Customer Pay Shop Charge for Repair Order: How to Manage Fees

Managing customer pay shop charges for repair orders can be a complex task, especially when it comes to understanding the fees involved.

The total cost of a repair order can be broken down into labor, parts, and shop charges. Shop charges are a flat fee added to the total cost of the repair.

This fee can range from $25 to $100, depending on the shop's policies and the type of repair being performed. Some shops may also charge a minimum fee for smaller repairs.

To manage these fees effectively, it's essential to communicate clearly with your customers about what they can expect to pay. This includes providing a detailed breakdown of the costs involved.

Labor rates are determined by how long a job should take the mechanic, not by how long your car remains at the shop.

A national labor guide typically sets the standard for labor hours and charges. However, higher mileage vehicles with extensive rust may take longer, and a quality mechanic will inform you of this potential extra charge ahead of time.

Auto repair shops charge varying labor rates, with dealerships and custom shops often having the highest dollar per hour charge due to factors like guarantees, higher tenured technicians, or specialized services. Your friend who works on cars in their spare time likely has one of the cheapest rates in town.

The most common method for calculating shop supplies is to charge it as a percentage of total labor on a service order, typically around 8%. For instance, if the total labor charge is $500, shop supplies would be $40.

This method is a good way to recapture the cost of consumables used on a job, as the longer a job goes, the more supplies your techs will use.

When you visit an auto repair shop, you may wonder how they're charging you for parts. Typically, your mechanic is able to acquire parts at a lower cost than you can.

They have commercial accounts with parts stores and order in bulk, which gives them a breakpoint. This means they pay less for the part than you would if you bought it yourself.

Your mechanic might only be charged $135 for a water pump, while you'd pay $189 at a local Napa store. However, the repair shop will likely mark up the price to around $200.

Picking up a part yourself can be tricky, as many cars have different parts for different engine sizes or other variables. This can lead to the wrong part being ordered.

If you bring in your own part, the mechanic may not warranty the work and won't repair it for free if the part fails. Most mechanics will research multiple shops to find the best deal for you.

The added advantage of having your mechanic get the part is that the repair comes with a warranty. This provides peace of mind and protection for your vehicle.

When you're quoted a price for a repair, it's essential to understand where the costs come from. The mechanic's labor and parts costs are often lower than what you'd pay at a parts store.

Typically, mechanics acquire parts at a lower cost due to their commercial accounts with parts stores and high volume ordering. This can result in a marked-up price when they sell the part to you.

You may be able to buy a part yourself, but it comes with risks such as picking the wrong part or voiding the warranty.

Removing the charge for shop supplies from repair orders may seem like a simple solution, but it requires a strategic approach to recoup the lost revenue.

Service advisors would likely choose to remove the charge to avoid explaining it to customers, but service managers are focused on profitability.

Many dealerships have removed the charge from repair orders, either by choice or due to recommendations from dealer associations.

To recoup the lost revenue, you can increase your customer pay effective labor rate to cover the shop supplies expense.

Let's use an example to illustrate the calculation: if you need to recover $4,260 from customer pay repair orders for monthly shop supplies, you would need to increase your customer pay effective labor rate by $2.33.

Here's the calculation: $4,260 ÷ 1,829.8 monthly customer flat rate hours = $2.33 increase in customer pay effective labor rate.

You would need to increase your customer pay effective labor rate to $65.31 ($62.98 plus $2.33) to recover the shop supplies expense.

To implement this change, have your office manager/controller make a manual entry to reclassify the revenue from customer pay labor sales.

When it comes to managing repair order charges, it's essential to keep certain fees on the repair orders themselves. This includes a fee that's typically set between 5% to 10% of labor, with a maximum of $20 to $30 per repair order.

To avoid potential legal issues, your managers should not allow anyone to remove this fee from the repair order. Contact your legal advisor for guidance on this matter.

Keep in mind that the total price including parts, labor, taxes, and shop supplies should be clearly stated on the repair order.

Setting price bounds and estimates is crucial to protect both you and your customers. Most states require mechanics to receive written approval on a work estimate before completing a repair.

Having a ceiling and floor on what you charge can keep your customers happy and your finances stable. A maximum, or ceiling, can keep charges reasonable, especially if you're charging based on labor and parts.

A minimum, or floor, can ensure you at least recoup some basic costs on every service. This way, you'll never be stuck with a repair that costs more than it's worth.

State laws and regulations can be a minefield for shop owners, but being aware of them is crucial to avoid potential lawsuits. Over the years, there have been lawsuits centered on the "shop supply fee", prompting lawmakers to take action.

Some states require an itemized list on invoices for shop supplies, so it's essential to know the specifics of your state's laws. This can be a challenge, especially for shop owners who work with customers from different regions.

Laws regarding shop supplies and charges vary by state, so it's vital to research and understand the laws in your area. This will help you avoid any potential issues and ensure a smooth operation.