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Automotive Repair Labor Pricing
By Tom Torbjornsen
How do repair facilities arrive at their prices for auto repair anyway? Are they guessing? Maybe it's the luck of the draw -- No No No! I've got it! Tarot cards! That's it! Actually there is quite a science behind it all. Here's how it works.
Most shops use a labor guide to ascribe value to a repair operation. The labor guides outline the average times for repair operations. For instance, if the labor guide says that it takes 1.5 hours to do a water pump installation, then this is the figure used, multiplied by the shop's labor rate. Let's say that the shop's labor rate is $20 per hour (I'm dreaming). The shop's charge would then be $30 for the labor.
In preparation for this article I spoke with a gentleman by the name of Greg Metzger. Greg is the factory rep for Mitchell Manuals, a well respected name in the auto repair industry for labor and repair guides. I asked Greg how they arrive at the time needed for each operation. Here is his response.
"Tom, first of all, remember that the labor guide is just a guide. There are many factors to take into consideration when pricing a job. Say, for instance, that you live here in Western New York. We have pretty bad weather during the winter months that wreak havoc on cars in terms of rust. This rust makes it difficult to replace some car parts and should be taken into consideration when pricing a job. Next, we take into consideration the car's equipment. Not all cars are made with the same equipment and sometimes this equipment gets in the way of the repair, making it necessary to add more time to the operation. Here at Mitchell we have a staff of editors that are all ASE-certified master technicians and have at least 20 years of hands-on experience. Our editors go into the field and do research on repair operations in different parts of the country. Next, the factory time is reviewed, which is the time the manufacturer allows for a warranty repair done by a technician who works on nothing but that make of automobile. In essence, this is a wholesale repair. We then apply a formula to the factory time and come up with an equitable time that the job take. That's how we do it at Mitchell, and it seems to be the fairest in the industry."
Well, that answers that. But is it that cut and dried? Absolutely not. In the event of the need for "exploratory surgery," the phrase "time and material" comes in. Let's draw a hypothetical situation to illustrate what "time and material"...