Is it unheard of for an independent shop to charge me $13.xx for a quart of Honda ATF if the dealer quotes me $8.xx / quart ?
I’m thinking that the extra $5 covers the shop overhead and the cost of the time & trouble it takes for them to order the stuff, but I just want to make sure I wasn’t screwed around by these guys. The total damage was $91 for the transmission service. Please and thanks.
jmw
It is normal, ethical, and expected for a shop to make money on the products they sell. A 40-50% mark-up is typical.
Where do you live that 40-50% is typical??? Not where I live…nor anyplace I ever lived. I don’t know of ANY dealership that sells FULL RETAIL to the independents. I guarantee the mechanic didn’t pay $8/qt…so that 50% markup is really close to 70% markup. I’d NEVER do business with someone who marks it up that much.
I’m just curious how much the dealer’s service department would have charged me for this relatively minor maintenance job.
I agree. Some markup is expected. But 50%-70%? That’s pretty ridiculous. This one of the reasons I almost always supply my own parts when I have a job that requires a mechanic.
Perhaps your math skills are the issue.
If the coolant was bought for $8 and sold for $13, the profit margin would only be 38.46%, which seems perfectly reasonable to me. The profit ($5) is 38.46% of the sell price ($13).
If the cost is $100 and the margin is 20%, the sell price is not $120. The sell price would be $133.33 ($100/0.8). If he sold it for $120, his profit margin would only be 16.67% since $20 is 16.67% of $120.
My belief that a 40-50% mark-up is normal comes from experience working for a distributor and in sales. A discount of 40-50% off the retail price is what almost all wholesalers give to almost all retailers. Do some research for yourself if you don’t believe me.
Why don’t you call them and ask them for a quote?
Perhaps your math skills are the issue.
If the coolant was bought for $8 and sold for $13, the profit margin would only be 38.46%, which seems perfectly reasonable to me. The profit ($5) is 38.46% of the sell price ($13).
WRONG…That would be a 38% DISCOUNT if the original price was $13 and you discounted it to $8. YOUR math skills are very questionable if you calculated it that way.
To figure out the MARKUP (NOT MARKDOWN). You start out with the $13…minus the original price of $8…that gives you $5…Then you divide the 5 by 8 and then multiply by 100… = 62.5% markup.
((Markup Price - Dealer Price) / (Dealer Price ) * 100 = Markup Percentage
Who cares what the price of the ATF was; it’s the overall cost that counts! Just had my wife’s Nissan transmission fluid and filter changed; it came to $85 including all charges and tax. Your $91 sounds about right if the job was done well.
Good point…The overall cost is what the real issue is.
What Whitey is talking about is mark-up vs mark-on. See:
For detailed information.
Whitey, I take it you have done some retail work or college economics?
Mike, if you don’t believe me, go to Office Depot and take a look at a business calculator…or do a little research. I know I am right about this.
Just for clarification…
38.46% markup on a $8 item = $11.07
Yes to both. Thanks for the back-up Joseph.
Try putting 38.46% under “gross margin.” There is a little confusion with the terminology. I have used “mark-up” and “profit margin” synonymously.
Did you actually read the site you posted…What you’re talking about is Gross Margin…NOT markup…Look at the first line in that chart…Shows a starting price of $100…with a markup of 50% which equals $150…That’s EXACTLY the way my calculation works…
I have used “mark-up” and “profit margin” synonymously.
That’s the problem…YOU CAN’T…They mean different things. I agree with you that he has a Profit Margin of 38%…but that wasn’t what you originally said and what I argued against.
Actually, I just checked, and I said “profit margin” in the places where I mentioned the formula, so I was correct on both counts. Both the profit margin, and the mark-up were in line with how it works in the real world. Using the terminology of the referenced web site, both a 38.46% profit margin, and a 62.5% mark-up are realistic and reasonable, that is if you want to keep your business out of the red.
Actually, I just checked, and I said “profit margin” in the places where I mentioned the formula, so I was correct on both counts.
Your Original Post -
“It is normal, ethical, and expected for a shop to make money on the products they sell. A 40-50% mark-up is typical.”
You are right. A 40-50% mark-up would be way too low. It should be much higher.
Both a 38.46% profit margin, and a 62.5% mark-up are realistic and reasonable, that is if you want to keep your business out of the red.