Reasonable Shop Labor Rate

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Originally Posted By: kingrob
And what's with the shops that charge a 75.00 "OBD II" service? The ads say to come on in and we'll hook your car up to our machine and perform a "computer diagnostics" to determine why your check engine light is on. News flash... most part stores do it for free!

Parts stores pull codes, and nothing more. Any moron can hook up a scanner and pull codes. The real job is actually diagnosing the problem once you have the codes. That is when the experienced tech with the right background is worth his weight in gold. If some shop is just pulling codes without any diag and charging $75, then yes, you might be getting taken.


Originally Posted By: Bill in Utah
Back to the original question, a reasonable labor rate would be about $30-$35 which is $20-$25 for the mech and $10 for the cost of the shop.

And you will never keep the doors open, at least not for long. That $4K/month rent, $1K electric bill, $400 insurance, equipment payments/lease payments, maintenance, non tech payroll, credit card process fees, advertising, garbage/sewage all adds up to big numbers that most in this forum are clueless about. I was so glad when the property my shop was on was sold. It forced me to take another direction.
 
Geographic location plays a lot into rates, which has a lot to do with what punisher mentioned.
The Critic lives in one of the more expensive areas of CA, so normal is skewed higher.
 
My mechanic buddy is billing labor at $85/hr. Overhead eats up cash big time. I don't know of any shop in the NY area that could operate for much less. When you start factoring in all the hidden costs to owning and running a business those costs mount quickly.

Frank D
 
Originally Posted By: Chris142
We get $87 and hr and need to raise it. Were just getting by as it is with all the Ca laws we must follow to stay in business.


Sounds like NY and CA aren't real friendly to small businesses.
 
Several folks here NEED to own a real brick and mortar small business (of any kind) for a short period of time. Unless wealthy to start with it'd only be a short period!

Bob
 
Critic,, what kind of odor filter are you using to keep from being over come by what you're stirring here?
wink.gif


Bob
 
Originally Posted By: benjamming
Originally Posted By: punisher
[big snip] advertising


Does a good shop have to pay to advertise any at all?


The goal of any shop, or any business, is to increase new customers coming in, so as far as I no matter how good the shop is, it doesn't hurt to advertise. For instance, if you're running a 19.99 oil change special who's going to know anything about it except the customers that already go there? If you're running a special, an ad in the paper is the way to go. If you're putting up a redundant little ad like "Come to Charlie's Tires, we have tires" then no, advertising is useless.


One thing I wanted to point out was that one of my first jobs was as a quick change oil tech. (Back then we were called greasemonkeys.) The way shops were run then was when someone took their car in for work, shops didn't make their money on labor. They made it on add-ons and parts. Now, shops make their money on EVERYTHING, which is what I have a problem with. With the advent of chain part stores customers started bringing in their own parts that they paid for at a much cheaper rate, so the shops got wise and upped the labor to cover their overhead. They weren't losing money to Napa and AZ, they just found another way to keep their margins high (or at least profitable).

Same thing with convenience stores. Back when most gas stations were "service stations" they made their money on gas, repairs and parts. When the chains like 7-11 and the Pantry started monopolizing gas stations, the profits shifted from gas (which is most often sold at a loss) to cigarettes, milk, snacks and beer.

I don't have any problems with shops turning a profit. When I see the prototypical dumb blonde being charged 75.00 to have a headlight bulb replaced in her Kia, it just rubs me the wrong way. Especially factoring in that she bought the part from the shop and paid three times what it actually cost. There's ethical ways of making money I guess but I saw a lot of stuff like that happening and it just isn't right to me.

But to reiterate, if you're charging me 75.00 an hour labor, then I expect all of that to go to the mechanic that did the work. If you're only paying him ten-twenty dollars an hour, then I should only have to pay him twenty dollars an hour. Fair is fair, and I don't want to pay for the shop owners tools and equipment. I want to pay for his labor, which is what I was charged with. I mean you don't go into the barber shop and get a bill for 100.00- 25.00 shampoo / scissor and 75.00 labor?
 
Originally Posted By: tom slick
they aren't friends to any business

or renters, or home owners, or anyone other than those who make $200K and more.
 
Originally Posted By: kingrob

But to reiterate, if you're charging me 75.00 an hour labor, then I expect all of that to go to the mechanic that did the work. If you're only paying him ten-twenty dollars an hour, then I should only have to pay him twenty dollars an hour. Fair is fair, and I don't want to pay for the shop owners tools and equipment. I want to pay for his labor, which is what I was charged with. I mean you don't go into the barber shop and get a bill for 100.00- 25.00 shampoo / scissor and 75.00 labor?


The shop may pay the tech $20 an hour, but if you add all the tax and insurance, idle labor that he may not use, etc. That usually double the cost.

Usually as a rule of thumb the salary is 50% of the labor cost to the employer. Now you add the business cost, that is probably going to be 3x the salary just to break even.

I assume most businesses want a reasonable profit, so you probably have to charge 3.5-4x the salary.

Think of it this way, if there are many mechanics charging the similar price, that means that is the reasonable cost plus reasonable profit for the trade. You are more than welcome to do it yourself or bring the car to 50 miles away to be worked on (I did that when I need a rebuild), or just shell it out if you are too busy/lazy to do so.
 
It does irk me that the shops, especially dealers, no longer stock the inventory of parts that they did years ago and I understand why. What irks me is the 100% mark up on the part when they have to get it from the warehouse. The dealer did not stock it, he did not have the carrying cost, he just ordered from another source and marked it up. Although independents are similar, they call NAPA have it delivered and mark it up. Just not right IMO!
 
It all depends on what the shop offers and their work. A decent honest independent in my locale (Seacoast NH) charges around $85/hour. The dealer (Subaru) is $100/hr and very good at work but the service advisers push unneeded maintenance on owners.

I found an ex Subaru tech of 35 years in a small place that has no frills for $60/hr who is honest and fair. I hope he survives.
 
There are compitent repair shops here at $60 $80 and $100/hr. The lowest priced one only does fast jobs but the others will do anything you want. Quality work in a timely and professional manner by all.
 
Originally Posted By: kingrob
I don't want to pay for the shop owners tools and equipment. I want to pay for his labor, which is what I was charged with. I mean you don't go into the barber shop and get a bill for 100.00- 25.00 shampoo / scissor and 75.00 labor?


I guess the solution here would be to only hire services performed by people who work out of the trunks of their cars. You could probably get that for the rates you are asking. Even then though, you are probably paying for their time, gas and vehicle wear to troll parking lots looking for customers, as well as allowances for lost tools, etc. I was about to add an allowance for customers who stiff them, but in this case it is more likely that they would be taking advantage of you. But you get what you pay for.

On the barbershop analogy, you do pay for the materials, overhead and tools, it just is not itemized on the bill - in the same way that most garage costs are not itemized.
 
Labor rates should be different according to how long a job takes. Small jobs should be billed more per hour, because a lot of the time is spent waiting for the customer, putting the car on the hoist, taking it off, cleaning up etc. Staying at a hotel at daily rates is higher than weekly rates.
 
$100/hr as a full, burdenedd rate means that the service guy is probably making $35-40/hr take home. That is $70-80k/yr. Pretty low if youre the owner of the business.

But what people dont understand is that at least when dealing with an independent shop, the rate needs to cover ALL expenses, overhead, healthcare, social securit by 100%, etc.

In reality, someone charging $50 in a shop is likely living below the poverty line if they are actually reporting their income and paying all their taxes. I would suggest that nobod in their right mind would charge such a low rate, as it would not be a sufficient rate to have a reasonable living.

My indy charges $85/hr or $120/hr if you bring your own parts. That said, he will typically use only OEM parts from the dealer, and his prices are better than I can get b a longshot... Im not sure how much he makes on parts, though Im sure it is something...

JMH
 
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Originally Posted By: JHZR2
In reality, someone charging $50 in a shop is likely living below the poverty line if they are actually reporting their income and paying all their taxes. I would suggest that nobod in their right mind would charge such a low rate, as it would not be a sufficient rate to have a reasonable living.

You might be pretty close to the mark. I had some work done at the beginning of this year, and while the labor rate wasn't noted on the invoice, the total labor charge seemed too low for the amount of effort that was expended. I was so appreciative that I wrote my check for more than he was asking. (I have never done that before, and probably never will again... it was a one-time gift.)

In some low-cost markets, a shop run like a real business may be profitable at $70/hour... so $80-100 is not out of line in the higher-cost areas. I don't want to pay more than that unless I see some added value, like exceptional diagnostic skills.
 
Absolutely agree about paying extra unless some extra value is required... and sometimes it is.

Unless it is a friend with no shop or overhead (unreported, but its just a favor, I guess), an "off time" favor (unreported), etc., I just cant see how it would work. All of it leads to being unreported, i.e. untaxed.

Id imagine that for an actual shop, lets call it a single owner/operator, so all income turns into business expenses or their income. Id guess that by the time they pay tax on gross receipts, full social security, etc., it is at least 50%.

So that means that a shop charging $40/hr is maybe netting $20/hr before anything else... $20/hr, if they took it all home would be $40k/yr. But then one has to pay for rent, heat, property taxes, retirement benefits, healthcare... WHat does all that result as a true net take home? $10/hr? $20k/yr?

Doesnt add up to me, unless its undocumented.
 
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