@jamhost76:
No offense taken. I suppose the easiest answer is that that is the way it has always been done. We divide out parts and labor so people know what they are getting. I think it would be impossible to try to get an entire industry to change the way it does business. We need that parts profit. Approximately 1/3 of our gross profit (more in some cases) comes from parts. I don’t think the entire automotive industry is willing to raise labor rates half again as much and then just trade dollars on half the gross sales that come in the door.
I think fear of competitiveness is another. Sure I could sell my parts at cost and raise my labor rate 50%. But many consumers compare shops based on labor rates. There’s even a website that does that. Think of all the business I would lose. Any car with an extended warranty contract, any fleet service vehicles, any parts that come with a warranty that covers labor charges, all have clauses pertaining to the hourly labor rate they will pay. If you sell a customer some RAM that fails under warranty, and the RAM maker will only pay you $60/hr while your labor rate is $120, you’ve lost $60 on that re-repair.
As for the mark-up on parts, I could easily turn that around and ask why don’t you mark up that price of that RAM for your customer? You’re letting him use your money to buy the part, you deserve something for your effort. Why tie up your capital and lose the buying power of your dollars and not expect anything in return? I would think raising the labor rate to compensate for the lack of profit on parts seems more underhanded than just charging more for the part. Assuming the RAM is about half the total ticket (as parts and labor are for cars) that’s a lot of your money to be tying up.
Half-joking about that, but seriously, the mark up on parts actually began as a discount on parts to customers who buy in quantity. You need a widget for your car, you go and buy one from the dealer/parts store. But I go and say “Hey, I’m going to buy 20 of these this month, that guy is only buying one. Do I get a break?” And so the vendor says “sure, if you have a business license and resale certificate I’ll give you X% off.” Try it. Next time you’re at an auto parts store, buy 36 oil filters and 15 cases of oil. See if they’ll give you a price break.
Another thing to consider is that parts and labor are essentially the same mechanism to shop owners. Shops may charge $90/hr to repair your car, but certainly don’t pay the mechanic $90/hr. Shops buy and sell parts, buy and sell labor. And of course they mark up both. The entire business is a for-profit venture. If part of it is not making you money it’s costing you money. I find it odd that people complain that we buy a part for $10 and sell it for $16 but not that we buy labor for $25/hr and sell it for $90.
There are number of reasons to keep parts purchases “in house.” Often the more we buy from a vendor the better our price bracket becomes. Another is quality. The quality of the part has a great deal to do with the outcome of the repair. I won’t install a rebuilt water pump someone brings in because I have no interest in lowering the quality of my work. Another is time. I can’t be waiting around for you to bring me the fuel pump your car needs while your car is tying up a money-making stall.
If someone wants to bring his own parts I’ll adjust my labor rate to make up for the lost profit had I sold the parts. If you like the quality of our workmanship then you’ll pay it. If you’re just looking to save money on your car repair then we’re not the shop for you.