Hourly labor rates are different in different countries; even you might see a difference in prices within the same city.
As of January 2017, auto repair shops in the AAA network charged between $47 and $215 per hour. Some people might think that auto repair shop rates are high.
In this article, we will discuss what is the average hourly labor rate for auto repair? Before handing your hard-earned money, look at some factors that contribute to establishing car repair labor rates.
Factors That Establish Car Repair Labor Rates
- Labor and benefit costs
- Vehicles make, and model serviced
- Type of repair shop (independent or dealership)
- Overhead facility (rent, electricity, utility, and upkeep)
- Certifications and skill level of technicians
- Business overhead (technician training, equipment, taxes, and advertising, etc.)
How to Determine Hourly Labor Rate for Auto Repair?
Like any other business, it isn’t easy to find out the right price, and lots of questions will be in your mind while determining the hourly labor rate for auto repair. One thing should be clear that a mechanic doesn’t receive the entire hourly labor rate. This rate includes business overhead, facility overhead, and other expenses as well. Currently, it’s not an easy job to run an auto repair shop. Along with the physical facility, high-quality diagnostic tools are required. So, servicing a modern vehicle, you easily need a six-figure investment.
Labor charges are either calculated manually or by computer. Time is noted with a machine that an expert mechanic spends on a car to repair. The flat rate is then multiplied with the hourly rate of labor, and then the total labor charges for the service are calculated.
Some people consider flat pricing as a way of overcharging, but it is not the case. It gives fair and consistent repair estimates while shops pay their technicians according to their expertise. Let’s say it takes two hours to replace a starter, and the shop owner quotes this rate to the customer, and the owner pays his technician twice their hourly wage for this task. If the technician is an expert and does the job in less time, he gets a higher hourly rate. If an inexperienced person or trainee performs this task and spends more time, he will earn less. Being a customer, you will pay the same rate. So this is how we can calculate the average hourly labor rate for auto repair?
You can’t estimate all the services cost by the flat-rate system. Diagnosing price is a good idea because every troubleshooting process is unique. Most of the auto repair shops diagnose the price by setting a maximum time limit and certain procedures. If the problem is not identified and fixed, then the owner contacts the customer and asks for more time and money. It can be frustrating for both parties (the owner of the shop and customer). Still, you can’t do much about it because there is no practical alternative to deal with these complex troubles.
In the case of electrical problems, this diagnostic cost can easily exceed the actual cost of repair. For example, it takes two hours to identify the circuit problems, and when the mechanic finds it, he can fix it in just five minutes. In such cases, you pay for the expertise to locate the problem, not for the repair itself.
You may find lots of auto repair shops offering package pricing deals. You can get your oil changed for $25, and other minor tasks will be done for free. Package pricing is offered as an incentive to the first customers, and it is offered as a loyalty bonus for repeat customers. Most auto repair shops in the town offer attractive coupons according to the package pricing system.
How to Calculate Your Labor Rate?
Labor rates can play a big role in the long-term success of any business. You might have to start with lower rates, but you can increase the price as your business grows. It is important to build a strong foundation before getting started. The formula given below can help you to estimate the hourly labor costs. The formula includes all the fixed and non-fixed costs. Calculate all the overhead expenses and divide it with the workable hours in a month. It can help you to calculate the hourly labor rate.
You can set your labor rates by observing your competitor’s rates, current market prices, and the number of shops in your area. At the start, you don’t want to either overcharge or undersell yourself. To calculate the hourly labor rate, use the formula given below:
Base Hourly Rate = R + E + S + EL + L + M + S + A + TX +EQ / TMO
R = Rent
E = Employees
S = Shop Supplies
EL = Electricity
L = Leased Equipment
M = Marketing
A = Accountant
TX = Taxes
TMO = Workable hours per month
The overhead expenses are divided by a total number of workable hours per month, and you can get an estimated labor hourly cost. For example:
Overhead expenses are = 16,000
Workable hours are = 160, then
16000/160 = $100 per hour.
This formula just gives you an idea of how to calculate the average hourly labor rate for auto repair.
What is the average hourly labor rate for auto repair? The hourly labor rate is calculated based on factors such as overhead facility, vehicle model, and business overhead. If you can find an auto repair shop that has lower labor rates as compared to other shops, you are not supposed to visit his shop before knowing more about him. Ask for recommendations from your friends, coworkers, and family members. Look for the best package pricing and warranty repairs. No doubt, labor rates are important, but you will have to take other factors into account as well before predicting the repair price.