Reasonable markup on parts

Reasonable markup on parts

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Kitchski

6,513 posts

229 months

Monday 20th June 2016
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POORCARDEALER said:
Very easy to make nothing at all running a one man workshop as your chargable hours dwindle away as you are busy chasing parts, answering the phone etc etc

I had one to prep our own cars, 1 mechanic, building rented etc, cost to run incl wages was £22 per hour x 40.
yes Nutshell!

It's amazing how many customers don't 'get' that too. We're very fortunate to have, on the whole, some great customers (I remember one who insisted I took his car for wheel alignment instead of him, and charge him hourly as "I might as well make something on it!" For all the knobheads floating around out there, there are some truly decent chaps!
I've seen some of the local garages having fun with more 'bread & butter' work though. Some people just don't understand how businesses work. I remember someone telling me once "Once you've covered the parts, if a mechanic earns £10 per hour or so, then why is the labour £50 or £60?!" Erm......

Our cost per hour is currently noticeably more than you had, and I'm the only full-time employee at our place. Costs so much to run even a tiny business frown

andy-xr

13,204 posts

202 months

Monday 20th June 2016
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The thing to remember is, you're using parts as a foot in the door to sell a service, right? It's not like you're just going to supply parts to customers and off they trot, you're bringing this in as a supply and fit.

With most standard car parts, I can find the same spec on Amazon or eBay as my local factors can. They've got a discount to play with of course, but when I'm being quoted eg £180 for a cambelt kit from my garage (who got the part trade from the local factors) and I can get that shipped for £120, the garage get stuck in a problem of either discounting out the part to keep the much bigger profit on the labour, or they fit my part, or I go somewhere else. It's going to be one of those 3 options.

You're always going to make hundreds more % GP on labour than you will with parts, just check the RRP from the supplier, discount it a bit and price match if you have to.

You should ideally be winning stuff on service and workmanship rather than Cheapest Price Guv, because you're not going to get the volume discounts that the bigger garages have available and that's just a race to the bottom

Edited by andy-xr on Monday 20th June 12:36

crossy67

1,570 posts

177 months

Monday 20th June 2016
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andy-xr said:
With most standard car parts, I can find the same spec on Amazon or eBay as my local factors can. They've got a discount to play with of course, but when I'm being quoted eg £180 for a cambelt kit from my garage (who got the part trade from the local factors) and I can get that shipped for £120, the garage get stuck in a problem of either discounting out the part to keep the much bigger profit on the labour, or they fit my part, or I go somewhere else. It's going to be one of those 3 options.

Edited by andy-xr on Monday 20th June 12:36
I'd happily fit any parts brought to me. If they're wrong the customer pays the labour (I will try to check they're right if possible), if they break there is no liability for me to worry about.

By the way, my 30-50% mark up has to cover the 16% (ish) tax I have to pay on the sale of parts here.

Splats

625 posts

160 months

Monday 20th June 2016
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Wearing my 'general public hat' I'd want 0% markup on parts and for you to make your profit in the hourly rate. I'd also expect you to be able to get the parts a little cheaper than I can with trade discounting, etc. That being said, if you were good and I know I can trust you and get me parts at a decent rate I'd have absolutely no issue with you making a good turn on the labour. That's what I'm paying for after all, your time, knowledge and expertise.

Local lad I use is great, parts are always the same or less than I can get on the internet and I don't think he charges me any more than £30/hr. That's probably a lot cheaper than you are looking to do but this guy's place is no great shakes. It's all cash in had stuff so I'm guessing there is one story for his wife and another for the Tax Man wink

Ken Figenus

5,678 posts

115 months

Tuesday 21st June 2016
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I though its that the garage trade buys parts at trade and passes them on to their customer at retail rates (and they claim the vat back). So if my dealer is trying to make 30% ABOVE retail on a new £2k diff for my car I dont think they would get my business much longer. That is profiteering from a bad situation and adds too muct to a massive cost their customer has - just make a living from your skills in fitting things not shopping! If its a 30% on a £5 oil filter then I'd cope!

You can fish out OEM parts for a fraction of the marque brand parts but are still guaranteed the quality. Suspension arms and bushes by Lemforder for the BMW for eg. In fact have an auto Gearbox oil change kit made by ZF with OE ZF fluid standing by to be fitted by my local indie - saved a ton and they still get the labour... This way I also know I'm getting 100% pukka parts not what is on offer at GSF that week!

Best of luck with the venture mate - maybe let PITA customers like me know you can do OEM quality parts at great rates!


Kitchski

6,513 posts

229 months

Wednesday 22nd June 2016
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Ken Figenus said:
I though its that the garage trade buys parts at trade and passes them on to their customer at retail rates (and they claim the vat back). So if my dealer is trying to make 30% ABOVE retail on a new £2k diff for my car I dont think they would get my business much longer. That is profiteering from a bad situation and adds too muct to a massive cost their customer has - just make a living from your skills in fitting things not shopping! If its a 30% on a £5 oil filter then I'd cope!
Thing is a garage is likely to get upto 50% discount on something like an oil filter, even from the main dealers (whose trade clubs often price match against factors these days). Something like a £2k diff would probably only offer 5% to the garage anyway, as it's a special order item. That being the case, garage buys for 5% off, sells to you for retail - you still pay what you would have done had you walked into the parts place in the first place. If the garage tried bumping 10% on a 5% discounted part, personally I think that's morally wrong. However, the garage is totally entitled to charge what they want for the part as they're the ones warranting it, so if you feel the price you've been quoted by the garage is steep, you can always shop around.

To be honest, if a garage is selling above retail price, I'd switch garages anyway! If they're happy to be that dishonest on something small, what are they going to do if they accidentally spear one of your coolant hoses?

The VAT aspect is a bit misleading too. Yes, they claim the VAT back, but they still have to charge it back out again (and if they're selling with a markup, the VAT amount will be larger.)

Ken Figenus

5,678 posts

115 months

Wednesday 22nd June 2016
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Kitchski said:
If they're happy to be that dishonest on something small, what are they going to do if they accidentally spear one of your coolant hoses?
Dishonest is a strong word as its mark up and selling but I think 'taking advantage' is wrong or as you say making say £400 on parts for fitting a £2k diff in 3hrs - franchised dealers may actually do that though? Its a business model?!

Our local garage is brilliant and I sometimes have to FORCE money into their hands so straight they are - Dugdales - thats the kind you want. Shame they cant do the more complex jobs but its so brilliant to 100% trust them and be able to just send my missus round knowing she would never be ripped off smile Always busy too smile

foxsasha

1,416 posts

133 months

Wednesday 22nd June 2016
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if you're buying from motor factors then charge their retail on the parts. Your discount as a trader should be reasonable if the factors are worth their salt. The customer won't be able to get them cheaper if they go direct to the factors. If there's no or little discount on the part then charge enough over retail to make it worth your while supplying the part considering the time and costs involved if said parts fails under warranty. If the customer doesn't want to pay then own supplied part instead.

I wouldn't dream of supplying parts at just 5% margin, let alone supply and fit. Not unless you set your labour charges high enough to cover losses involved in your supplied parts failing but then your labour charges will be inflated.

Ken Figenus

5,678 posts

115 months

Wednesday 22nd June 2016
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Sounds very fair mate.smile

oddball1313

1,174 posts

121 months

Thursday 30th June 2016
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In the machine tool market 300% at the very least commonly the guide for spares

With these feet

5,726 posts

213 months

Thursday 30th June 2016
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For me it depends on what the item is,Low cost like filters can easily be 20% as you make a few £. Tyres not so, its a bloody competitive market, most suppliers also have fitting centres so on a budget tyre its difficult to make £10 plus fitting without it becoming expensive.

Mate of mine who also owns a workshop said its only the crooked bds that make money, if youre honest youll struggle.

stinkspanner

701 posts

179 months

Thursday 30th June 2016
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I used to run a little garage, my parts were bought at trade and sold at retail give or take a couple of quid. The hourly rate was where I earn the my money, parts and consumables were a little bonus.
By the way i had cheap overheads so could offer very competitive pricing, but I went away from trying to be the cheapest because I found cheap prices got me cheap customers! Whatever the price was wasn't cheap enough for these dicks

Trabi601

4,865 posts

93 months

Thursday 30th June 2016
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My mechanic doesn't mark up parts at all. He also tells me if my source is cheaper than his (eg. when I got a set of Boxster S brakes for 300 quid due to a ECP discount weekend). He's happy to work on either basis, though.