subject: What Is Your Labor Rate? How The Automotive Repair Industry Manipulates What You Pay. An Industry In [print this page] 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 part quality.
Flat Rate
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!
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by: Stein Olive
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