Margin/markup on parts

the_pen_turner

mgbgt1978 wrote: »

In this particular case the garage didn't just charge the difference between Trade and retail prices. They apparently added 18.5% on top of the Retail Price (after they purchased the parts at a Trade price).


When a garage buys parts from a motor factors (or main dealer) they will not take the hit for the cost of faulty parts. The garage will obviously have to cover the labour to replace any faulty parts, but they will return the faulty parts to their supplier and get a replacement.

we dont know the numbers so cant tell if it was above retail.
but that doesnt matter. the garage has worked out what they need to sell a product at and that the price they charge. what someone else sell sit for is irrelivent

i dont know how much a otor facter would take back but i know in the building game it isnt that much unless something major. very rare for the supplier or manufacturer to cover the labour and often not the materials .

mgbgt1978

If you read the full thread you might get a better idea of the mark-up involved. Post #10 tells us exactly how the price charged relates to the retail price
As you say, you don't know about the Motor Game. All indie garages, mechanics, etc will return faulty parts for a replacement.....their supplier wants their business, and will then return a faulty part up the chain to his supplier. And I specifically said that the garage would cover the labour involved so I don't see why you would mention the supplier in that regard.

bucketybuck

mgbgt1978 wrote: »

In this particular case the garage didn't just charge the difference between Trade and retail prices. They apparently added 18.5% on top of the Retail Price (after they purchased the parts at a Trade price).

No, you do not know this at all, you do not know what price the garage paid for it. Yet again, trade price is an antiquated term, there is no guarantee that that garage got those parts at any significant discount. They might have, but you don't know it for sure.

When a garage buys parts from a motor factors (or main dealer) they will not take the hit for the cost of faulty parts. The garage will obviously have to cover the labour to replace any faulty parts, but they will return the faulty parts to their supplier and get a replacement.

When the garage supplies the part the liability is with them, and that is full liability for the repair, not the part only warranty that came from the supplier.

You say that they "obviously have to cover the labour" as if that is a small thing, as if the cost of the labour and the time wasted isn't often significantly more valuable than the part was in the first place.

Strip out a clutch or a kingpin twice or three times because of poor quality parts failing and then tell me about not taking the hit, I'll bet you change your tune. Hell, waste a day fault finding because the new sensor you just fitted is faulty and giving false readings and then try and reclaim that time back from the suppliers, that one is good for a laugh as well.

Del2005

mgbgt1978 wrote: »

In this particular case the garage didn't just charge the difference between Trade and retail prices. They apparently added 18.5% on top of the Retail Price (after they purchased the parts at a Trade price).


When a garage buys parts from a motor factors (or main dealer) they will not take the hit for the cost of faulty parts. The garage will obviously have to cover the labour to replace any faulty parts, but they will return the faulty parts to their supplier and get a replacement.

How do you know that the garage looking for same day delivery is getting a discount? You pay a premium from every business from Amazon to DHL for next day delivery and you think that same day delivery is discounted!

A lot of assumptions are being made about how businesses are run and what you can make a profit on.
Why are you willing to let the motor factors or main dealer make a profit on parts, which they will be ordering in bulk and regularly so little work involved, yet the mechanic can't add a mark up.

If you don't want to pay the garage mark up do the job yourself.

mgbgt1978

bucketybuck wrote: »

No, you do not know this at all, you do not know what price the garage paid for it. Yet again, trade price is an antiquated term, there is no guarantee that that garage got those parts at any significant discount. They might have, but you don't know it for sure.



When the garage supplies the part the liability is with them, and that is full liability for the repair, not the part only warranty that came from the supplier.

You say that they "obviously have to cover the labour" as if that is a small thing, as if the cost of the labour and the time wasted isn't often significantly more valuable than the part was in the first place.

Strip out a clutch or a kingpin twice or three times because of poor quality parts failing and then tell me about not taking the hit, I'll bet you change your tune. Hell, waste a day fault finding because the new sensor you just fitted is faulty and giving false readings and then try and reclaim that time back from the suppliers, that one is good for a laugh as well.

We do know that the garage did charge 18.5% more than a main dealer retail price. If you honestly believe that the garage paid anywhere near that for the parts you are perfectly entitled to that opinion.


Regarding the labour to replace a faulty part, I was simply saying that another poster claimed that in the event of a fault a garage would have to cover both the cost of replacement parts and labour. This is not the case, regardless of the labour involved.

mgbgt1978

Del2005 wrote: »

How do you know that the garage looking for same day delivery is getting a discount? You pay a premium from every business from Amazon to DHL for next day delivery and you think that same day delivery is discounted!

A lot of assumptions are being made about how businesses are run and what you can make a profit on.
Why are you willing to let the motor factors or main dealer make a profit on parts, which they will be ordering in bulk and regularly so little work involved, yet the mechanic can't add a mark up.

If you don't want to pay the garage mark up do the job yourself.

Oh, I do all my work myself......;)

Are you seriously suggesting that in this case the garage purchased the parts from Amazon ????
They went to their usual motor factors, or a main dealer if spurious parts aren't available.

Toyotafanboi

How do we know the main dealer wasn't doing x% off cutches that week? Or had a clutch kit in stock for an older model that they discounted when there was an enquiry because they wanted to shift it? How do we know the "kits" were the same, dealer could have been disc and pressure plate only, spurious could have been a 3 piece. Dealer part could have been second line also, we don't know.

I still think there really isn't enough info here.

mgbgt1978

We do know it was a LUK kit.....we don't know where the garage purchased it from.


And the OP seems to have taken a back seat while the Thread goes off on a load of Tangents.:D

bucketybuck

mgbgt1978 wrote: »

Regarding the labour to replace a faulty part, I was simply saying that another poster claimed that in the event of a fault a garage would have to cover both the cost of replacement parts and labour. This is not the case, regardless of the labour involved.

Its rather a specious point. I assume you know the hassles involved in trying to claim parts costs from a manufacturer?

Having them tell you that they have to return the part through their own warranty processes before they will issue a credit, which could take weeks, or telling you that they will only replace the part like with like when that is no use to you because you had to go elsewhere to get an alternative to try and get the customer sorted quickly. Or then telling you that their supplier says there is nothing wrong with the returned part so they aren't giving any credit at all.

And please don't tell me that those things don't happen, this is my industry and I'm a long time in it.

Which all comes back to the original point. 30 years ago parts were a revenue stream for mechanics, a chance to make a few quid on top of the labour. But by and large those days are gone and now they are quite often a minefield that frankly can be more ****ing hassle than its worth.

So when I hear some know it all lecturing about how the mechanic should be doing this or that I can't help but think they have missed the point, they are pontificating and warning the mechanic about something that the guy most likely would be happier having nothing to do with in the first place.

When I say "jog on and get the damn things yourself" it isn't some bluff, it is an honest and accurate summation of what I want you to do.

mgbgt1978

bucketybuck wrote: »

Its rather a specious point. I assume you know the hassles involved in trying to claim parts costs from a manufacturer?

Having them tell you that they have to return the part through their own warranty processes before they will issue a credit, which could take weeks, or telling you that they will only replace the part like with like when that is no use to you because you had to go elsewhere to get an alternative to try and get the customer sorted quickly. Or then telling you that their supplier says there is nothing wrong with the returned part so they aren't giving any credit at all.

And please don't tell me that those things don't happen, this is my industry and I'm a long time in it.

Which all comes back to the original point. 30 years ago parts were a revenue stream for mechanics, a chance to make a few quid on top of the labour. But by and large those days are gone and now they are quite often a minefield that frankly can be more ****ing hassle than its worth.

So when I hear some know it all lecturing about how the mechanic should be doing this or that I can't help but think they have missed the point, they are pontificating and warning the mechanic about something that the guy most likely would be happier having nothing to do with in the first place.

When I say "jog on and get the damn things yourself" it isn't some bluff, it is an honest and accurate summation of what I want you to do.

Yep. I hate that too.

Good job I didn't lecture anybody here :pac:.

the_pen_turner

bucketybuck wrote: »

Its rather a specious point. I assume you know the hassles involved in trying to claim parts costs from a manufacturer?

Having them tell you that they have to return the part through their own warranty processes before they will issue a credit, which could take weeks, or telling you that they will only replace the part like with like when that is no use to you because you had to go elsewhere to get an alternative to try and get the customer sorted quickly. Or then telling you that their supplier says there is nothing wrong with the returned part so they aren't giving any credit at all.

And please don't tell me that those things don't happen, this is my industry and I'm a long time in it.

Which all comes back to the original point. 30 years ago parts were a revenue stream for mechanics, a chance to make a few quid on top of the labour. But by and large those days are gone and now they are quite often a minefield that frankly can be more ****ing hassle than its worth.

So when I hear some know it all lecturing about how the mechanic should be doing this or that I can't help but think they have missed the point, they are pontificating and warning the mechanic about something that the guy most likely would be happier having nothing to do with in the first place.

When I say "jog on and get the damn things yourself" it isn't some bluff, it is an honest and accurate summation of what I want you to do.

the building game is the same. the small trademan gets feck all trade discount . you need to be building multiple houses a year to get anything worth while.

several months ago i priced up a job for a guy doing an extention in stages. he is ready to build some stud walls, and slab the ceilings and studs. i gave him a list for the materials and he got a quote in a local hardware that i use. he has spent very little in there probably less than 1000 in all the years. compared to me at 20k that year
as these jobs go they rearanged things and i reworked it out. i was going into town anyway so said i would get the quote and he could pay for it.
a few weeks later i was pricing a job myself and went back looking at the quote to get the numbers. what he was quoted for each item was practically the same as me. i quickly re did the quantities to make them the same and his was only 200 euro dearer on over 6000 worth of materials. thats about 3-4% discount i got over him.
how can anyone keep a busineess going with that rate

Hellrazer

mgbgt1978 wrote: »

We do know it was a LUK kit.....we don't know where the garage purchased it from.

I think whats happened here is that the garage that did the job bought the part off his local factors. An LUK kit that RETAILED higher than the main dealer RETAIL price.

That's not too uncommon. I had to order a clutch for a car in the workshop last week. The Manufacturers rrp was 396 + vat less my discount of 25% so it cost me 304 + vat.

Problem was the part was 8 days away- Brexit crap.. No choice but to go to the factors.

The factors retail price for the same brand of clutch was 520 less 35% discount + vat. So it was costing me 348 + vat.

In a case like this I had no option but to tell the customer that it was going to be higher than Manufacture RRP as making 48 euros profit on the factors clutch isn't in line with what we have to make profit wise in the parts department.

bladespin

Get a quote first then choose, simples, part of the Mark up can be the ridiculous amount of time it takes answering customer questions too.

mickdw

Hellrazer wrote: »

I think whats happened here is that the garage that did the job bought the part off his local factors. An LUK kit that RETAILED higher than the main dealer RETAIL price.

That's not too uncommon. I had to order a clutch for a car in the workshop last week. The Manufacturers rrp was 396 + vat less my discount of 25% so it cost me 304 + vat.

Problem was the part was 8 days away- Brexit crap.. No choice but to go to the factors.

The factors retail price for the same brand of clutch was 520 less 35% discount + vat. So it was costing me 348 + vat.

In a case like this I had no option but to tell the customer that it was going to be higher than Manufacture RRP as making 48 euros profit on the factors clutch isn't in line with what we have to make profit wise in the parts department.

This makes sense and if flagged to customer is acceptable.
Pretty much rubbishes alot of the comments on here re there being no trade discounts anymore.
Even with this scenario, the part wouldnt be wildly above the original expected price as at least you were getting 35 percent trade discount at the factors albeit on a higher price.

bladespin

mickdw wrote: »

This makes sense and if flagged to customer is acceptable.
Pretty much rubbishes alot of the comments on here re there being no trade discounts anymore.

Trade discounts vary depending on volume etc, also the mechanic/garage would have to have a trade account with the distributor to get one at all - not all would have a credit account - especially the smaller indy's.

mickdw

bladespin wrote: »

Trade discounts vary depending on volume etc, also the mechanic/garage would have to have a trade account with the distributor to get one at all - not all would have a credit account - especially the smaller indy's.

Again not the customers fault and therefore completely out if hand then to think you could stick 30 percent on top of your too high cost price.
As i said before, if garages cannot get their part costs down to a point that allows them their margin while still being competitive, they need to look at themselves not just pile exvessive price onto customer.

bucketybuck

mickdw wrote: »

Pretty much rubbishes alot of the comments on here re there being no trade discounts anymore.

I didn't say that "there were no trade discounts", if you are going to be smug on the internet why not try to be accurate at the same time.

mickdw wrote: »

As i said before, if garages cannot get their part costs down to a point that allows them their margin while still being competitive, they need to look at themselves not just pile exvessive price onto customer.

They did look at themselves, did the cost benefit analysis and decided that supplying parts wasn't worth it unless they had a markup that suited them.

As always, the customer is perfectly entitled to go elsewhere if that is unacceptable.

zg3409

Firstly I think its a deceptive practice charging a markup on parts, where in many cases its relatively straight forward to get car reg, order parts, have them delivered. It sounds like it is common practice which I was unaware. The mark up seems to vary by garage with no system of showing customers. If some garage wanted to look like they were cheap they could have a low hourly rate, and overcharge for parts. It seems like deceptive practice to me.

As to the costs, yes garages have different needs.
Often car arrives at 9am, they need to find fault or give it a quick once over. They need the parts delivered before noon the same day so customer gets car back, and car does not block parking area. This limits their options, no next day courier, no dealer parts unless they are in stock and can deliver straight to garage, no secondhand parts unless stuck
. As said they are also not going to ring 3 or 4 places to get best deal, particularly if main dealer is lower risk of part not being correct one. Returning parts often nakes no sense, they might need to be in unopened packaging, and then the car still needs fixing but customer is upset car not fixed same day.

However in the hourly rate I expect the mechanic to pay for rent, insurance, light, heat, phone , tools, free tea or coffee, unproductive time waiting for customers or parts, etc.

I would prefer a fair relationship and I understand the hourly rate sometimes does not equal the amount if time actually working in car. Say 15 minutes billed for delivered parts and rounded up to next hour would seem fair, and an allowance for nightmare jobs where things don't go to plan and you can't really bill that customer but need to spread cost over all customers.

I accept all that, but not hidden fees in the parts costs.

Toyotafanboi

zg3409 wrote: »

Firstly I think its a deceptive practice charging a markup on parts, where is many cases its relatively straight forward to get car reg, order parts, have them delivered.

Did you think garages just re-sold parts for what they paid for them?

kirving

bucketybuck wrote: »

They did look at themselves, did the cost benefit analysis and decided that supplying parts wasn't worth it unless they had a markup that suited them.

As always, the customer is perfectly entitled to go elsewhere if that is unacceptable.

And in this case, the customer is very likely paying over €100 more than main dealer prices. Special cases aside (and to be fair Brexit is screwing things up at the moment too), the mechanic likely got a discount on the main dealer RRP.

The expectation isn't for the mechanic to spend hours online to source the part a fiver cheaper from Latvia with a weeks delivery time, but that €100 beyond the dealer RRP significantly reduces the competitiveness of the indy, and the customer probably won't be back.

mickdw

Toyotafanboi wrote: »

Did you think garages just re-sold parts for what they paid for them?

I certainly didnt but genuinely believed they would be working only within the confines of thier trade discount.
I.e. that clutch is 600 from vw. Agree it and expect to pay that.

Hellrazer

mickdw wrote: »

I certainly didnt but genuinely believed they would be working only within the confines of thier trade discount.

That is probably more true than not. However some manufacturers the trade discount can be quite low as in 5-7.5%

Its not feasible to work at that low a discount especially for a part that there is feck all labour in.

The average figure that most workshops / indys need charge out to make profit before costs is around 35.00 per hour per technician (in a main dealers that is).

Whether thats parts profit or labour profit doesnt matter. So while an Indys labour rate might be a lot lower you often find their parts prices can be higher.

bucketybuck

Are mechanics the only trade that are not allowed to set their own pricing?

"Buy for a dollar, sell for two" used to be a pretty basic business concept, I wasn't aware that garages were not allowed to follow it, that they were charities who should be providing these services for free.

Do people walk into Tesco and demand that they sell Coca Cola at a price that the customer thinks is fair? After all, if you can get coke cheaper in Aldi then how dare Tesco have a greater markup than that! Apart from cranks do any people actually do that? No, they vote with their feet and just go to Aldi instead.

Why are garages treated differently?

kirving

bucketybuck wrote: »

Are mechanics the only trade that are not allowed to set their own pricing?

"Buy for a dollar, sell for two" used to be a pretty basic business concept, I wasn't aware that garages were not allowed to follow it, that they were charities who should be providing these services for free.

18% on most things is absolutely grand - if fact I would expect to pay a premium for the mechanic sourcing parts. Normally that's a few quid par part, and added up probably fairly covers the the trip to the motor factors or dealer.

But on big items such as a clutch kit (which let's be honest are easily ordered, in particular from a dealer) do you think over €100 very likely even more, above the main dealer price is reasonable? I think it's a step too far.

Hellrazer

Kevin Irving wrote: »

But on big items such as a clutch kit (which let's be honest are easily ordered, in particular from a dealer) do you think over €100 very likely even more, above the main dealer price is reasonable? I think it's a step too far.

But we dont know any more info on this.

See my example above - its quite possible the retail price from the factors was higher than the main dealers - until we know that theres no point in going around in circles.

Spook_ie

Two repairs, same car, same fault, same mechanic

Bill 1
Parts €300
Labor €200
Total €500

Bill 2
Parts €350
Labor €150
Total €500

You're all chasing smoke and mirrors the only thing that should concern you is the total

mickdw

Spook_ie wrote: »

Two repairs, same car, same fault, same mechanic

Bill 1
Parts €300
Labor €200
Total €500

Bill 2
Parts €350
Labor €150
Total €500

You're all chasing smoke and mirrors the only thing that should concern you is the total

Bill 3
Parts 350
Labour 200

Total 550.

trellheim

But so what if its 550, the work is done and the parts are on the car. Is it illegal ? No. You're being told what you're bill breaks down as. That's it. Is it wrong ? No, and for 99% of people no-one knows what the clutch cost , it costs what it costs on the bill

mickdw

trellheim wrote: »

But so what if its 550, the work is done and the parts are on the car. Is it illegal ? No. You're being told what you're bill breaks down as. That's it. Is it wrong ? No, and for 99% of people no-one knows what the clutch cost , it costs what it costs on the bill

Ive no issue if i agree a price obviously but depending on the job, excessive parts pricing could really distort the invoice - Take something like a starter motor, some of them can be fairly expensive - say €400 while the labour might not be much at all.
A customer might look at the invoice and see the labour figure as being fair and agree the works, not knowing that the garage charging 500 for the starting available from main dealer for 400 is taking another 100 on the deal.
The point stands - if garages cant in general make their margin within their trade pricing, its not all fine and dandy to just charge the customer inflated parts prices.
Its a very bad business plan -
A garage should be able to take a view on parts pricing and take less or more margin on certain items not just a f*ck you attitude to the customer.

the_pen_turner

mickdw wrote: »

Ive no issue if i agree a price obviously but depending on the job, excessive parts pricing could really distort the invoice - Take something like a starter motor, some of them can be fairly expensive - say €400 while the labour might not be much at all.
A customer might look at the invoice and see the labour figure as being fair and agree the works, not knowing that the garage charging 500 for the starting available from main dealer for 400 is taking another 100 on the deal.
The point stands - if garages cant in general make their margin within their trade pricing, its not all fine and dandy to just charge the customer inflated parts prices.
Its a very bad business plan -
A garage should be able to take a view on parts pricing and take less or more margin on certain items not just a f*ck you attitude to the customer.

you think all the mark up goes straight to the bottom line and into the owners baxk pocket.

its not an f u attitude to the customer. its this is the price i need to sell this item at to atchieve my business goals. then its buy it or dont