The Digital Shop® Blog
To keep the customers of your auto shop satisfied and increase their likelihood of doing business with you in the future, delivering accurate estimates is crucial. If your repairs take longer or cost more than clients expect, it could annoy them at best or damage your reputation at worst.
Are you unsure how to calculate estimates, or would you like a refresher on this subject? Either way, keep reading for a comprehensive labor guide for auto repair shops.
Auto Repair Estimate vs. Auto Repair Quote
Essentially, these estimates are contracts between your shop and your customers. They include approximate labor schedules and pricing for your services, along with disclaimers clarifying that this information is not final.
Auto repair quotes, on the other hand, are broadly similar to estimates, but they fall into a separate category. Like estimates, quotes predict how much a customer’s repairs will cost. With that said, quotes are considered an “expert opinion” on auto repair expenses, which both clients and insurance companies use. Quotes–not estimates–are used in the case of disputes related to service or billing.
Calculating Auto Repair Quote
Delivering a quote for auto repair may seem as simple as taking your hourly rate, multiplying it by how long you expect the job to take, and adding the cost of parts. However, there’s more to the quote calculation process than that implies. You’ll need to:
Predict the Materials Needed
While you’re pricing an auto repair job, add a markup for any materials you’re likely to use. That doesn’t just include auto parts, either–you should also take things like paint, screws, and sandpaper into account.
As a basic principle, it’s wise to start with your discounted costs for parts and materials and increase that cost until it reaches the price that customers would pay independently. To avoid legal issues, be sure to check your state’s applicable pricing laws first.
Determine How Long It Will Take
Labor expenses are a significant portion of auto repair costs, so you need to know how long a fix will take to complete. You may want to use information from a reliable labor guide catalog, such as:
Set a Labor Rate
To start calculating a basic labor rate, add up all your expenses and divide them by how many hours you work. As a demonstration of how this works, assume your monthly overhead is $12,000 and you work 40 hours each week:
$12,000/4 weeks = $3,000/week
$3,000/40 hours = $75/hour
That rate will help you take care of your expenses without losing money on jobs, but you’ll need to introduce a markup to earn a profit. For many shops, a 50-60% markup is appropriate. Here’s what that looks like applied to the example above:
$75 x $0.50 = $37.50
$37.50 + $75 = $112.50
Calculating Auto Repair Estimate
Since auto repair estimates are separate from auto repair quotes, it stands to reason that the process of calculating them is also different. Fortunately, this labor guide can help you provide detailed, transparent estimates for your customers. When it’s time to deliver an estimate, you should:
Assess the Vehicle
You can’t create a reliable estimate without knowing the condition of a client’s vehicle. That means the first step in this process is doing a vehicle inspection, focusing on the sections of the car where you plan to install parts. And, for larger-scale jobs, perform a diagnostic scan for additional information.
Calculate Cost of Damage
Auto repair labor catalogs can help you figure out how long it will take to fix a vehicle and how much it will cost. Of course, you need to be cautious–these guidelines may assume you’re installing OEM parts in a car that’s in mint condition.
To steer clear of any unexpected pitfalls, thoroughly inspect damages to the vehicle during your initial assessment. Then, take the number of hours you expect to spend fixing it and multiply that value by your hourly labor rate.
Determine Tools and Parts Needed
Before you’re ready to put your estimate together, you’ll need to take one more step–ordering parts and materials. To ensure you’re getting compatible materials, use the vehicle’s VIN while placing your order.
Once you know what auto parts and materials are needed, you can add their cost (and your markup) to the labor rate you’ve already calculated. With that, you’ll have the total cost of repairs for the job.
Create the Estimate
Preparing a professional auto repair estimate involves more than just writing down a number on a piece of paper. Your estimates also need to include:
- Contact details for the customer
- Information on your business
- Parts and labor warranties
- An estimate expiration date (since prices can change before customers authorize repairs)
You’ll be ready to send out a reliable estimate once you have this information!
Improving Your Margins
Offering reliable auto repair estimates and quotes is a great way to keep your customers happy. With the information included in this labor guide, you’ll be ready to deliver estimates your clients can trust–making them more likely to come back the next time they need auto repairs.
But there’s more to making money than boosting customer satisfaction. While that is a major piece of the puzzle, you should also try to improve your margins by increasing technician efficiency. Today, that means reducing downtime with the use of cutting-edge technology.
AutoVitals is the auto repair industry’s most trusted provider of digital solutions for shop success. With services and products from AutoVitals, you can benefit from automated workflow management, digital vehicle inspections, professional web design, and much more.
Increasing your car count and revenue means implementing automation, and AutoVitals’ easily integrated software is ready when you are.
