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Mechanics Markup?

I recently had my alternator changed by a mechanic that others recommended on this site. When he quoted the price for the job, he said that the alternator goes for $360 for the part alone though he would give me a discount and charge me $275 for the part and over $400 total for the job (I think it was $150 for labor). When I went to get my car, (he works out of his garage) I noticed that it was an Autozone Duralast alternator. I pulled the part number and found I could have purchased this same alternator for under $150. I suspect he got it for less than I would have paid. I couldn’t find the cost of $360 he quoted anywhere. Is this a common practice for quoting and marking up parts? This mechanic comes highly recommended on this site though this practice didn’t feel right to me.

Markups are fairly typical, the shop I worked at would double their cost. He probably did about the same.

Marking up parts is a common practice, though a near 100% markup is excessive IMHO. One of the reasons I always try to provide my own parts.

100% is high in my experience, but markups are normal.
Honestly, if he did good work and completed it as promised I wouldn’t quibble about the markup. Honest and competant mechanics are worth the extra bucks.

A long time ago auto parts vendors would have several different prices–jobber, wholesale, retail, list. Joe Upthestreet would walk in and buy and alternator and pay retail. Bob’s Automotive would buy an alternator and pay wholesale, because he would probably buy 8 or more a month, and the vendor would make up on volume what he lost on the retail markup. Now along comes Autozone and the other mass-market retailers and they decide to sell to everyone for wholesale, and advertise that fact.

The dirty little secret here is that auto repair facilities need to make money. Markup on parts can vary from place to place, but 40% gross profit on parts is average, I think. Meaning that if you buy a part for $10.00 you’re going to sell it for $16.67. But it’s not unusual to have a shop double the cost on parts.

This is a common practice because auto repair is a business and businesses have to make money to stay in business. It’s no different than a plumber or electrician selling you their supplies for more than you could get them at Menards. You wouldn’t believe how much it actually costs to run a repair shop. And besides, what if something goes wrong with that alternator and your mechanic has to do the job again for free? If you would have provided the part yourself, you would have to pay the mechanic again to remove the part, you would take it to Autozone, have them test it and (hopefully) condemn it, they would give you another one (if they condemned it), you would have to take it back to the mechanic, then he would install it. Then you would have been ahead if you had just paid list price for the part anyway.

This reminds me of a fellow I knew a few years ago. He ran a seamless gutter business. He might pay $300-400 for a coil of gutter material, run it through his machine, and turn that $300-400 worth of material into many thousands of dollars. Is that a ripoff, or what? What’s worse, he might get called to do a clean-out and repair job, spend two or three hours working, use a couple dollars worth of sheetmetal screws and spikes and ferrules, and charge them $500. Sounds like he’s making a killing off those screws and spikes and ferrules, right? His customers didn’t seem to mind because he was still by far the cheapest operation around, and I’ve never heard of someone pricing up gutter coil to find out if their seamless gutter installer is overcharging them for 160’ of gutter coil (which is sold by the pound anyway, so good luck with that).

Marking up parts is a legitimate practice, but what really matters is the total cost. He could sell the part at cost and have a higher labor rate, or give a lower labor rate and mark up the part. He needs to make money, and how he charges is a business decision. If the cost is $400, it really doesn’t matter how it’s added up. That seems a bit pricey to me, but it depends on several factors, including where you are; or it may just be a real pain on your particular model. You could compare the total cost for the job with other mechanics in your area.

And realize that this guy is working out of his garage. The auto parts store probably does not deliver to him. He has to go get the part, using time he could be doing skilled work.

As somebody mentioned above: total cost is what matters.

Every type of service operation marks up their parts. If they do not they will cease to exist.

The next time you receive a bill for a hospital visit take a look at what they charge you for an OTC Tylenol or pair of rubber sanitary gloves.

“The best path to prosperity is free-market Capitalism”

This mechanic intends to be prosperous…

Year, make model of your car?

My advice is to get your mind on what really counts. In this case it is the total cost.

Is it really important that the mechanic charges you $50.00 for parts and $50.00 for labor or just charges you $100.00? Personally I would prefer that they just charge me $100.00.

If you get fixed on the breakdown of the total, you are going to loose sight of the total cost.

Each business has fixed costs to cover just to put the key in the lock and turn on the lights. This is called overhead. This cost must be amortized over the direct cost of doing business such as replacing alternators. Overhead costs typically include property taxes, rent/mortgage, utilities, advertising, facility maintenance, etc. In larger businesses, they have staff to do all the accounting and can usually come up with a pretty realistic cost factor usually expressed as a percentage of direct cost. Direct costs typically include direct labor and cost of materials. All of this is too complex for a small garage to handle so they usually eyeball it by applying a percentage factor on parts and labor to cover the overhead. Hopefully, the eyeball is close on.

This mechanic comes highly recommended on this site though this practice didn’t feel right to me

A revelation on how to make a small fortune in the auto repair business:
Step 1: Start with a large fortune.
Step 2: Sell parts to customers for what you paid for them.

Markups are NOT common in other industries. It depends on the industry.

We design and build complete systems for the telecom industry. We don’t mark up one bit. We are NOT in the business of selling parts. We are in the business of building solutions.

Now in the Auto Repair industry…It’s different throughout the country. I’ve dealt with a couple of repair shops here in NH. The ones I’ve dealt with buy their parts from local parts suppliers. They buy at a discounted price and then mark it up to the price that I can buy it for. I’ve NEVER EVER seen an honest mechanic buy a part at retail and then mark it way up. Mechanics are in the business of repairing cars…not selling parts. All the places I’ve dealt with don’t have a problem with you bringing in your own parts. But they won’t warranty the part because they didn’t buy it.

All of this is too complex for a small garage to handle so they usually eyeball it by applying a percentage factor on parts and labor to cover the overhead.

The smaller the garage…the easier it is to figure out your overhead. As a small business owner you should know what it takes to open the doors every day. Granted some expenses fluctuate, but when breaking it down over a year the fluctuations are small.

I seriously doubt that there are any text books that have any true insight into the operation of an honest and successful automobile repair business.

The biggest jobber discount I’ve ever gotten or by anyone that I know has been 10% and a 10% markup is not going to cut it from a financially viable standpoint.

Every service industry marks up their parts. No one should think for a minute that a plumber, electrician, or even a HVAC guy installing a new outside condenser unit is charging labor only.

Either way a service person is going to charge you enough so they can be in business. It’s either done through labor or a combination of labor and parts. Doesn’t matter how they achieve the final cost. Some do it by offering a lower rate, but by having a huge markup in parts. Others do it by having a smaller markup, but with higher labor rates. Obviously a mechanic isn’t going to be in business if they can’t make a profit.

As for markup…I guess it’s different in other parts of the country. Places like ADAP don’t give mechanics much of a markup at all. The local parts suppliers we have here give around 25% discount…AND they deliver the parts. But that discount is determined by how much your shop buys from them. I don’t go there often…but when I do I know the prices of the parts BEFORE I go there…and I’ve yet to see them charge me more for a part then what I can buy it for at a normal retail store. There are some on-line discount places I can get some good deals on for certain things…but in general what the mechanics have always charged me is in line with what I can buy it for.

As has been pointed out already, business owners, even when they work out of their personal garages, have fixed costs and variable costs. All the OP saw was an estimate of one of the variable costs. If you were to know and consider the total cost of your repair, you might realize the shop owner’s profit margin was smaller than you thought.

Mike, everytime the part changes hands, it has to be marked up. You’re kidding yourself if you think your business isn’t doing it too. You’re just charging more elsewhere to cover the cost of acquiring and handling the parts. Only one business is IN BUSINESS to sell parts, that is the manufacturer of the part. Everyone else down the line is selling value added services.

Let me ask, when one of your telecom solution parts fails, do you provide replacement parts at your company’s cost to purchase? Or do you tack on additional costs to cover your cost of providing those parts? The point being, the initial equipment costs are buried in the NRE to design, build and install the system. Down the road, you can’t afford to keep supplying replacement parts without any compensation for providing that service can you?

As has been pointed out repeatedly in this thread, they have to make money somewhere. So if they turn around and invoice parts at their cost, then the labor rate must be sufficiently high to cover the overhead costs of parts acquisition, handling, etc.

People who tend to focus on details of the invoice are going to comparison shop every aspect. Even if your parts are invoiced at the same cost as the consumer can get them, they will be astounded at your labor rates compared to the competition. You’re ripping me off! These people do not have any idea how businesses are run or what those costs entail. It’s a lose-lose proposition. So most businesses try to be competitive by marking up parts enough to be palatable to the consumer and then keeping their labor rates competitive as well.

In the end, all that matters is the final cost. Was it reasonable? It doesn’t matter if the part is priced at $1000 and the labor is $1 or visa-versa.

This is the approach I use when buying cars with a trade-in. I don’t care how you guys want to divy up the proceeds and costs. In the end I want to give you a check for X and drive out of here in the new car. You figure out how to get there…

There is time involved in calling the parts supplier for the part and there may be time spent by the mechanic going after the part. A mechanic’s time is worth money.