. There are three main criteria used in pricing any given auto repair. They are labor, parts, and shop support.

LABOR RATE

A shop’s labor rate is the hourly rate at which the shop charges for work. The two determining factors of the cost of auto repair labor are “Book Time” and the shop’s per hour labor rate as compared to other local shops’ rates.

The term “Book Time” refers to the average amount of time it takes to perform a particular automotive repair or maintenance job as defined by the labor flat rate guide used by the automotive industry. The tech’s responsibility is to complete the job in that time. The guide’s average times are determined by what it takes a factory tech to do the job. Then an equation is applied to the factory time in order to establish the general time for the auto repair.

Shop labor rates vary with the geographic area of the country and are competitive within a particular area. Labor rates typically run $80 to $150 per hour nationwide.

LABOR PRICING MATRIX

Say, for instance, a shop offers you a price for a job that takes two hours. When you break down the costs, you find a major discrepancy in the labor price. You divide the shop’s labor charge by two (because the shop told you the labor would be no more than two hours) yet simple division of the labor charge indicates that the hourly labor rate comes in at 1½ times higher than what was quoted. Ask about this because it is an unfair practice that some shops use to boost their labor income. The service advisor may give you a story about shop costs, etc. Don’t accept it and find another shop that uses a calculator correctly. The shop that uses what is called a labor matrix-pricing guide for labor is gouging you unjustifiably.

AREAS OF SPECIALTY

A shop that specializes in a particular area usually charges higher labor rates for their service than general service facilities. While they may charge more for their service, they usually wind up being cheaper in the long run because they tend to go directly at a problem in laser-like fashion, diagnosing and fixing the vehicle with the least amount of time and materials. Shops unfamiliar with specific areas usually end up muddling around, spending the customer’s money on parts and/or labor trying to find a solution.

PARTS USED

Typically, auto repair shops use a markup on average of 30%. This markup enables them to provide the customer with a warranty. The type of parts used for auto repair directly affects the bottom line price. OEM (Original Equipment Manufacturer) parts tend to be the highest priced, followed by aftermarket parts. There are typically two to three tiers of aftermarket parts. Different tiers are defined by quality. I use the top of the line aftermarket parts to raise the chance of a longer lasting, effective auto repair. Finally, used parts also vary in price depending on the mileage and/or demand of the part. A used part can render an effective repair depending on its condition. Parts that have sat out in harsh weather conditions and rusted or been contaminated by precipitation usually fail shortly after installation. So make sure you are using parts that have been in a protected environment. In addition, it is obvious that the less mileage on a used part (in general), the longer its life expectancy. 

SHOP SUPPORT

Shop support is defined as any services / products used to complete the repair. During the course of any auto repair certain products and / or services are used. Products like brake cleaning solution, shop rags, and carbon cleaner are necessary in the auto repair process, as well as services like waste oil disposal, junk tire removal, and any other byproduct cleanup from auto repair. Costs for these products / services are passed onto the consumer as environmental and operational costs.

SHOP OVERHEAD

• Physical plant: Regardless of size, a shop has expenses that have to be paid by the work generated. Such things as rent or mortgage, electricity, heat and air conditioning, water, maintenance and repair to the building, equipment maintenance, etc.

• Number of trained/certified techs: Good trained service personnel costs money, period. Usually techs are classified as “A”, “B”, or “C” techs. The more high-grade techs in a shop, the more it costs to pay them. In order to attract a high-grade technician these days, shops have to pay a good hourly rate or weekly salary. In addition, health insurance and other benefits such as a company car often go into the package to attract the class “A” technician.

• Tech training: Auto technicians have to go to school on a regular basis to keep up with new automotive technology. Without this training, techs cannot repair vehicles in the “book time” allotted for a particular service operation (not to mention the occasional “headache” job that comes along that every tech in town has had his/her hands on without success). A repair shop usually pays for this training.

• Equipment and information systems: In order to work on today’s cars a shop must have state-of-the-art equipment. Hand held scanners, diagnostic software, and lab scopes analyze vehicular datastreams in an effort to extract critical info for accurate vehicle repair. Other equipment such as vehicle lifts, floor jacks, lubrication equipment and the likes are necessary to operate a shop efficiently and effectively. Due to the ever-changing landscape of vehicular information/technology, up-to-date information systems are necessary to address specific problems. Without such info, techs cannot deliver accurate repairs. Regular costly info updates are a necessary part of running a successful auto repair shop.

• Parts inventory: In order for a shop to turn around a broad spectrum of work in an acceptable amount of time, it must have a large enough parts inventory on hand. Given the number of different years, makes, and models of vehicles on the road, parts inventory must be quite broad and inclusive. This costs money to maintain and that cost is reflected in auto repair pricing.

As you can see, there’s a lot more that goes into auto repair pricing than parts and labor.

‘Til next time ... Keep Rollin’

“America’s Car Show” with Tom Torbjornsen airs 7:30 p.m. Wednesday, 9 a.m. Thursday and 11 a.m. Saturday on WBBZ-TV.

"America's Car Show" with Tom Torbjornsen airs 7:30 p.m. Wednesday, 9 a.m. Thursday and 11 a.m. Saturday on WBBZ-TV.