If your shop isn't using at least one mark up matrix to get the most out of your parts sales, then you might be leaving a lot of money on the table.
In fact, auto repair shops have an amazing opportunity to maximize their profit margin on parts sales in particular. Especially when you consider the tools available to support and simplify the entire process. Gone are the days of using pen and paper or busting out the calculators.
Cloud-based shop management systems have made it easier than ever to not only manage your shop, but really get the most value out of the work you're already doing.
Using a parts matrix in particular is one of the most important aspects in making sure your shop is profitable. By building streamlined process for marking up parts, shops can ensure grow your shop’s profit margin while staying fair to customers.
What is an Auto Parts Markup Matrix?
An auto parts markup matrix is a powerful tool for optimizing your parts pricing and increasing your gross profit.
When it comes to providing parts for a repair, auto repair shops can build multiple markup matrixes to determine the best markup percentage to apply based on different factors, like how much it costs your shop to purchase the part from your selected vendor.
In our latest Auto Repair Industry Index shops were achieving an average 35% with just 3 markup matrixes. There's a lot of room to grow their profits!
Why should shops use a parts markup matrix?
It might be easy for a shop to leave parts markups up to individual service advisors. However, this can result in widely varied processes based on each employee’s unique experience.
You want to build a consistent, reliable mark-up process to save your team time, while maximizing profit yet remaining fair to your customers.
With a detailed parts markup matrix in place there’s no more second-guessing.
Instead of spending precious time figuring out the right markup for every single repair order, the perfect markup percentage can be applied every single time -- both saving time while maximizing profit margins on every repair order.
The Price is Right: Efficient Parts Shopping
Before you decide how much to mark up a part, you obviously have to buy that part (or find it in the inventory). When shopping for parts, getting good deals is important, but so is having an efficient process for finding those deals. Efficient shops strike a balance between quickly finding parts and snagging good deals.
There are various ways to quickly shop around and find the best deal on parts. Some shops still send their part’s person to the local auto parts shop or scrapyard to find those hard-to-find parts.
These days, many auto repair shops save themselves a lot of hassle by turning to shop management systems that enable them to swiftly compare prices from multiple vendors at once. With online parts houses, repair shops can earn back the time they would have spent sending someone to hunt down these parts and making these comparisons in person.
Mark Up Parts By Just the Right Amount
After comparing prices and deciding which parts to purchase, it’s time to find the markup “sweet spot,” where it’s a good deal for your customers and your business.
As a general rule of thumb, the more expensive a part is, the less you can mark it up.
Consider this: fast food companies make some of their highest profit margins off of their least expensive menu item—soda. If a cup of soda costs the fast-food company $0.25, charging a dollar for it gives them a 75% profit margin. But a 75% profit margin on a hamburger that costs the fast-food company $7 to make would hike up the price to $12.25, which is probably more than most customers are willing to spend.
If you double the price of a $10 wiper blade, the customer won’t bat an eye. But if you try to mark up the price of a $400 alternator by 100%, it’s a different story! The customer will balk at the $800 price tag and probably go ask another shop for a second opinion.
Reach the Right Pricing With a Parts Matrix
Marking up Parts with a Simple Calculation
A simple calculation is used when you markup parts in a certain price range by a specific amount.
But you can also use a compound calculation for parts markups. With a compound calculation, parts are marked up by different percentages within specific cost ranges. For example, if you sell a job for $20, you could mark up the first $10 by 10%, and the last half by 20%.
Marking up Parts with a Complex Calculation
While compound calculations are more complicated, using them for your markup matrix can give you an edge when it comes to increasing your gross profit margins. Some shop owners that use complex calculations in their parts markups have been able to increase their profit margin by about 8% to 10% when compared to using a simple calculation.
Find the Right Markup Matrix For Your Shop
Ultimately, each shop has unique needs and preferences, and it’s up to you and your team to determine which type of calculation to use when building your parts matrix. But no matter which calculation method you choose, an automotive markup matrix can be a game-changer.
The Tekmetric Shop Index allows auto repair shops to benchmark themselves against thousands of Tekmetric shops nationwide
Most shop owners have a feel for how their business is doing. They know the slow weeks, the strong months, and whether the bays stayed full. What they often don't have is a good way to compare those numbers against anyone else.
That gap is where opportunity hides — and it's exactly what the Tekmetric Shop Index is built to close.
The Tekmetric Shop Index is a free benchmarking tool that lets you enter your shop's key metrics and instantly see how you stack up against more than 10,000 auto repair shops nationwide. No Tekmetric account is required. No commitments either. It's just an honest look at where your shop stands on the four numbers that matter most.
Top-performing shops track these metrics religiously — and they know exactly where they stand relative to the industry. Here's what each one means, why it matters, and how your numbers compare.
ARO is the average dollar amount of each repair order — total revenue divided by the number of cars you serviced. It's one of the most direct measures of how well your shop is selling and completing work.
A low ARO isn't always a bad sign on its own. But if your car count is healthy and your ARO is lagging, you could be leaving approved work on the table, underquoting, or missing opportunities to present needed repairs. A high ARO, on the other hand, means customers are approving more of the work their vehicles need.
ARO is also the metric most directly tied to your digital vehicle inspection process. Shops that complete digital vehicle inspections (DVIs) consistently — and share them with customers — tend to see higher approval rates and stronger AROs.
"I like the ease and the ability to be more transparent with my customers with detailed inspections and photos." — Verified Tekmetric User, G2
Car count measures how many vehicles you service in a given period. It's the volume side of the revenue equation. ARO tells you how much you make per car; car count tells you how many cars you're making it on.
Both numbers matter. You can have a strong ARO and still struggle to grow revenue if car count is stagnant. And you can have a strong car count but a weak ARO if jobs aren't being sold thoroughly. Top shops keep an eye on both.
Car count breaks down further into new customers and returning customers — a distinction that matters when you're trying to understand whether your growth is coming from acquisition or retention.
"Customers can review inspection results, check estimates, and approve repairs with just a click. Everything is integrated, making our workflow way smoother than before." — Verified Tekmetric User, G2
Parts margin is the percentage of profit you're earning on the parts you sell. It's calculated as (retail price minus cost) divided by retail price.
This one is easy to overlook, especially if your shop has been using the same parts pricing for years. But small differences in parts margin have a compounding effect across hundreds of repair orders. If your parts pricing isn't keeping up with cost increases from your suppliers, your margin erodes quietly.
Top shops use tiered parts matrices that automatically adjust markup based on part cost ranges, protecting margin without requiring manual pricing decisions on every job.
"We were stuck at a certain level. … Once we made the switch, it just opened doors — payments, parts ordering, inventory — it all became more streamlined." — Tim Lanier, Lanier Auto Group, Tekmetric Customer
Effective labor rate is the actual dollar amount your shop earns per labor hour — not your posted rate, but what you actually collect after discounts, flat-rate work, and packaged pricing.
A shop might post a $140/hour labor rate but collect significantly less per hour because of how jobs are built, discounted, or packaged. Tracking effective labor rate surfaces that gap and gives you something concrete to address.
This metric also helps you evaluate how well your labor matrix is working or whether you need one.
"I value its cloud-based agility and the way its real-time shop management board eliminates the bottleneck at the service desk … handling parts tracking and labor margins seamlessly." — Verified Tekmetric User, G2
These four metrics are the foundation of shop performance analysis. But knowing what they are is only half of it. The other half is knowing how your numbers compare — not to a theoretical ideal, but to real shops in the real industry.
That's what the Tekmetric Shop Index is built to show you. It's a free benchmarking tool that lets you enter your shop's numbers and instantly see how you compare to shops across the country on ARO, car count, parts margin, and effective labor rate. No Tekmetric account is required.
"With the implementation of Tekmetric we have seen a dramatic increase in business and positive feedback from customers." — Verified Shop Owner using Tekmetric, G2
You can't improve what you don't measure. And you can't prioritize improvements without knowing where the gaps actually are.
Takeaways
ARO measures revenue per vehicle. Strong shops track it and act on it.
Car count captures volume. Both new and returning customers matter.
Parts margin erodes quietly if you're not tracking it against your costs.
Effective labor rate reveals the gap between your posted rate and what you actually collect.
Benchmarking against real industry data turns these numbers into a roadmap.
See how your shop compares. The Tekmetric Shop Index is free, takes less than two minutes, and doesn't require a Tekmetric account.
In the auto repair industry, where customer trust and satisfaction are paramount, leveraging customer feedback is an invaluable strategy for improving shop performance. As technology improves, customer expectations for service quality and transparency continue to rise. Fortunately, shops can actively seek, analyze and act upon customer feedback to better position themselves to meet these expectations, enhance their service offerings and build long-term loyalty.
Customer feedback is a powerful tool that, when leveraged effectively, can lead to enhanced customer satisfaction, repeat business and a stronger reputation in the marketplace. As the industry continues to evolve to meet the needs of its customers, auto repair shops that prioritize and act on customer feedback will be better equipped to rise to these standards, thrive and succeed.
Know your audience in the modern industry
Today’s customers are increasingly more digital. In the past, auto repair shops relied on phone calls as their primary form of communication. In the modern market, however, digital communication like email or text messaging has become the preferred type of communication for most people. In fact, 91% of texts are opened within the first three minutes after receipt, with 81% of Americans texting regularly. Ultimately, the best way to get ahold of your customers is to cater to their preference – so ensure you know your audience’s preference and offer solutions that help meet their desired communication style.
Furthermore, the modern landscape of the customer experience emphasizes convenience. At the click of a button, you can have groceries delivered or receive an item within two days of ordering it. Long wait times and visiting brick-and-mortar stores to purchase items is no longer the only way customers can buy things. The same applies in auto repair shops. With this knowledge, you can implement digital solutions to make the customer experience more convenient, thereby increasing loyalty and ensuring your customers return time and time again.
Collect feedback on your shop’s customer experience
Once you understand your audience in general, you should also strive to understand their experience with your business specifically. It’s important to foster a two-way relationship with the customer and give them the opportunity to share direct feedback. This can help you gain insight into the customer experience, including your shop’s strengths and pain points for customers, so you can adjust and improve.
Tracking feedback is just as important as tracking your shop’s internal operations or financial performance. You can gather feedback through multiple avenues: Google reviews, post-service surveys or even in-person conversations. Each option offers customers an opportunity to share their thoughts on areas where you perform well or bottlenecks that need to be addressed.
Digital tools can help monitor all forms of customer feedback. Through Tekmetric, you can integrate with a variety of solutions to monitor and respond to feedback via Google reviews. Or, to help drive your customer experience and gather feedback, you can utilize Tekmetric’s Smart Jobs feature to create estimates within one click, allowing your service advisors to spend less time on manual labor and more time cultivating strong customer relationships.
Leverage feedback to improve shop performance
Customer feedback is critical because it addresses your shop’s bottlenecks from the perspective of the vehicle owner. For example, some shops may include parts ordering and inventory tracking among service advisors’ responsibilities, in addition to taking care of the customer. At Tekmetric, we’ve found this creates many opportunities for miscommunication between the technician who needs the parts and the service advisor, leading to a delay that affects the customer. To solve this problem, we created our Inventory Orders feature so technicians can easily order the parts needed. This ensured better accuracy within the shop and a greater customer experience.
Customer feedback also highlights the importance of convenience when it comes to driving loyalty. For vehicle owners, convenience is not always about choosing the closest shop. It is about choosing the shop that will make their life easier. For example, digital payments solutions can create a more convenient solution for customers. With Tekmetric’s two-way texting and text-to-pay features, customers can pay from their desk or their home office, pay for their college kid who lives in a different state and even pick up their vehicles after regular business hours.
Implementing customer feedback cultivates a stronger connection between your shop and your customers. Through open dialogue, feedback creates a two-way relationship that allows you to address customer needs effectively and improve shop performance. Customer feedback can also help address bottlenecks and streamline processes in your shop, leading to enhanced customer experiences, increased loyalty and, ultimately, a healthier bottom line.
It turns out that the shop owners, service writers, general managers, and technicians that rely on Tekmetric everyday chose us once again as the clear market leader on G2!
Okay, okay, we're sorry for another humble brag... But this is really more about you, the users than it is about us! If you're not familiar, G2 is a peer-to-peer review site. Users just like you can submit reviews and vote on the tools they use everyday, like Tekmetric.
Really, this is all thanks to all the amazing independent shops that do great work every day with Tekmetric. The shops that keep people's vehicles safe and reliable. The heroes that get their customers back on the road every single day!
We were just chosen because you all love us so much! 😳
But that's not all. Tekmetric was also chosen for how easy it is to get your shop up and running!
Most Implementable Fall 2023
Most Implementable Small Business Fall 2023
Fastest Implementation Fall 2023
Momentum Leader Fall 2023
Leader Fall 2023
We totally get it, the last thing you want is to have to pause everything you're doing and let the bills pile up, just to relearn how to run your own shop.
That's why we make it as easy as possible, handling all the heavy lifting so your shop can sit back, relax, and hit the ground running right away!
That kind of makes sense, considering Tekmetric was chosen as one of the easiest shop management systems to do business with.
Leader Fall 2023
Easiest To Do Business With Fall 2023
Easiest To Do Business With Small Business Fall 2023
Tekmetric comes from shop owners, advisors, technicians, and managers just like you. We live, breathe, and execute innovation, the kind of innovation your shops need to get even more value out of the work that shops like yours already do!
We're always working hard to make Tekmetric even better!
Thank you! Thank you for partnering with us, and thank you for helping us create the best possible solution for running an independent auto repair shop!
We're excited to be awarded and regarded so highly, and we strive to keep that level of excellence and support at every step in your shop.
Tekmetric is always being updated, and we’ll never stop working with and supporting shops to help them run efficiently and with fewer headaches, so you can focus on doing what you love!
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