Archive for January, 2018

Why shopping around for the cheapest labour rate doesn’t make sense.

Thursday, January 11th, 2018

affordable mechanic airdrie

By Chris Dekker

 

“Hello, what is your labour rate?” We must get this phone call two or three times every day. We understand what the person on the phone is attempting to do: they’re trying to gauge how expensive we are (or aren’t). What these people don’t realize, though, is that if they’re looking for the best overall value, then they’re going about this all wrong.

Auto service businesses in our area all charge around the same labour rate, usually within $20/hour of each other. Yet prices for a given repair can vary wildly from shop to shop; sometimes a $350 repair at one business will cost $500 at another. Why is this? It’s because there are other factors at work – factors that are much harder to measure – that have a much larger affect on the overall price. Let’s explore some of these:

 

Parts pricing:

Believe it or not, our labour rate alone isn’t enough to pay our bills. Our industry’s hourly labour charges are actually quite low compared to other professional services who have similar operating costs. In order to actually turn a profit, every auto service business purchases parts at a wholesale discount from their suppliers, and then re-sells them for a retail price. However, that wholesale discount varies from shop to shop. While we’ve negotiated a rock-bottom cost on parts with our suppliers, many other businesses pay a higher price in exchange for rewards programs; warranty programs; and kickbacks like free vacations for the owners, etc. Obviously this cost gets passed on to you, the customer. The actual parts mark-up will vary as well; with some shops charging a higher percentage than others.

 

Extra fees:

We don’t charge any additional fees on top of our labour rate, but this is pretty rare in the industry. Most businesses charge another $5-$10 per hour in “shop supplies” or environmental fees, so you’ll want to make sure you know their true effective labour rate including fees.

 

Labour times:

To arrive at a labour quote, we multiply our labour rate by the labour time for a given repair. We discuss labour times more here. Most of these labour times come from a labour guide; a sort of industry standard that most business use. However, the guide is just that: more of a general guideline than a rule; and businesses can charge for as many hours as they want. Because the labour times are based on brand new vehicles, we may occasionally charge extra labour when rust, corrosion and other age-related issues make a repair much more time-consuming on an older car, for example. We’ll sometimes also charge a lower labour time on repairs that we know won’t take as long as the guide suggests.

Some auto repair businesses in Calgary charge absurdly low $60-$80/hour labour rates to attract customers, but charge twice as many labour hours for a given repair, so the final price ends up the same. Just remember that even if two businesses have the same labour rate, the labour charge you pay may still be different.

 

Labour overlap:

What happens when doing one repair makes it easier (and quicker) to do another, separate repair? That’s what we call labour overlap. Here’s an example: on a 2005 Chevy Silverado 1500, the published labour time to replace one front wheel bearing is 1.3 hours, and the labour to replace both front brake rotors is 1.0 hours. So, if we’re replacing both rotors and a wheel bearing, is it fair to charge you to total combined time of 2.3 hours? We don’t think so, since one of the brake rotors must be removed anyway in order to access the wheel bearing. However, many businesses in our industry do not pass this labour savings on to their customers; and this can have a huge effect on the price.

 

Diagnostic ability:

Here’s another one of those little things that you may not think about. Will you be charged for two hours labour to diagnose a problem that a more qualified technician could find in one hour; or will a misdiagnosis leave you paying for parts that you didn’t need? The pace of change quickens every year in our industry, so this should be an important consideration as we continue to move away from internal combustion engines and into the age of autonomous electric vehicles, with technicians who can’t adapt getting left behind.

 

Honesty:

This one is huge. As we explain in this blog post, honesty is the number one way that we save people money every day. We often say that a great price for a repair that you don’t actually need – or need yet – is still a bad deal! Whether it’s being honest about what your vehicle needs; how urgently you need a repair; owning up to a misdiagnosis; or being up-front about a mistake, our policy of uncompromising honesty ends up saving our customers a lot of money every year.

 

Warranty:

One final consideration when determining overall value is the warranty that an auto service business provides on their repairs. Unfortunately, repairs sometimes fail; most commonly due to a parts failure, but occasionally due to a mistake on the part of the technician. A longer or more comprehensive warranty will provide some security that you won’t pay twice for the same repair. A business that provides a better warranty may be more mindful of their quality of work, and likely chooses better quality parts for their repairs.

Another important question to ask is regarding collateral damage. Here’s an example: Let’s say you pay to have an alternator replaced, and the new alternator seizes up, breaking the serpentine belt. Will the installing business only replace the faulty alternator, or will they also replace the broken belt that resulted from the failure?

 

When the cheapest price isn’t always best:

We always tell customers that if our price is noticeably higher than another business, it’s time to start asking questions because they likely aren’t “comparing apples to apples”. For example, our price to replace a power steering pump will almost always be higher than our competitors, because we’ll only use OEM (from the manufacturer) pumps, while many shops are installing poor quality rebuilt aftermarket units.

You also don’t want to seek out the cheapest business around, because delivering the expertise and service you expect costs money. A shop that’s not charging appropriately likely won’t be able to afford to pay the most skilled and caring technicians, or provide you with a quality warranty and service after the sale.