Your auto repair labor revenue and parts margins are critical for enhancing your shop’s profitability. Adjusting your pricing on parts to make a profit is pretty straightforward.
But when it comes to labor times for auto repair shops…that’s where things can get a bit tricky.
Yes, you need competitive labor rates, but you also need to keep those rates reasonable so you don’t scare off your customers with sky-high prices.
3 ways your shop can make more money on labor:
- By using a labor matrix
- By creating custom labor rates
- By applying a labor guide markup
Before we dive into the differences between these three methods for setting the best labor times at your shop, here’s a quick refresher on the one thing these methods have in common: the labor guide.
What is a Labor Guide?
A labor guide is like the gospel of labor times for auto repair shops. It tells you how long, on average, it takes to complete different types of repair work.
Remember that the times listed in auto repair labor guides are averages, so it’s best to treat them as a starting point.
Factors That Can Affect Labor Times for Auto Repair Shops
Let’s take a look at some of the factors to consider when determining how much to mark up (or mark down) your shop’s labor rates.
1. Age of Vehicle
Older vehicles are often trickier to fix, especially because finding parts for them can require a time-consuming hunt across parts suppliers. You can make up for the time spent hunting down uncommon parts by charging more for all repairs involving vehicles over a certain age.
2. Geographic Location
Some areas lead to different types of repair challenges that can affect the time it takes for repairs.
For example, shops in Syracuse, New York—the snowiest city in America—might find themselves working with cars that have rust, which can significantly add to the time it takes to remove or even clean certain parts.
3. Experience of Technician
Chances are, you’re already paying experienced technicians a higher base salary or hourly rate.
However, certain situations might call for cranking up those numbers, like if you really need to put their skills to the test for a tricky repair for a client who wants it done ASAP.
4. Customer Needs
You can offer customers who need their cars back fast a “Pro Tech” rate, where your tech wraps up the job in record time.
When you’re asking techs to complete a job faster than the time on the labor guide, and still do a good job, the customer is getting special service. Be sure to let customers know that speediness comes with a surcharge.
5. Relationship with Customers
It’s a good idea to consider giving loyal customers a special rate as a token of appreciation.
With that said, industry leaders advise sticking to your labor rates as much as possible, because if it becomes a habit, you risk financially harming your business.
How to Choose a Reliable Labor Guide
A reliable auto repair labor guide is foundational for your shop when you’re setting labor rates, so you’ll want to use a labor guide that stays up-to-date with the latest labor times in the industry.
Just like many people use online directories instead of the Yellow Pages, many auto repair shops use digital labor guides that are constantly updated with the latest labor times.
When seeking out a digital labor guide, look for one that:
- Offers consistent, comprehensive data on labor times from industry leaders, so you can set accurate labor rates that will keep your shop profitable
- Adds labor times for new vehicles and jobs periodically, so your shop’s pricing can stay competitive
- Integrates with your auto repair shop management software, so you don’t have to dig through multiple systems
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