Auto Shop Management Forums

Find answers, ask questions, and connect with our community around the world.

  • 90% Parts GP? Where did I go wrong?

    Posted by Tom Ham on April 11, 2014 at 5:43 am

    Is our 50% or so parts GP a flop? According to some it is. Two conversations that began by discussing matrices:

    1: “They don’t use one at our shop. They sell all parts at O.E. suggested list price. Then they shop for the cheapest part (brand etc. is irrelevant) in town. If a brake rotor is $100 list for an O.E. part at the dealer and we can find one for $10, then we sell it for $100.”

    2: Him: “We don’t use them at our shop. We multiply everything by three (X3).”
    Me: “What about more expensive parts, especially ones from the dealer?”
    Him: “Doesn’t matter…everything is multiplied X3.”

    OK…so #2 is only at 66%. Still a lot higher than me! Are my sights set way too low?

    Joseph Van syoc replied 6 years, 12 months ago 6 Members · 5 Replies
  • 5 Replies
Advertiser / Sponsor
  • Richard Ehler

    Member
    April 14, 2014 at 10:38 am

    I like the selling at OE price.  No reason not to charge the going market price, and then the lower you can buy, warranty with confidence, etc. the better!  Buy Low, Sell High is what most business do right?

  • Scott Waddle

    Member
    April 14, 2014 at 12:03 pm

    I suspect neither plan is a good idea.

    A matrix based on cost works well when used in conjunction with OE list.

    Lower cost items require a higher GP, particularly when there is a high liability in that part. A bad crank seal can ruin an engine, you need to keep that in mind.

    OE list can not be ignored when selling higher priced items, but it is a case by case basis.

    We tend to sit right around 48% GP on parts overall, everything but tires is in there, including engines and transmissions, but we don’t sell too many of them, so it doesn’t make much difference.

    In the future, I expect parts GP to go down, not up, the internet and parts retailers are making it harder all the time.

  • Patrick McElroy

    Member
    April 14, 2014 at 1:42 pm

    I pretty much agree with Scotts view. I also believe scenarios 1 & 2 border on the fringe of unethical and thievery.  In scenario #1, I’ll suggest that when someone is selling a $100 brake rotor that costs only $10, that rotor is not even close to the quality of OE.  I’ll bet that rotor comes in a white box with a far east countries name on it. But, if the rotor is the same quality of OE, then I won’t have a problem selling it at an OE price. In scenario #2, three times the cost of an OE part would attract the attention of most Attorney Generals in this country for price gouging.  I believe its every shops private business on how to price parts and labor.  I also believe its every customers business to make sure they’re not paying far above market value for what they’re buying.

  • mylesj

    Member
    April 14, 2014 at 1:46 pm

    Tom,

    Ask this question a different way. What is the parts /labor split on your average ticket? What are your parts pricing policies, what are your labor rates and pricing policies and how do parts sales affect the incomes of workers? Do you pay flat rate, straight time or a mix? I think you will get a better picture.

    You also need to consider the attitudes that exist in the area under consideration. I’m not trying to be political, but realistic. In areas with lower labor rates and higher unemployment many shops have more techs than they need. The shop staffs for the busiest times and guys are often idle. In many areas it is not the work that the techs do that is valued, it is their ability to install high margin parts. Labor rates are lower and parts margins are high. Shop efficiency rarely breaks 60%. In areas with higher labor rates and lower unemployment shops are staffed for average work load. Shop efficiency is generally 90 to 120%.

    Some well qualified techs make $15 and hour and 10% of all parts with few benefits, others make $40 an hour, no parts money and good benefits. That is why you’ll get a wide variety of responses to your original question.

    Think about this – why is the same house worth $80,000 in Florida, $200,000 in Minnesota, $250,000 in Oregon and $400,000 California? I just looked at getting the exact same house built in Arizona and Oregon and the difference was 50% not including the lot and permits, etc.

    Is the management style focused on how to get the days required profit out of the customers that show up today or is it focused on being sure that all time available today is sold today?

    Size of market is important too. In a small market that guy charging 300% will lose business eventually.
    In a big market there is enough churn for that to be a viable policy.

  • Joseph Van syoc

    Member
    June 30, 2015 at 10:44 pm

    Most parts, with the exception of big ticket items, tires and batteries average about 50%.  With the increasing popularity of Amazon Prime, if the customer is not in a rush, I order some name brand parts there, sell at the same price the identical part would sell for if purchased from a local vendor and bank the difference.  Also have made some special purchases of stocking parts on Ebay,or Amazon, and use the average list price of all the vendors in my local area for a comparable quality part. This usually nets a 65-80% GP.  IMO stocking parts demand a higher GP as that is money sitting on a shelf that could be invested elsewhere