It's of the cost in a labor rate has to do with the overhead. Techs make anywhere from $15-30 an hour on flat rate which is like piece work. That additional $85-$70 an hour and the parts mark up ( every part sold is marked up anyone that tells you different is lying) are to cover the cost of salary and hourly employees, overhead and profit.


Salary and hourly employees are your general service guys ( the oil changers, tire changer, every shop has them you have to them you can't bill a $30 an hour tech time to Change tires and oil all day) or front workers like service writers and managers.


Every garage operates for a 60% gross margin, that means if the job cost $100 in parts and labor it has to net $250 in return at minimum on average. So here's why you have a mark up on service when you get an oil change there's sometimes a $2 profit most of the time the garage will lose money on an oil change sale to get you in the door so that money has to be made back, tires there about a 20% profit margin there so that additional 40% has to come from somewhere.


The only income for a garage is the part markup and billed labor, naturally you can only mark a part up so much normally a price matrix of between 1.0-2.5 based on the purchase price is used the rest of that 60% margin has to come from billed labor. So back to my $100 example say where installing an external water pump, that water pump cost me roughly $35 so run it through the price matrix and sell it for $75 now I'm paying the tech an hour and half to install it my labor cost if he makes $20 and hour is $30 so I'm at a cost of the job being $105 I gotta make $250 there's your labor rate.


Any shop not maintaing a 60% margin at the end of they year isn't in business long, the equipment and cost of business is to high. Hell my alignment rack cost 80k I make that back $80 at a time.


It's completely normal for a garage to do 1.2 million in sales am only make 20k in profit on the pnl. Hell my old garage we did service exclusively didn't mess with tires which lowers you overall sales but increases profit margin and if didn't do at least 40k with a 60% margin we lost money at the end of the month that was a three man garage. Where in at now we have to do over 100k with the same margin to make money and even then the expenses can eat up any profit if someone makes a mistake.

---