Home / Help At My Car Shop Labors cost in auto repair: All you need to know Every car shop from the owner’s perspectiveCalculating Labor Cost In Auto Repair : A Definitive Guide Understanding labors costs is vital for an Auto Repair Shop. This usually includes a few main actions, that can change the total labor cost greatly at the end.
Flat Rate vs. Hourly Rate
Flat Rate System- Most automotive repair shops use a flat rate manual, which gives the number for carrying out every job. This means the customer will pay a set price based on the flat rate no matter how long it really take to do the job. For instance, if a water pump replacement is billed at two hours labor and the shops rate is $75 per hour, cost of labor will still equal $150 even if it only took the technician one hour13.
Hourly Rate: On the other end of the spectrum you have some shops that charge for the labor based on the actual time they worked on your aircraft. Both factor in hours worked multiplied by the hourly wage of the technician. For example, if a technician charges $50 per hour and spends three hours working on a job, the total cost of labor would be $150.
Effective Labor Rate Calculation
Shop owners should divide their total monthly expenses by the total number of billable hours available to fairly set a reasonable labor rate. This sets the hourly rate at a basic level to protect overhead costs. Also, you want to mark this up 50-60% as well for profit12.
Reasons for Labour Cost
Four Primary Drivers of Labor Costs in Auto Repair
Market Competition: It is important to know where the market rate. Shops will often adjust their prices to what competitors are charging for the same work5.
Specialization – If the technician has some specialty skills, they might charge you more.labor cost calculation (ad) For instance, electric repair specialists tend to be more expensive than general mechanics 14.
Efficiency Levels: The capabilities of your techs are going to have a direct effect on the overall productivity and profitability of your garage. More billable hours means more dollars coming in the door — which again reduces the effective cost per hour for customers45.
To sum up, auto repair labor costs are a matter of knowing both the flat rate and hourly rate systems, developing an efficient labor rate by analyzing expenses, and weighing assorted market factors to determine pricing strategies.
