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How far behind the industry is with labour rate
Image credit: Depositphotos.com
Automotive aftermarket service and repair shops are charging at least $100 an hour less than they should be, industry experts recently argued.
A recent report from AutoLeap, a shop management software company, reported that the average shop it surveyed charges $120 per hour for labour, and figures fluctuate depending on the kind of shop. The State of the Auto Repair Industry found that a specialty shop will charge $179 per hour, compared to a franchised shop at $112 per hour. An independent shop will charge $110 per hour.
“We are at least $100 an hour less expensive than we should be in comparison to other professional trades — and it’s killing us,” said Cecil Bullard, chief executive officer of the Institute for Automotive Business Excellence and RLO Training, during a recent AutoLeap-hosted webinar.
“We’re not keeping new technicians in our business, we’re not attracting new people in our business, because we don’t pay enough. And we’re not profitable enough, etc.,” he added. “Labor rates have to increase in our industry; and they are going to or you are not going to be in business — end of sentence.”
Chris Cotton, owner of AutoFix-Auto Shop Coaching, agreed. He pointed to other skilled trades that charge far more despite not having the overhead or ever-changing knowledge base that automotive service providers have.
“There’s no new technology and plumbing that I know of in the last several years,” he said. “There’s no new technology in electricity. And we’re dealing with electric vehicles and hybrid vehicles.”
Bullard said his plumber charges $250 per hour; his electrician comes in at $300. “And they don’t have the tools or the knowledge level that I need to work on today’s cars. It’s insane, that we’re not $250 an hour [on] average right now,” he lamented.
Cotton advised the audience to look at their bill the next time they need a plumber. It’s likely they paid $250 per hour for the journeyman plumber and then another $130 per hour for the apprentice. “And the apprentice is the one that did all the work,” Cotton noted. “He’s the one underneath the house and everything else while the journeyman was just sitting there watching, training and mentoring him. And everybody’s OK with that.”
He had one simple message when it comes to increasing your labour rate: “Just do it, for crying out loud. Stop thinking about it and just do it.”
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I have long lamented this exact fact. One of the hardest things that people forget to relate in car maintenance and repair is its frequency compared to those other trades and also the fact that any major electrical/plumbing job will either be done by a contractor on pre tax dollars or essentially be capitalized into a long term gain in asset value. Where as for example if someone decides to do $3000 transmission repair and the car is only worth $6,000 you think twice. There isn’t enough residual value in the car. If that $3000 job now cost $4000 even more cars don’t get fixed and new ones are bought and repair shops go out of business. The best thing the industry could do to help their rates is lobby the government so that car repairs have a certain amount of tax credit received so the average joe operator can spend more on good repairs of cars. In BC they also need to drop the full taxation of used cars as that would drive up residual values as the gov’t will no longer be taking their 12% tax that actually should be increased value of the car.
We most certainly need to increase the rates that we charge. Our costs to operate a facility with power, gas, phone, taxes, insurances, building rents/mortage payments, snow clearing and lot clean ups, garbage disposal costs, waste oil disposal costs…I could keep going as there are many more costs. The current labor rates barely cover these costs never mind paying any wages, and being able to put a little away for the rainy day…
I am already at 115.00/hr. Soon to be 120.00. Other private shops are about the same. I agree, the govt could give us a tax break instead of taking everything their grubby little hearts desire. To put it up 100.00 more per hr, is suicide. No plumber or electrician around here is charging those prices. Finding anyone who wants to get into this trade is as rare as sockboy telling the truth.
In general, the Trades, be it Construction, Plumbing, Electrical, Automotive Service, are having a tough time attracting new blood from youth. However, the automotive service technician trade is at the bottom of theses trades. In general, the kids entering as plumbers and electricians will have a higher entry wage, will often have benefits and possibly pensions. They will also likely have a more certain future pay structure. The same can not be said for the youth entering our automotive trade. It is a hodge-podge depending on where they end up. If the parents have any influence on chosing the trade of choice for their kids, what trade do you think that they may want them to ignore…? You probably guessed right.
What do the other trades have in common that our Auto industry doesn’t? Sad to say, but they are generally unionized. The rates those industries charge reflect this. Too may shops think that raising rates will kill their business. If you run a quality shop and are generally busy, raising rates will only help… Usually. In 2022, we raised our labour rate from $130 to $137.50/h. Then we raised it again to $155/hr. NO ONE SAID A THING. We gave our staff raises each time so that we would stay well ahead of the inflation. Some rate differences between shops in an area are manageable. Agreed, it can get problematic if the labour rate differences are always way too large. Unfortunately, our industry usually will not see a unified front in labour rate increases to what we all need them to be. The way I see it, if all the auto repair shops charge the higher rates, the clients’ choice will only be whether they proceed with repairs or walk.
We can’t continue doing what we are doing now. Whatever change it is, we need the industry to change now for its survival.
Much of this article is true. And what Kurt mentioned is right on the money. However, I think that it is important to remember that unlike other trades, we usually have a generous margin and net parts sales.
But just working from the old 5% a year rule for labour, we should be increasing in leaps and bounds in todays inflationary world. Just look at you heating bill, property tax, payroll deductions. Those are expenses that cant be covered by being meticulous with your parts margins.