December 23, 2016 at 8:23 pm #65039
The New Jersey Automotive Business Association has a very interesting post at the above link:
What does it cost a four (4) bays Auto Repair Shop to do an oil change?Yes, for a proper oil change, it costs the auto repair shop $41.91 to do a 30 minute 5w20 conventional oil change.
Why in the world would they be doing oil changes for less than their cost?
It is stupid, they charge 24.95 for an oil change, the customer is getting a $16.96 subsidy!
Edit: it is even worse, here is another “idxxt”:
That would be a $25.92 subsidy!!!December 24, 2016 at 1:01 pm #74639Tom HamParticipantThat math sounds reasonably accurate.I think you see the oil change low pricing for a number of reasons.For us, the trick is to set it high enough to cover as much of the cost as possible, but to also set it low enough so that almost no good customer goes elsewhere for their oil change service. As soon as a car enters any other service facility of any kind, we are highly likely to lose some sort of sale – other than the oil change. We want that car to always go to one place for everything – here.This is why many successful shops work hard to get as many oil changes as possible. Ideally, about half of all RO’s should include an oil change because statistically about half the cars coming into the average shop are due, over due or nearly due for an oil change.
Tom - Shop Owner since 1978December 26, 2016 at 10:24 pm #74640J. DouglasMember
The term “oil change” should have been dropped 20 years ago. (Same thing with the expression “Tune-Up”). In fact it should never have been used in the first place. What should be happening when a vehicle is in for “service” is exactly that. It is a VEHICLE SERVICE, not just an oil change. While trying to help people control their vehicle expenses, we price the VEHICLE SERVICE at a revenue neutral price point. We don’t MAKE money on it but we also don’t LOSE money on it. This means to survive, we don’t play the game of upselling garbage. We make our profits on the subsequent LEGITIMATE services and maintenance that every vehicle needs.
If someone wishes to “complain” they are invited to view the level of service we provide, or, they can go down the road to the 29.95 or 39.95 “oil change”. We’ll see the vehicle for more costly repairs and services later…..December 27, 2016 at 1:17 pm #74642Alan Ollie Gelfand Pres.Participant
About 50% of the cars that come to our shop are in for a oil service .Our price ranges from $79 -149. For an oil service and inspection.
The dealers Audi – Volkswagen – Bmw used to have specials for $69 for Full synthetic I’ve noticed they stoped that. I’m guessing because lots of my customers is just go to the quick lube there at the dealership took the free coffee and food then called us about the ton of upsells they need.
Our oil change stickers say $10 $20 $30 that means if they do three oil changes in a row they will save $60
Since the avg ticket is around 550 it’s a win win situation .
Anytime in the past we’ve tried cheap oil changes we got customers who do not want to take care of their cars just looking for a cheap oil change.
For 2017 my goal is to set up a quick lube at our shop to try to get the customer out in 35 or 45 minutes right now it takes over an hour .We always try to schedule leased cars or almost brand-new cars with less than 20,000 miles at the end of the day.December 27, 2016 at 8:59 pm #74643Bob WardParticipant
We have let the “oil change” become a lost leader when in fact it shouldn’t be. Since manufacturers have increased the service interval it becomes even more important to take a good look at the vehicle which cannot be done quickly. Does your doctor or dentist advertise how fast they can get you in and out? The only way to get paid properly for our services is to educate the customer about what they are receiving, ie quality products, trained technicians and relationship building to establish a long term customer. Value and price are two very different things.December 27, 2016 at 9:31 pm #74644Gary Keyes AMAMParticipant
I have to agree with Tom, we try to cover our base cost and keep it low enough to not scare away our good customers. Many customers believe that a oil change twice a year will keep their car going, I want to be able to get them into the shop, check out the vehicle and educate them on proper maintenance. Our oil changes average between $ 40 for conventional oil to $ 120 for a 9 + Quart synthetic.
1 user liked this post.December 27, 2016 at 10:03 pm #74645Joseph Van syocParticipant
Always hated low ball oil changes, mostly because I used to work for a shop that expected me to do the work for free, hoping to make an up sell before I made nickel one in commissions. That being said, Id like to see a breakdown on these costs, and know what is included, overhead, tech wages, a portion of door rate or what? Because my direct material cost on a 5qt, 5w20 syn blend oil change is $10, and while I still think the prevailing price in my area is still too low, I’d like to know what costs are being factored in? What is the average price in your area for this service?December 28, 2016 at 12:37 am #74646Tom SchmitzerParticipant
I do a buy 3, get the fourth free oil change club. It has been very successful for the past few years. We have added a lot of new customers. If the conventional oil change is $39.95, and the synthetic is $99.95, the synthetic gets the $39.95 deducted off his / her bill. The conventional gets it free except for any extras we end up doing. We spend and average of 45-60 minutes, and find plenty of extra work. We always check factory recommendations and give that info to the customer. We also have CRM to remind customers of upcoming service or past recommendations.December 29, 2016 at 1:24 am #74648LowellNigoffMemberI also agree with Tom. I don’t think you have to make a profit on every job line on your invoice. Like or not there at lost leaders, those items where consumers a more cost conscience.Also, what percentage of your sales are oil change service (or whatever you want to call it).If you can justify dumping 5-10% of your gross into advertising you can surely cut your oil change price to get them and keep them coming in.December 29, 2016 at 5:42 pm #74649
I find it interesting how you all justify giving away your work for free in oil changes.
My best argument from experience from about 7 years ago is this:
Go into your database and see how many oil changes you have done in the past few years, then take out your costs, how much money did you lose or made?
Since 7 years ago, I have not lost money on oil changes and gained a better class of customers.
My competition? Six shops have gone out of business, and we are still here doing better than before.
My recommendation to you is this, fire your cheap oil customers. They are not the class of customers that spend money to keep their cars running.January 1, 2017 at 5:15 pm #74650Greg McConigaParticipant
Using selected goods and services as a loss leader to promote traffic is just another marketing technique and if you choose to use it then one way to look at lost income is write it into your advertising budget, rather than viewed as lost or unrecoverable income. The lowly LOF (Labor Opportunity of the Future) is often used to pull traffic. Sometime in the late 1970’s (as an independent) we ran a full service at about $29… but we checked the lights, horn, loaded the battery, pressure tested the cooling system, did a dry park check, aired up the spare, lubed locks and hinges, tested the charging system and handed the customer a State of Health report on every visit…. and we sold a ton of work off it. By the mid to late 80’s our average ticket was just a tick over $400… big loot for those days. In the interest of full disclosure, I now work for a mid sized dealer group (about $9,650,000 in annual service RO sales) and we have slowly moved away from the real cheap oil changes, sticking to the middle of the road now… a bit less than the average Goofy Lube (which runs $45-50 total average) but less than the premium shops. Our EFRH on our services runs about $75 per hour, against a full retail rate of something north of $105 (varies between our locations.) What we should be concerned about is what’s going to happen in the marketplace, and here’s what I think will gradually happen: We are going to end up with controlled volume dry sump systems (there will be a dry sump tank with excess oil in it and controls that keep a controlled 1-2.5 quarts of oil in the engine to knock down the windage issue that costs us MPG so we can hit those 50-60 MPG numbers the government has demanded) and with that we will see tank R and R as we begin to isolate our waste oil streams to keep them more recycle friendly (once you mix various weights with various additive packages the waste oil stream becomes less useful… if you isolate the incoming feed stock streams to all 0W-20 then you can re-refine to 0W-20… something a tank recycling or cartridge recycling program would make doable.) Since drain interval is largely set by the volume of oil over which contaminants are spread and the quantity of additives contained in smaller volumes that are depleted (by design) what will intervals become if we install a system with 10-20 quarts that increases total system volume, automatically makes up for consumption over extended operating intervals and maintains tight in-engine crankcase volumes? We could be looking at 12-36 month drain intervals before long… and since the oil tanks will be serviced on an exchange basis only… clearly marked and controlled to avoid cross contaminating the waste oil stream… the whole idea of a low priced oil change might become just one more thing of the past. At the end of the day, what a service costs a customer is always too much unless you build the value of what you’re doing for them first… The customer always thinks it will be faster that it really will be, easier than it ends up being and cheaper than what it ends up costing, so the only thing we can do is reset and manage their expectations… building the value proposition first and discussing the costs last. Best to all in the New Year,
GregMc.January 3, 2017 at 4:00 pm #74651
Like we said above, customers do not know if you are losing money on oil changes.
If you don’t know your costs to keep your doors open, you don’t even know how much money you are losing per cheap oil change!
You may even get upset or even slighted when a customer may ask you for an additional discount on a cheap oil change.
value judgments are distorted by cheap oil changes. They think that if
an oil change costs $19.95, or $24.95, other services that may take the
same amount of time should cost about the same.
oil changes sets a dangerous precedent for your shop by letting
customers think you are making money on a services that you are not even
recovering your costs.
creates a race to the bottom across the whole industry, as other shops
follow along thinking that they need to lose money on oil changes to
What to do?
Remove all signs that may mention cheap oil changes from your shop.
Remove all printed materials that mention cheap oil changes from your sales literature.
your prices. At lease increase your oil change price by $5.00 at a
time, every 6 weeks until you are able to recover your costs.
Stop offering conventional oil and move to synthetics oils, that way you can recover your costs much faster.
Stop competing on price, compete on convenience and other amenities that let you make a margin where you can prosper.
seasonal packages that let you make a good margin, for example combine
tire balance, rotation, wipers, fluid top offs, etc., that co-inside
with the season, i.e., winter, spring, summer, fall.
you have any questions or need help, don’t hesitate to reach out to us.
We want you to prosper and to keep the auto repair industry healthy and
viable for us all.
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