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
Compare your shop's performance against real data from thousands of auto repair shops by state.
Benchmarking data is only useful when it changes what you do next.
If you've run your shop's numbers through the Tekmetric Shop Index and seen where you rank on ARO, car count, parts margin, and effective labor rate — good. You have a diagnosis. Now you need a plan.
This post walks through what each gap in your TSI results is actually signaling, which operational levers move the needle on each one, and how to build a focused 90-day improvement target that gives your team something concrete to work toward.
Start With the Biggest Gap
Your TSI results will show you four rankings. Resist the temptation to try to improve all four at once. The shops that make the most progress pick the metric with the largest gap and stay focused on it for a full quarter before adding another priority.
Trying to improve ARO, car count, parts margin, and effective labor rate simultaneously often means improving none of them because the operational changes required for each are different and can compete for your team's attention.
So step one is simple: look at your four rankings, find the biggest gap from the industry benchmark, and start there.
Gap: ARO Below Benchmark
If your average repair order is lagging, the most common root cause is inspection performance. Either digital vehicle inspections (DVIs) aren't being completed consistently, or they're being completed but not converted into approved work.
A few questions to answer before you act:
What percentage of repair orders have a completed DVI attached?
Of the DVIs sent to customers, what percentage include photos or video?
What's your close ratio on recommended work?
If DVI completion is below 90%, that's almost always the first lever. Tekmetric's Inspection Report shows completion rates by technician, making it straightforward to identify who needs coaching and who's already performing well.
"Now I can look at everybody at a glance. I can be in a different state, different city and know exactly what's going on in each location all the time." — Leroy Ingram, Ooroo Auto Care, Tekmetric Customer
If DVI completion is strong but close ratio is low, the issue is likely in how inspections are being communicated to customers — photo and video quality, the language in findings, how quickly the estimate follows the inspection.
Shops on Tekmetric also have access to the Parts and Labor Matrix, which protects against underpricing. It can be a quiet ARO killer that doesn't show up until you look at margin data.
A car count gap can mean two different things depending on how it breaks down: you're not bringing in enough new customers, or your existing customers aren't returning at the rate they should. Both problems need attention, but they need different solutions.
For new customers, the questions are acquisition-focused. Tekmetric's online booking gives customers a way to find you and schedule an appointment 24/7 — filling bays without your team picking up the phone. The more friction you remove from the booking process, the more new customers follow through.
For returning customers, the questions shift to communication. Are declined jobs being followed up? Are customers receiving service reminders? Tekmetric Marketing automates follow-ups on declined work and scheduled maintenance intervals — so your team stays in contact with your car count without adding manual effort.
"Seven hundred and two dollars in ad spend has generated 11 net-new customers and $12,802 in new customer revenue — an 18.3x return on ad spend before factoring in the lifetime value of those customers returning for future visits." — Tanner Markham, Phase 2 Automotive, Tekmetric Customer
A parts margin gap is almost always a pricing problem — either your markup isn't keeping up with cost increases, you're applying flat markup where a tiered matrix would protect margin better, or your team is manually overriding prices inconsistently.
The fix starts with reviewing your Parts Matrix in Tekmetric. A well-structured matrix automatically applies the right markup based on part cost ranges, removing the inconsistency that comes from individual pricing decisions at the job level.
After updating the matrix, run your Parts Purchased Report to verify that retail pricing is reflecting the changes accurately. This is also a good time to cross-reference against recent vendor invoices — if costs have moved significantly in the last 6 months, your matrix thresholds may need updating.
If your effective labor rate is trailing your posted rate, the most common culprits are inconsistent discounting, flat-rate job structures that cap labor recovery, or package pricing that doesn't account for actual labor time.
Start by pulling your Discount Detail Report to see where and how often discounts are being applied. If they're being applied inconsistently across your team, that's a coaching conversation — and Tekmetric's real-time reporting makes it easy to see which service writers are discounting most frequently.
The Labor Matrix is the structural fix. Similar to the parts matrix, a tiered labor matrix adjusts the billed hours or dollar amount based on configured ranges, protecting margin without changing what customers see on the invoice.
Once you've identified your primary gap and the lever that addresses it, the last step is turning it into a measurable target for the next 90 days.
A good 90-day target is specific, tied to a leading indicator, and gives your team something to track week over week. For example:
ARO gap: "Increase DVI completion rate from 72% to 90% over 90 days, tracked weekly via Inspection Report"
Car count gap: "Launch declined-job follow-up automation within 30 days; track returning car count monthly for 90 days"
Parts margin gap: "Update Parts Matrix for all parts under $150 within two weeks; track parts margin weekly via Parts Purchased Report"
Labor rate gap: "Reduce average discount percentage by 15% over 90 days, tracked via Discount Detail Report"
These aren't arbitrary numbers — they're examples of the leading-indicator approach that lets you see progress before the outcome metric moves. Set yours based on where you're actually starting, not where you want to end.
Check Your Rankings Quarterly
Your TSI results are a snapshot. Set a reminder to re-run the benchmarking every quarter so you can see whether your numbers are moving relative to the industry — not just relative to your own history.
The shops that use benchmarking most effectively are the ones that treat it as a recurring discipline, not a one-time exercise.
"Thanks to Tekmetric, we've really enhanced our business and are looking to expand. We're the #1 shop, 6 years in a row in Upstate New York." — Chris Chevalier, AAA Auto Repair, Tekmetric Customer
A customer comes in with a grinding noise and is hoping it’s just pads and rotors. The digital vehicle inspection tells a different story: a sticking caliper, worn brake lines, and brake fluid that should have been flushed two years ago.
Your service advisor writes an accurate estimate. The diagnosis is solid. The customer still says, “Let me think about it.”
In most shops, that moment has nothing to do with trust. The customer believes you. They just weren’t ready for the total. And as repair costs climb, that total is getting harder to say yes to.
Buy Now, Pay Later gives you a way to change the conversation. Instead of asking a customer to come up with the full amount at pickup, you show them what the repair costs per month, right on the estimate, before they decide. Here’s why that matters more than it did a few years ago, and how it works inside Tekmetric Payments.
The affordability gap is real, and it’s widening
The cost of keeping a car on the road has outpaced just about everything else in the household budget. Motor vehicle maintenance and repair prices rose 11.5% in 2023 and have kept climbing since, running more than 5% higher than a year ago as of spring 2026, according to the U.S. Bureau of Labor Statistics.
At the same time, drivers are holding onto their vehicles longer. The average vehicle on U.S. roads is now a record 12.8 years old, and the average passenger car is 14.5, according to S&P Global Mobility.
Put those two trends together and you get the situation most shops are living with. Older vehicles need more work, and that work costs more. And the customer who used to approve a $900 repair without a second thought is now deciding which line items fit this month’s budget.
Your service advisors see it every day. The customer approves the pads and declines the caliper. The declined job gets saved to the repair order as recommended work. Sometimes that customer comes back for it. Often they don’t, and the work goes to another shop, or doesn’t get done at all.
What financing changes at the counter
Buy Now, Pay Later gives your customer a different number to react to. Instead of $1,149.98 due at pickup, they see what that repair costs per month, and they can pick a plan that fits.
With Tekmetric Payments, financing options from Affirm, Klarna, and Sunbit appear directly on the digital estimate your shop already sends. The customer taps “See if you qualify” from their phone, checks eligibility without affecting their credit, and chooses a plan. On a $1,149.98 estimate, that might look like six monthly payments of $191.66 at 0% APR, or a longer term with interest, depending on the provider and the customer’s approval.
From there, the customer signs the digital authorization, the work gets started, and your shop gets paid.
The timing is what makes this work. Financing shows up while the customer is still deciding, not after they’ve already said no. That’s why it sits right next to the digital vehicle inspection and the estimate in Tekmetric’s service advisor workflow. When you offer financing earlier in the decision, more of those decisions go your way.
Why financing moves your average repair order
Shops that offer financing through Tekmetric Payments see an average $200 increase in average repair order per month.
That isn’t upselling. It’s the caliper that doesn’t get deferred. When a customer can see the problem and afford the fix, the job that would have been declined gets approved, and your repair order reflects it.
It’s the same logic behind digital vehicle inspections. Tekmetric shops average $612 per repair order, and shops using inspections average $741, because customers approve more work when they can see what’s wrong. Financing does the same thing for cost. That’s why the top-performing shops on Tekmetric pair digital authorization, inspections, a parts and labor matrix, and financing. Each one removes a reason for the customer to say no.
What it means for your shop
You get paid in full, and you’re done. The financing provider pays your shop. The customer pays the provider over time. There’s no payment plan for your service advisor to manage, no balance to chase, and no awkward call three weeks later asking when the rest is coming.
It’s built into Tekmetric Payments. There’s no separate application to run, no third-party terminal, and no second login. Financing lives on the estimate and the invoice, and it reconciles with everything else at the end of the day.
Setup is a one-time step. Tekmetric Payments offers same-day setup, and the Payments team turns on financing as part of onboarding. After that, there’s nothing for your team to configure.
For your customer, it’s immediate. Financing appears on the estimate automatically. They check eligibility from their phone, get a decision from Affirm, Klarna, or Sunbit in moments, and approve the work. Your service advisor doesn’t walk anyone through an application or wait on a callback.
Affirm, Klarna, and Sunbit are names your customers already know from buying furniture, electronics, and plane tickets. Seeing them on a brake estimate doesn’t need an explanation.
What your customers see
Pay-over-time options directly on the estimate, before they approve the work
An eligibility check that doesn’t affect their credit
Plans that range from interest-free installments to longer monthly terms, depending on the provider
The total they’ll pay, shown upfront
The question to ask your service advisors
How many jobs were declined last month because of cost? Not because the customer didn’t trust the recommendation, and not because the timing was off. Cost.
Pull the declined jobs report and take a look. If the answer is more than a handful, the repair nobody can afford is already costing your shop. Putting financing on the estimate is how shops get that work approved.
Already running your shop on Tekmetric? Talk to our Payments team about adding Tekmetric Payments and offering financing on your estimates.
Not on Tekmetric yet? Book a demo to see the all-in-one auto repair platform, with payments and financing built in.
Find out what shops in your state are charging, and how to set a labor rate that keeps your shop profitable
In the automotive repair industry, your labor rate is more than just a number on an invoice — it is one of the key metrics that drives your business's profitability and overall growth. For shop owners, staying competitive while maintaining healthy margins requires a clear understanding of how labor costs fluctuate across the country. But knowing the national average is only half the picture. The more important question is: how does your shop compare?
Whether you are running a small independent shop or a high-volume operation, knowing where you stand relative to the average labor rate in your state — and against top-performing shops in your market — is essential.
This guide covers the current landscape of automotive repair labor rates across all 50 states, the factors that drive those numbers, and a step-by-step roadmap for setting a rate that supports your shop's long-term success.
Methodology and Key Terms
Tekmetric built this auto repair shop index as a community resource, backed by data from more than 10,000 shops across North America. Shops can use this tool to benchmark themselves and see how they compare state by state.
Key Terms to Know
Labor rate: The retail price per hour charged to the customer for repair services.
Flat-rate: A pricing model where a job is billed based on a predetermined number of hours from a labor guide, regardless of how long the actual repair takes.
Effective labor rate (ELR): The actual amount of labor revenue earned per billed hour after accounting for discounts, menu pricing, and unbilled time.
Understanding these terms will help you interpret the data below and apply it to your specific situation.
Mechanic Labor Rates by State
The average labor rate across the United States is $132 per hour, with the lowest state at $85 per hour and the highest at $197 per hour. Labor rates vary significantly by state, primarily driven by local cost of living and competition.
📊 See How Your Shop Compares — Free
The data below tells you what shops in your state are charging. But the labor rate is only one piece of the picture. The Tekmetric Shop Index lets you benchmark your shop across the four metrics that actually drive profitability — ARO, car count, parts margin, and effective labor rate — against thousands of real shops nationwide.
It's free, takes less than two minutes, and requires no Tekmetric account.
Why do auto repair labor rates vary so widely from state to state? A few key factors drive the differences.
Cost of Living
In states with a higher cost of living, shop owners face higher wages to attract technicians, more expensive rent, and elevated utility and supply costs. Those overhead realities push labor rates up — not because shops are padding their margins, but because the math demands it.
Shop Type and Specialization
Dealerships typically carry the highest labor rates because of their overhead, factory-trained technicians, and reliance on OEM parts. Independent shops often have more pricing flexibility, particularly for routine services like oil changes. Specialty shops — focused on European vehicles, diesel, or performance — tend to command higher rates as well.
A diagnostic job requires a different skill set than a brake job. Shops that employ ASE-certified technicians or master technicians can and should charge accordingly. The rate reflects the expertise required to do the work correctly.
Start with what it actually costs you to have a technician on the floor. This includes:
Wages and overtime
Payroll taxes
Benefits (health insurance, 401k)
Workers' comp and liability insurance
Training and certifications
Divide that total annual cost by the number of billable hours that technician produces in a year. That's your loaded cost — and it doesn't include any profit margin yet.
Step 2: Account for Overhead
Your labor revenue also needs to cover the cost of running the business:
Rent
Utilities and shop supplies
Marketing and software
Taxes
Step 3: Determine Your Target Profit Margin
Tekmetric shops average 65% labor profit margins. If your loaded cost for a technician is $45 per hour and you want a 65% margin, your base labor rate should be at least $128 per hour.
Step 4: Benchmark Against Your Market
Your internal numbers come first, but you can't ignore the local market. If your rate is $128 and every comparable independent in your area is at $100, you need to either clearly justify your value — through better inspections, faster turnaround, stronger communication — or find ways to reduce overhead. Benchmark against shops of similar size, service mix, and geography.
Step 5: Implement a Labor Matrix
Not every repair order is equal. Shops that implement a labor matrix can automatically adjust rates based on job complexity — billing more appropriately for diagnostic work or specialty repairs without manually recalculating every estimate.
Managing labor rates manually is a recipe for inconsistency and missed revenue. Here's how Tekmetric gives you the tools and data to stay ahead.
Know Where You Stand with the Tekmetric Shop Index
Before you can optimize your labor rate, you need to know how your performance compares to other shops. The Tekmetric Shop Index gives you free, instant benchmarking across four metrics: ARO, car count, parts margin, and effective labor rate. Enter your shop's numbers and see exactly where you rank against thousands of shops nationwide — no account required, no sales call, no commitment.
You can't improve what you don't measure. This is where that work starts.
Tekmetric's reporting features give you live visibility into ARO, car count, revenue, and technician productivity — so you always know how your shop is performing, not just at the end of the month.
Custom Labor and Parts Matrices
Tekmetric lets you build a labor matrix that automatically adjusts rates by job type. A custom parts matrix works the same way on the parts side, protecting your margins consistently across every repair order.
Digital Inspections That Justify Your Rate
Tekmetric's digital vehicle inspections let your team send photos and videos of needed repairs directly to a customer's phone. When a customer can see the worn brake pad or the leaking gasket for themselves, they're far more likely to approve the work — and far more comfortable with the rate attached to it.
Accurate Labor Guide Integration
Tekmetric integrates with industry-standard labor guides so your estimates are based on real, accurate times — not guesswork or memory. That means technicians get credited fairly under a flat-rate system, and your service advisers spend less time on paperwork and more time with customers.
Benchmark Your Insights Now
Knowing the average labor rate in your state gives you a useful reference point. But the shops that stay profitable long-term don't stop at state averages — they benchmark continuously, track the right metrics, and make adjustments based on data instead of instinct.
Your labor rate should reflect your actual overhead, your team's capabilities, and the quality of service your customers experience. Use the state data above as a starting point, then go deeper with the Tekmetric Shop Index to see how your shop compares across every metric that drives profitability.
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