Acceptable parts markup for shop?

Travis_K wrote: I believe the shop in question was getting it from worldpac,

I found out about Worldpac from a friend of mine who worked the parts department at a dealership. He said that they preferred to get parts from there and not the dealer network, because it was the same parts but cheaper and more timely.

They're great for a lot of things, but returns can be a bitch. We were forced to get calipers for an obscure European car through them, and one of them was bad right out of the box. We had a replacement in two days, but they haven't sent anyone around to pick up the defective one, and it's been there for 3-4 weeks already.

This is a big reason why I have a problem with a lot of my local shops. I have no problem paying someone $100 - $120 an hour to fix something that I "can't / don't want to / don't have the time to" fix. Some won't agree with me, but I think a skilled mechanic is worth their weight in gold and have no problem paying for their skills. I do a good chunk of work myself, but I'm not above taking a car to the shop when the situation warrants. Generally, the big thing that gets me into a shop is I don't have the time to make the repair in the foreseeable future.

I do have a major problem with the markup on parts, I've seen instances where they charged me just about double what the dealer cost was for a fuel pump on a Chevy truck! Again, don't charge me more than the dealer will, or I'll just go there and have them fix it for less money. And honestly, I think if someone opened a shop and promised that they'd charge you Rock Auto's price (I'm not even talking wholesale) +30% for parts they could do well. After all, most of us know exactly what a part costs at Rock Auto/NAPA/etc. Don't insult me by telling me a serpentine belt is $75 and takes a full hour to install on a vehicle with an electric fan. On the other hand, I think 1/2 hour labor and $35-40 for the $25 part is in the realm of reasonable.

One interesting tidbit - I got quotes from two dealers and one independent for new front rotors/brakes for our Odyssey two years ago. They were within $40 of each other, but the interesting part was that the independent was the most expensive, and they weren't even using OEM parts!

Travis_K wrote:

Knurled wrote:

pres589 wrote: Poor analogy, and you apparently never had this very thing happen to you. I had it happen about once a week when working a store less than two blocks from an O'Reilly's. It's a pile of fun trying to tell someone that you 'need' to charge $30 for a widget that they charge street customers $20 for.

We just inform those people that we don't like doing work twice, and we've cultivated a lit of suppliers who we can trust to provide high quality parts. (O'Reilly's and Autozone are not on this list) And that the book-time labor rate goes up ~30% for customer supplied parts, since they're usually incredibly crappy.

See, that makes sense to me, If it had been your shop she took it to then she would likely have had the work done. Charging 225% the dealer price for a part, and saying that they do not install customer supplied parts, nor buy parts from other than one source = having the car taken elsewhere and a recommendation to anyone who might ask to not go to that shop, because even the dealer is cheaper.

and just for the heck of it you might let the offending shop owner / manager know what you just posted

at a company sales school many yrs ago we were taught that a satisfied customer told 10 people and a dis-satisfied customer told 100 people... or some such ratio

Worldpac is pretty good for the most part. But some of their stuff (window switches, etc) can be absolute crap. BTDT.

Rock Auto kills on prices but you have to consider the added shipping and the wait time. If you get crap coming from all over, the freight will quickly gobble up any savings. So that RA + 30% is a pipe dream, guys.

And finally, it's no problem to find cheap parts. But you get what you pay for. There was a vid going around where a 4x4 shop somewhere or other checked several different hub assemblies from various suppliers, the max alowable end play was .004, IIRC. Some of them had .010 end play right out of the box. This doesn't sound like much until you realize this could be as much as 1" of 'rock' when measured at the tire edge.

So what does a reputable shop do? Stick with quality stuff and mark it up so they can keep the doors open and don't listen to the whiners who shopped it around somewhere else not realizing they weren't truly comparing apples and apples.

The motorcycle shop I use has great prices, and the people that work there are extremely friendly and honest. They are up front about their rates, and their parts prices are actually about even with the online retail. Because of this, I won't go anywhere else for service.

Guys,

What a great thread.

I have suspected much of the stuff that curmudgeon and curtis detailed. Great to hear it from the guys in the trenches.

Now: How about some comments on the cost of VW parts........ (I have only one experience and it seemed excessive....)

Rog

Curmudgeon wrote: So what does a reputable shop do? Stick with quality stuff and mark it up so they can keep the doors open and don't listen to the whiners who shopped it around somewhere else not realizing they weren't truly comparing apples and apples.

I agree on the quality of cheap parts not being something a shop would use, and really they can charge whatever they feel is necessary as long as they let the customer know before any work is done. I still cant figure out any reason that makes sense to me to charge more than 50% over the dealer retail price on parts.

The 50% markup makes the shop a lot more money. Seems simple enough why they charge extra. If they can get away with it 95% of the time, why not?

poopshovel wrote: Q: "What is an acceptable markup." A: "Whatever the market will bear." Ever looked at how much aspirin costs in an emergency room?

[Off topic]

Yep. Outside of the visit cost of your assigned doctor/PA/NP or speciality provider/service, everyone who sees you for your problem is "FREE". That $85 for an aspirin would be closer to $5, if you really had to pay for the nursing cost involved with your care. That bill would also be a LOT higher then the amount of said aspirin.

[/Off topic]

And now back to your regularly scheduled program.....

MitchellC wrote: The 50% markup makes the shop a lot more money. Seems simple enough why they charge extra. If they can get away with it 95% of the time, why not?

It's a great business model, as 90% of the people who take their car to the shop would never compare parts prices online. However, for the 10% that do know what the prices are, you would think they wouldn't try to pull the same garbage. I mean, when the customer gives you the correct diagnosis for the problem, they would be able to assume that the customer probably has a good idea how much it costs to fix it. Is it worth losing that customer (and their 3-4 vehicles) entirely so you can pad a bill by $100? To me, we're the type of customers you want to keep, as everyone asks me as the resident "car guy" where to take their vehicles when they need work.

As a society, we are more savvy about prices. With the internet, people comparison shop on just about everything. At some point that will trickle down to car parts, and the shops who overcharge will lose customers. People are not as dumb as they think...

A lot of the people running businesses are less tech-savvy than the customers that they serve. A lot of them will continue to operate the same way that they did ten, twenty, or thirty years ago, but some day they will ask, "Where did everyone go?!" as all of their business went to the new guy in town.

dj06482 wrote: People are not as dumb as they think...

I'm not so sure about that... Look at DC, or the white house....or the pols in MA.

If people keep putting the same useless politicians in office they will pay the same marked up prices.

To get back on topic, even if a customer comes in with the right diagnosis the shop still needs to confirm it, and if it doesn't solve the problem it's not the customer that is going to have to make it right.

Regardless of the customer's skills or knowledge they are having the work performed at the shop, utilizing the shops tools, equipment, knowledge and skill. The shop needs to cover costs and still turn a profit, by pricing labor and parts cost to accomplish that.

I've always done my own work. I don't like to pay someone to do something I can do myself. If someone isn't happy with what a shop charges they can do the work themselves as well or find a different shop.

Recently I have been having oil changes done by the dealer, for warranty documentation, and it hard to justify the time to do the work, go and by the supplies and dispose of the used oil when the dealer charges $30. The savings is not enough to justify the hassle of doing it myself.

They keep the price low to build up a relationship and trust with the customer so that when the customer needs more involved repairs they come back.

If you only go there for the major repairs then you don't see the low mark up on the maintenance items. From the shops perspective, if the only time you've come in is for the current repair, you've obviously had maintenance done elsewhere and what are the chances they will see you again regardless of how they mark up the parts? Why give up profit for someone that is unlikely to return?

As an example: I had a radiator hose blow on the way to work. I had the shop that did the tow do the repair. Even though I grumbled at the markup, further thought brought the realization that they know I won't be back any time soon no matter how good the deal is, so why give away profit?

How in the world did you pull politics into this discussion?

Curmudgeon wrote: And finally, it's no problem to find cheap parts. But you get what you pay for. There was a vid going around where a 4x4 shop somewhere or other checked several different hub assemblies from various suppliers, the max alowable end play was .004, IIRC. Some of them had .010 end play right out of the box. This doesn't sound like much until you realize this could be as much as 1" of 'rock' when measured at the tire edge.

Wheel bearings/hub assemblies. We use Timken and only Timken unless the customer is in a real bind money-wise, and even then we discourage it. Yeah, they're expensive as hell, but we never have to worry about a misboxed item, or a used part stuck in a new box, or an ABS sensor that doesn't work, or wheel studs that stretch and break when torquing the lugs, and then finding out that the cheap manufacturer used a non-OEM wheel stud so when you order replacement studs, they don't fit.

That was a good one. I believe it was a Chrysler-chassis Sebring. We were halfway into figuring out what the stud application really was when we realized that it would be a real nightmare down the road if a stud had to be replaced again, so we took the part off and installed a Timken, eating the markup to partially make up the difference. (hey, we're human too you know)

I've said it before, but we've found that price-matching people make the worst customers, for various reasons. We're busy enough that it doesn't pay to deal with hagglers, we're perpetually one-two weeks behind on work as it is. And we're busy because we have a lot of people who like the quality of work we do.

jstand wrote: If you only go there for the major repairs then you don't see the low mark up on the maintenance items. From the shops perspective, if the only time you've come in is for the current repair, you've obviously had maintenance done elsewhere and what are the chances they will see you again regardless of how they mark up the parts? Why give up profit for someone that is unlikely to return?

They're justified in overcharging me on the major work because I do my own oil changes? Really?

So if they screw me over on the major repairs, what incentive do I have to use them for basic maintenance?

ransom wrote:

curtis73 wrote: It totally depends on the shop and the day. I run a transmission shop and if someone comes in asking for a brake job I have to choose carefully. If I'm busy with 10 cars all getting a $2000 tranny job, I can't take two hours out of my tech's day to do a brake job for $150, so I'll try to get more for it to make it profitable. If it means that I won't be able to finish one of the tranny jobs before the week ends, I'll shoot them really high. If they take it, I can maintain my income. If they don't, I still maintain my income. If business is really slow, I'll hit them with a cut-rate deal because some money is better than no money.

I'm trying to learn more about how to run a business; this is absolutely curiosity and not second-guessing: Does it impact return business or whether you get a second chance down the road with a customer if you give them a really high estimate? I'm assuming (with the normal risks of assumption) that you can't really tell the customer "look, I'm really busy, so to make it worthwhile it's going to have to be this much." So they wander off and if they get an estimate from a similar shop who are having a slow week, they'll just think your prices are high, right?

Being a mostly-transmission shop, there is that risk of scaring people away from future business. For most vehicles, a transmission will need to be rebuilt once so earning repeat business is not quite as big a deal as it would be in (for instance) a general repair place.

I'm lucky that this job is at an honest shop... truly. We have 42 years of reputation to back it up. I don't have to sucker people into paying for more than they need. I earn their trust, keep good communication, invite them to see the damage if they don't believe me, and price accordingly. Its a blessing compared to the previous jobs I've had.

Having that kind of reputation to back me up, we do earn a ton of repeat transmission business. We're rebuilding the TH350 in a guy's 1982 Chevy pickup that we did 15 years ago as well.

So I don't sweat the occasional dust-off of a 20 year old kid with a ricer who wants an oil change and brakes. On the other hand, I do take notice when a repeat customer comes in for brakes. If I don't have time to make it cheap for them, I sometimes dust them off by telling them I wouldn't be able to get to it until next week. They can't argue with that... if we're busy, it must mean that we're good and it supports the very same opinion that brought them back in for more service.

Running a repair shop is sales. Period. I back it up with a heaping helping of customer service. The secret is to make money so the owner is happy, and make the customer feel like you bent over backwards to help them. Its a daunting task sometimes. You have to possess the talent to be able to tell people to berkeley off in such a way that they thank you for it, and the talent to know which people are the kind that are trying to take advantage of YOU versus the ones that another shop would take advantage of THEM.

Case in point. Last week we did a trashed 4L80E for a rock-bottom price. He kept trying to take advantage of me and in some ways I let him. Seeing the hitch on the truck, the 7-pole trailer wiring, the electronic trailer brake controller under the dash, and several RV accessories in the bed, it was obvious why his tranny was trashed. So, I knew that in order to prevent a warranty issue later I had to install an external transmission cooler and a mild shift kit. I passed them off as freebies, like we tried to hook him up with a bonus. He thought the firm shifts were the sign of the apocalypse. It took me and the builder an hour to calm him down and explain why the shift kit helps prevent damage. Some people you will never please. Others will leave the lot, have a solenoid fail, and are so afraid of confrontation that they just take it to another shop and pay all over again. Its my job to please the unpleasable, and make the fearful ones feel so comfortable that they come back. Its not easy.

The owners see the bottom line; the dollars you collected versus the dollars you spent. They don't care about anything else until someone complains. Then they question your management skills. The secret is to run interference in such a way that customers pay you money, leave happy, and expect a somewhat thankless existence.

Fortunately my new bosses are very pleased with how I'm doing and they've been very willing to give kudos where they're due. That's all I need.

Now, if you are going to own and operate your business, expect one of two things to happen at first; either you'll cut the rate to make people happy (which won't work... people in general want the cheap fix but then curse YOU out later when they are disappointed with their own decision to go cheap), or you'll develop a thick skin and piss people off but make money. Think of it this way... if you eat at a steak house and pay $50 for a good meal, you may have a little remorse about spending that much, but you got top quality grub. If you spend $5 and eat at McDonalds, you're just as full but the crappy food takes its toll on your guts. You might complain to McDonalds about the way your guts feel, but in truth its your own dumb fault for choosing to eat a substandard meal. Auto repair is the same way. Make it cheap and people will not respect your repairs. Make it expensive and they will feel like its a top-notch repair. They might complain about the price, but a wise man once told me, "If you want the $2000 paycheck, you have to put on the $2000 show"

My indy Porsche guy sells parts at about retail. With the part of town his shop's in, I can't imagine his overhead is very high.

The 4L80E story reminds me of two trans stories. (We don't do transmissions, but we have a shop that we trade work back and forth with who does excellent work)

One was a fullsize GM SUV where the trans failed. Long story short, all of the internal lugs were sheared off. The rest of the trans was smoked anyway, so they rebuilt it with a good used case. A month later, "it's doing it again!" Same symptoms as before (would barely move backwards, not at all forwards) and sure enough, lugs sheared. Trans guy tells us that the only way that could happen would be if he was slamming it from neutral to 1st while under power. (Later we found out that the vehicle owner was trying to pull stumps out of his yard) He re-cased the otherwise good transmission and told us to tell the customer, this is an unusual problem with a specific cause of failure. This is the only time we're going to cover the trans for this, but whatever you're not doing, don't do it again. That was 2-3 years ago, we still have that customer and the trans hasn't failed yet.

Story two was a stakebed that smoked the trans. Like, the paint was burnt off of it. Unit got overheated from overzealous rocking back and forth to unstick from mud. A couple months later, it came back, same problem. Customer says, "yeah, I got stuck again..." Didn't have a problem with it not being warrantied.

What Poop said.

When I price a repair at a shop, I don't care what they charge for the parts. If the overall cost of the job is worth me not crawling my fat butt under it to fix it, I let them.

The wife's Venture puked the brake booster a couple of weeks ago. The part was $150. A local shop wanted $400 to change it, including parts. It was worth $400 to me to not have to change a booster I couldn't see, much less crawl under the dash and cuss and fight it for hours. What he charged for the parts was irrelevant and I honestly couldn't tell you what that was. The only thing important was the cost of the whole job.

I can tell you as a business that sells parts, we mark everything up 100% from our cost.

dj06482 wrote: They're justified in overcharging me on the major work because I do my own oil changes? Really? So if they screw me over on the major repairs, what incentive do I have to use them for basic maintenance?

I didn't say it was acceptable to overcharge you.

I said why give up profit they would normally make, to cut a break to someone that you will likely never see again regardless of how great of a deal they give?

Look at it from their perspective. For example, you come to them for an estimate, and when diagnosing the problem they see the ball joints , brakes, exhaust, or something else is fairly new. While discussing the estimate, the smart business man will feel you out by asking about when some of the previous repairs were done or pointing out something else that is going to be due soon to find out if there is a chance of gaining your business. If your response is I do all my own work, but I am not doing this because (insert any reason you want), then why would he expect to get any additional business?

If another shop did the work chances are you'll make some comment about who did the previous work or at least why your not taking it there, and he can decide how to best try to gain future business.

Honestly a great shop is so far and few between I dont mind if they charge 120$ for a set of spark plug. When I was down in San Diego I had a shop who was expensive but knew how to repair a CIS mercedes, at 80$ an hour they were absolutely great. If they were to charge me 30$ for a 15$ distributor cap, I wouldn't complain.

You have to be able to trust a mechanic and I always do an interview before I'll bring my car in to a shop. I am too poor lately but I always feel a shop out before going there. I won't let just anyone work on my car and if I'm not convinced of your ability you aren't going to get my business.

I think Curtis basically reflects the same issue I've had getting body work done on the Benzer, the shops make too much money on insurance to want to deal with a guy paying himself. If you are a poor bum it isn't much of an interest to a busy shop pumping out insurance jobs.

In reply to curtis73:

Thanks for the overview!

Knurled wrote: We just inform those people that we don't like doing work twice, and we've cultivated a lit of suppliers who we can trust to provide high quality parts. (O'Reilly's and Autozone are not on this list) And that the book-time labor rate goes up ~30% for customer supplied parts, since they're usually incredibly crappy.

That's the rub of it, we were getting our parts from the O'Reilly's around the corner, they'd drive around in the delivery truck and people would see this stuff. That shop was in a somewhat less affluent neighborhood so some of the more price sensitive customers would figure this out and start asking questions, many times not returning to our shop/store.

Knurled wrote: I've said it before, but we've found that price-matching people make the worst customers, for various reasons.

This times about a billion unless we're talking about a guy looking at tires, in which case I relished the challenge of getting the potential customer into as good of a product as I could without breaking the budget. I'd usually try to get the person to tell friends about the store so we could move more hoops and build up a word-of-mouth reputation for a good product.

Which had been a real problem about a decade ago and further back because the store's name ended in "stone" and there had been a lot of negative press about a few of the products.

As a shop owner in the Northeast. I try to go for a total profit margin of about 60% Usually it winds up splitting into about 35/25% ratio in favor of the parts. i would rather have it the other way but hey. One thing everyone has to remember is that these local guys that alot of people have come to rely on are struggling to survive in the current economy and the fact that alot of people start shopping things around to whittle out the last penny from anyone makes life really tough. I for one will not give any one an estimate over the phone, what if the car is 10 years old has been parked on dirt its whole life and they want some fuel lines replaced? I would rather chew my own leg off than do that for book time. I do not let anyone bring in their own parts. If I did then my labor rate would double TO START.....
Also keep in mind that you as the consumer expect that the part and the labor should carry at least a 1 year 12k miles warranty correct? well guess what we factor that in to our profit margin.

Keep in mind the average pro mechanic has well over $100K in tools and boxes, yet a plumber can keep all his tool needs in a hand carried box generally speaking yet he can make 3-5 times as much as an auto tech. And the Auto tech needs to be a plumber, electrician, HVAC, computer, and mechanical repair guy all wrapped in one.. 5 guys in one I guess that means he should get 5 times the salary right? Sign me up for the $500k per year salary!!!!

As for price matching/price hunting customers sorry I am too busy (i dont care if they see me sit on my fat ass and cruise GRM online all day and not pick up a wrench, I am still too busy :-) )