Automotive labor charges explained

Lessons on how shops charge for repairs.

This Section deals with general repair shops and not discount chains like muffler or oil change shops. Chains sell price first and have a supporting structure of low costs to do so. Specializing in a very narrow line of products requires lower installation talent and the costs savings of both allows price to be the true product they offer.

Shops can use some very confusing (even to themselves sometimes) systems to figure the price of a repair. It may even include guessing! Usually it includes a charge for labor and parts with some minor others sprinkled in. Where these numbers come from is sometimes a mystery. Suppliers have "suggested" retail prices, (which vary amongst suppliers) shops use various "markup" formulas, some just guess or price by comparing to what other shops charge. Few use sound business practices. Thus, the often confusing array of estimates you get when asking "how much?"

The following are some definitions of basic pricing concepts used in the industry and where the public can often get confused.

Labor charges:
Many service shoppers know that most repair shops have a "per hour" labor charge for working on the car. Therefore, it makes sense to them to ask what that rate is when looking for a shop. What the consumer rarely knows, is that the "actual time" it takes to do the job is often different than what the shop uses to compute charges for the job.

Makes no sense?.... right!

Many shops open up a book that various companies supply them and use the hours that the book indicates as a "time to do the job" and charge that time, multiplied by their hourly charge, to come up with the "labor charge" for the job. (Note also that the books many times disagree as to the amount of time per job)
Example: 2.5 hours (book time) X $60.00 per hour (shop rate) = $150.00 labor charge.

If doesn't matter how long the job actually takes... you get charged $150.00 for labor

Now as long as you know ahead of time the cost of the job, this method of pricing doesn't really matter.... EXCEPT for one issue, people tend to compare the shops more by their "hourly" or "flat rate" charge, than their end price.

... guess what some shops do... charge LESS per hourly charge and MORE hours for the job... The is NO law against it as long as the estimate for the WHOLE job is met. There are shops in the Denver area that charge as little as 1/2 of what other shops charges per hour yet the total job is still within 10%. Go figure?

They know some consumers call ahead and tend to go to the shops with lower hourly charges, even though in the end, it may mean virtually the same end cost as any higher charging shop.
So where is all this headed?

Once again I conclude that one must measure the quality of work first and the value of that work second. Comparing hourly flat rates is generally useless.

Parts charges:
This one is just as confusing. Not only are there many pricing schemes but many different parts sources and manufacturers. One can even buy the same part that SAAB uses, from the manufacturer that sells it to SAAB. This means a whole level of markup is bypassed. Larger shops get bigger discounts from suppliers, SAAB dealers get discounts from SAAB but independents must by from those Dealers paying a markup from them. Dealers are restricted from buying parts like independents do from manufacturers that in turn supply SAAB, missing out on those discounts... Well... get the picture?

Some shops sell at the manufacturers suggested list price, some markup all parts as a percentage of either their cost or off of list, some shops pick arbitrary numbers...... here we go again... see how useless comparing prices is?

The bottom line:

What you need to ask is:

What quality of parts will be used?

What comes with the job?

How much is the completed job?

.. most importantly... ask yourself were you happy with the whole event?

Ask yourself this... would you do your job better if your Boss paid you less or more?

What sets the value of the job is your concept of its relationship to your wallet. If you shopped price, and got the lowest, then be happy with that. Even if the car isn't fixed. (And that's highly probable) If you shopped quality, and got the best, then be happy with that. What sets the price of the job is up to the skill of the shop owner. What sets the value of it is you.

If I had "the dime" for every time I heard the phrase "I want it fixed right but I don't want to spend a lot of money", I'd be rich.... NOT that quality is more expensive, for now days its usually "cheap" that becomes more expensive than "quality", in the end.

Never spend too much but spending too little will almost always cost you more in the long run.