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Question for Auto shop

 
Old 01-27-2018, 04:44 AM
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Quick question about shop pricing

Do mechanics really make a huge profit when they help you buy your parts? I had one highly reputable mechanic quote me an additional $200 "bring your own parts" fee and another highly reputable telling me that he wouldn't do the repair because "he wouldn't make any money," with additional info saying, "oooh, if you buy your own parts, i'm liable if it goes wrong. Mercedes wont reimburse me for the repair if it fails within a year" and stuff like that. Like is a $150-$200/hourly rate not enough?? Im trying to understand the finances. Shop rent is around $1/sqft/month. Both shops are no more than 3,000 sqft. $3000/month rent / 5 days a week = $150/day fixed cost to break even. Now comes the variable like employee and utilities. iíve been to the second shop a few times and never seen more than the owner along with 1 other employee. So assuming this owner is generously paying this guy at $25/hour * 8 hours = $200 + $150/ fixed rent = $350 break even. and to be extremely generous, weíll add an additional $50 per day, round up to $400 for daily utilities and insurance. Now break even is $400/ day. 1 owner and 1 employee = 16 workable hours. Keep in mind, the employee only has to work 1 billable hour for the shop to pay him for the day. So saying he probably got more than 1 employees dont make sense. amount of employees can vary but fixed cost is still his $200/day pay which is pretty much 1 billable hour. Each additional employee would tac on another 8 workable hours. So theoretically, more employees = fatter profits for the shop. Tools/equipment are an upfront cost but theyíve both been opened for years. Their stuff should have depreciated substantially and received what they paid for in tools/equipment from their tax deductions. I cant think of any other costs involved. So basically, the shop begins profiting after 2- 3 hours out of the 16 workable hours. Im not saying to avoid shops but im just really trying to understand why shop rates are over $150/hour min. It doesnít make sense to me. What am i missing here??

Last edited by myn8m3is8ndy; 01-27-2018 at 07:00 AM.
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Old 01-27-2018, 07:30 AM
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Well you live in the Bay area, so $25 an hour doesn't get you an employee, owner isn't working for $25 an hour if he is making a living in the bay area, payroll taxes, medical insurance etc all add up. Up front costs don't just come out of thin air, the business is an investment, so they are either paying off all those up front costs or repairing replacing all those up front costs, they have to deal with hazardous materials, disposals, pay government fees etc.

A small shop with an owner and 1 employee will need to probably make 300k to survive, 500k to be comfortable a year, work that backwards to how much an hour they need to make.

Also from what I have heard, you will usually pay more bringing your own parts because they have the have no idea what kind of stupid **** they will bring which costs them extra time and money to deal with and they have no idea the quality of the parts, so they get people coming back with issues etc. and they do make a markup on the parts they loose and compensate for that.

Around here, good quality independents are 60-80 but rent and labor is cheaper for sure than where you live.
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Old 01-27-2018, 08:00 AM
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Originally Posted by roadkillrob View Post
Well you live in the Bay area, so $25 an hour doesn't get you an employee, owner isn't working for $25 an hour if he is making a living in the bay area, payroll taxes, medical insurance etc all add up. Up front costs don't just come out of thin air, the business is an investment, so they are either paying off all those up front costs or repairing replacing all those up front costs, they have to deal with hazardous materials, disposals, pay government fees etc.

A small shop with an owner and 1 employee will need to probably make 300k to survive, 500k to be comfortable a year, work that backwards to how much an hour they need to make.

Also from what I have heard, you will usually pay more bringing your own parts because they have the have no idea what kind of stupid **** they will bring which costs them extra time and money to deal with and they have no idea the quality of the parts, so they get people coming back with issues etc. and they do make a markup on the parts they loose and compensate for that.

Around here, good quality independents are 60-80 but rent and labor is cheaper for sure than where you live.
I have a few friends who work for nissan / lexus / mitsubishi dealership as mechanics that dont even make $25/hour lol up front cost should be tax deductible through various method of depreciation. Not to mention these shops been opened for years. upfront cost shold have been well taken care of years ago. However, 300K/ year seems quite a lot for a 1 owner + 1 employee operation. Whatís weird is that I told the guy my parts were brand new OEM in mercedes boxes and he still refused to do it. I mean, they could have knocked the job out in 3 hours and made $600
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Old 01-27-2018, 01:51 PM
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I'm sure it's a combo of profit margin on parts and not wanting to deal with unknowns. They want to work on what they know, so they want to use known parts from sources they trust.
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Old 01-27-2018, 09:02 PM
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Or it could simply be supply and demand. My experience tells me there aren't enough mechanics in the bay area for them to consider lowering prices. We like high salaries and appreciation for our property here but we'll have to deal with high taxes and cost of services.

I just decided to stop whining after a while. Bay area life is a b*tch lol
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Old 01-27-2018, 11:54 PM
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Originally Posted by m a x i m u s View Post
I'm sure it's a combo of profit margin on parts and not wanting to deal with unknowns. They want to work on what they know, so they want to use known parts from sources they trust.
most likely just trying to resell parts for a huge profits. doubt itís using known parts, keep in mind i told both of them that i had OEM brand new parts still sealed in mb boxes.

Originally Posted by Hackin247 View Post
Or it could simply be supply and demand. My experience tells me there aren't enough mechanics in the bay area for them to consider lowering prices. We like high salaries and appreciation for our property here but we'll have to deal with high taxes and cost of services.

I just decided to stop whining after a while. Bay area life is a b*tch lol
now that i can believe. opening up shop sounds better than 4 years of college 😂 haha
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Old 01-28-2018, 12:05 AM
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Yes you make a ton of $$ on parts
For example when I had my tire discount a set of tires that would cost the average dude $1000 at tire rack I could get for around $600 so without doing **** you are making 30-40 percent part markup and the price of parts via dealer discounts is dependant on the amount you buy. So if I bought $20,000 in parts from Mercedes for example they might give me a 20% discount whereas if I bought $50,000 I might get 30-35 % which makes the prices I could charge lower and profit margins higher . However we charged less for the parts then you could get them via a dealer or most online places to further the drive for people to just give us the entirety of their business... so that could be a reason why they donít want to accept foreign parts ... cuts into their wholesale price potential
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