Automotive repair is a tough and expensive industry. Not many independent shops stay in business past 5 years due to high cost of insurance and technology. What is even tougher is the bad reputation caused by crooks that overcharge customers for work they don’t do correctly or installation of poor quality parts. One complaint that is most often heard by auto repair business owners is the prices charged for parts and labor. This is because many consumers do not understand how the prices are calculated and why. The most important thing to remember about any business is that it is there to make a profit. To do this the business must charge a price that covers labor, equipment, and overhead costs. This article discusses the calculation of auto repair labor rates and the purposes of these rates.First, let’s discuss how the hourly labor rate is derived. There are many costs that the hourly labor rate charged must cover. This includes technician labor, machine/equipment, and the most expensive part of running an auto repair business known as overhead (we will discuss overhead later in this article). For the purpose of this illustration, we will assume that each technician is paid a flat rate wage of $30 per hour. The hours that each job takes is based on book time using a standard repair rate book. For example, the book time on a particular job calls for 1 hour labor. The technician gets paid for 1 hour or $30. If the technician finishes the job within half the time, he still gets paid for the full hour and can potentially flag more hours within the 8 hour work day.Many times to diagnose a drivability issue, the vehicle must be plugged into diagnostic equipment. This equipment is very expensive. The up front purchase cost of this equipment is not the only cost to the shop. There are also maintenance, update, and depreciation costs associated with it as well. The only way to recover these costs is to allocate it into the labor rate or into overhead. Typically, shops will allocate it into the labor rate.Finally the most expensive cost to the shop is overhead. What is overhead? Overhead is the cost of keeping the doors open. This includes, rent, electricity, insurance, taxes, etc. The fact is these costs can be the death of a business as sometimes they cannot be controlled. In fact, there are costs when the business isn’t even open. Therefore, allocation of overhead is the majority of the markup of both parts and labor. How is overhead calculated? Typically overhead is added Category:Home › Autos • Will the trend toward economy-size car models lead Americans back to buying smaller-sized cars? — part 2 • You should never use after-market auto parts when maintaining or fixing your car • Should a new car be rust-proofed? • Will the trend toward economy-size car models lead Americans back to buying smaller-sized cars? — part 1 • Five safest cars in North America • How to ensure your teen drives safely after getting a license • Pros and cons of using an hydrogen generator for your car • DIY automotive maintenance: How to change the oil
