Sunday Question – How Much Do You Think A Dealership Should Make on Repairs?

Welcome to the Sunday Edition of Hooniverse Weekends. The lack of posts this weekend is due to two facts; I am trying to clear all the ice from around the house, and the fact that I now have to try and care for my elderly parents, with both of them currently residing at different care facilities (My father is recovering from a stroke, and my mother recovering from a mild heart attack with both events happening within days of each other). This will be the last posting from me for this weekend, and with this being Super Bowl Sunday, most of you will probably be glued to the broadcast.
Anyway, I thought I would open a thought provoking subject. What do you think a dealership should make in the repair and maintenance of your vehicle?

Remember, there are fixed costs for a dealership, including utilities, labor, overhead, and taxes. Let’s take a typical dealership in a typical suburban setting, and let’s say the garage has at least 15 bays.

If the dealership is fully staffed they would need the following personnel:
– Service Manager
– Assistant Service Manager
– At least 3 service writers (Greet the customer, write up the work order, schedule the service, take phone calls, etc.)
– 15 fully trained mechanics, with some of them trained on specific services, diagnostic tools, for different types of vehicles.
– at least two people who interface with the parts department to get the proper items to complete the repair, including sourcing from outside the dealer.
– A Parts Runner
– A Shop Foreman
– A Shop Custodian
– a couple of trainees
– and maybe a couple of people in charge of cleaning the vehicles after the service has been performed.

They also have to have the proper diagnostic equipment on hand (and they are not cheap) for each type of vehicle. Lifts are capital equipment, and are part of the building, but they need to be serviced every so often. Shop supplies are getting more expensive every day, as are the fluids needed to maintain your car (Oil, Grease, Lubricants, Antifreeze, Coolant, Brake Fluid, Hydraulic Fluid, and now Diesel Exhaust Fluid). Insurance premiums are continually rising because of the hazardous nature of the business.

I know what you’re saying… Warranty work should cover the operating costs of the service department at the dealership. But they don’t. The manufacturers have been cutting the time it takes to repair a vehicle under warranty. For example: Replacing a faulty Alternator. The Manufacturer might have allowed 1/2 hour to remove, and replace the alternator 5 years ago, but now only allow 22 minutes to do the same job, and that is all they will pay. Dealers have to constantly ask for a warranty rate increase, and the manufacturers usually allow for a semi annual rate increase.

There is also the growing technician gap, in which there isn’t enough good technicians to work at dealerships, and the ones that are good command better pay. This leaves the not so good to work at Pep Boys, or Sears, or even at your local garage. Many of these shops don’t have the proper electronic diagnostic equipment to work on newer cars.

So I have to ask again….. What do you think a dealership should make repairing or maintaining your car? Express your thoughts now, and civility is the Hooniverse way.

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  1. PrawoJazdy Avatar

    I can't put a number on it as I don't math, but I think you should pay the premium for a premium service.
    Dealers do more than whats listed above.
    shuttle drivers
    cost of buying and maintaining a shuttle
    providing a work space for rental companies
    providing loaners
    loaner maintenance
    the wasted sales persons time while you kick tires in the show room (even though your not ready for a car for 3 years)
    and in some dealers the cost to run a cafe to keep you fed and happy while you wait
    I don't know… Maybe 10-20% of the actual cost of doing business.

  2. From_a_Buick_6 Avatar

    The same as any reputable independent repair shop. Unless it's warranty work, there's nothing special about going to the dealership for service. They should have to compete for business just like anybody else.

  3. Age_of_Aerostar Avatar

    I wouldn't mind the cost of a dealership repair, if I thought that all that expertise was going to fix the problem correctly the first time. I realize this is sometimes easier said then done, but if I'm paying a premium, I'd expect the vehicle to be throughly tested.
    I would assume also that the price descripency between the dealership and independant shops will narrow, as cars become more electronic, and the independant shops have to purchase specialized diagnostic and repair tools for ALL manufactures, their costs will increase to cover those expenses.

  4. Age_of_Aerostar Avatar

    JIM, best wishes to you and your family. I have had experience helping someone who had a stroke, and learned how evil strokes can be.
    We'll keep the Hooniverse warm for ya.

  5. aastrovan Avatar

    Dealership mechanics do warranty work for scale,
    and make the money on customer work.

  6. Scoutdude Avatar

    There isn't a technician gap for most brands as the number of dealers has dropped significantly for some brands. So many independents now have factory trained techs. In addition many of those special service tools were sold and also reside with independents. The aftermarket makes some very good diagnostic tools that closes that gap and add in the service info subscription services and other than the newest of new vehicles a good independent has the capabilities of the dealer and in fact since the warranty times have dropped so far vs the customer pays many of the best and brightest techs have left the dealerships. For many of those reasons the shop I used to work for got many referrals from dealerships. We had 3 GM 2 Toyota and 1 Ford dealer that sent us business as well as another Ford dealer that regularly sent their fuel injectors to us for proper cleaning and flow testing.
    Just as a reference the average Honda dealer makes aprox 110% of it's profits from the parts and service depts, that's right they sell the cars at a net loss because the money is in the $$$ maintenance and repairs on those vehicles.

    1. Confused Avatar

      How do you make a 110% ? 100% is all of the amount.

    1. jeremy![™] Avatar

      that lead photo made me think jim had some very bad luck with his saturn…

    2. Matt Avatar

      Mods – please update picture in story to be this one instead.

      1. Tim Odell Avatar
  7. west-coaster Avatar

    with this being Super Bowl Sunday, most of you will probably be glued to the broadcast.

    Hmmm. I've heard of that…I think. It's like the Indy 500 but not as fun, takes way longer, and no engine sounds.

    1. dwegmull Avatar

      Except during some commercial breaks…

    2. alewifecove Avatar

      and is slightly more pointless…

  8. optflv Avatar

    I suppose it depends a bit on the type of service we are talking about. Like most of you, I'm happy to handle my own routine maintenance items myself, but you average driver will see value in having that done at a place that has the same brand on the building as their car. At that point, we have to figure out what the value of that warm fuzzy feeling should be. For an oil change that costs the dealer maybe $10 in materials and $30 worth of combined labor time, I don't think it's unreasonable for them to charge $75.
    For major repairs such as big engine/transmission/electrical work, it might be a little different. At that point, all those training and equipment costs come into play. Even if there are no parts needed, the labor time might cost the dealer $500. It's not unreasonable for them to expect $1000 for having the properly trained person using the right diagnostics and tools on hand.
    The convenience of having OEM spare parts available is certainly worth some premium as well. Let's say that OEM widget costs the dealer $100 to order and have on a shelf for when the widget in my car quits. Sure, I can order the widget cheaper, and wait for it. Then, I have to either figure out how to install it myself, or find another mechanic to do it. What's it worth to have that reliable parts around? To me, a 30% profit on that seems about right.

  9. Joe Dunlap Avatar
    Joe Dunlap

    Just to inject another line of thought about this. When I began my career as a tech in 1972, a tech was usually paid 40-50% of the labor cost on a job, and received nothing from parts sales. Depending where you lived, the hourly rate could range from 15-40 dollars an hour, meaning a tech would make roughly 7 to 20 an hour. Now, this scale was variable, in that a job in most shops was billed on something called flat rate. For instance, a clutch replacement on a given vehicle might be billed at 2 hours and pay $80. If the tech could do it in one, he was paid $40 for one hours work. This could also work against him if it took him say, 3 hours as the job was still billed at 2. Today, with shop labor well over $100 per hour (over 200 in some areas) The tech is now receiving less than 30% of that, much less in some cases. So, where is the rest of it going? Food for thought.

    1. packratmatt Avatar

      That's about what I experienced when I was a tech 15 years ago. I think our Ford dealership was overcharging for service to make up for lack of sales.

  10. P161911 Avatar

    I would say dealership service is worth a 20-30% premium over an independent garage, but I expect them to be 20-30% better too and fix it right the first time.
    At one time that was a big factor in my choice of a Corvette as a high performance sports car. There are very few places in the eastern US that are more than 1/2 hour from a Chevrolet dealership that should have at least one technician that knows how to work or a Vette. There are big parts of the country where BMW, Audi, Porsche, or Infinity dealerships are few and far between. For those that travel a lot in rural areas this should be somewhat of a concern. There are big parts of this country that anything other than a GM, Ford, Chrysler, or maybe Toyota and Honda dealerships are few and far between. If you are traveling you know that you can find good, if expensive service at a dealership. Unlike a local garage there is an upper level to take a problem to.
    At home I either do my own repairs or find a good independent garage, but on the road a dealership is usually a safe bet.

    1. facelvega Avatar

      You surprise me by saying that dealer work is worth so much more than an independent garage. Unless someday I break down and buy a new car and thus a warranty, I can't imagine ever choosing to go to a dealer, precisely because I don't trust their work and I expect them to hose me on the price by, say, selecting a $300 replacement lens instead of a plentifully available $10 one from a nearby junkyard, or just telling me to fix things that don't need it. I've never yet heard of a dealer actually identifying a tricky problem promptly and fixing it cheaply, where good independent garages do this all the time in the name of building client relationships. Also, every really brilliant mechanic I've ever met, the ones I respet and admire, worked at an independent garage, usually his own, which is inevitably crawling with vintage cars whose owners have figured out which mechanic in town is the best. Even on the road I go to independent shops. Now with a web browswer on my phone, I can read reviews and identify a competent local garage in a few minutes from the cartalk database and consumer review sites.

      1. P161911 Avatar

        I guess part of it depends on the vehicle. I would expect anyone above Pep Boys to be able to fix my 88 F-150. But for the 1994 Corvette I used to have or the Z3 with a M3 engine that I currently have I look to specialized independent shops, not always an easy thing to find on the road. Also, I am basing this on my experiences of 10-15 years ago before all the current online information. To a certain extent it depends on the problem the car is having, what type of car it is and how hard it will be for someone who doesn't see that type of car everyday to figure out.

        1. facelvega Avatar

          Well yeah, if you put it that way then I completely agree. Thank goodness for the internet, though, I can't imagine planning the kind of long trips with vintage cars that I do now if I didn't have the reassurance of being able to look up an old car specialist if I broke down along the way.

    2. M44Power Avatar

      Amen. My nearest BMW dealership is an hour away and staffed by people who can even surprise me with their stupidity (and I have taught college freshmen!). I've seriously factored in the "ease of ownership" as a big benefit of a CTS over another foreign car.

  11. M44Power Avatar

    I just haven't had enough good experiences with dealer service (e.g., being told it would take 6 hours of labor to diagnose why my lock cylinder was spinning freely in the door when I knew exactly the P/N that needed to be ordered to fix it) that I just don't care if the present dealership service model disappears. Of course, once it gets truly terrible, the manufacturers will step in and do something. But I can't see taking my cars to a dealership for service no matter what price they get to charge for their "expertise": the indie shops are so much better.
    All that being said, I did have my F-150 taken to a Ford dealer and was very impressed by the service and price. The total came out to be about 40% inflated on parts as compared to how I could source it, and the labor rate was reasonable. Overall, I would say the domestics might have the edge here.

  12. Black Steelies Avatar

    I think a dealership should pass out repairs for free like candy!

  13. MattC Avatar

    First off, my thought are with you Jim as you care for your parents. I was and am in a similar predicament this past year. My Mom recently passed away (she had advanced Alzheimers disease) and my father has had 2 seperate stints in rehab facilities (one for breaking his leg last year and just recently breaking his ankle several weeks ago). As soon as he recovers, I will have to have the "talk" about either him moving into an adult care facility or moving in with me.
    In reference to dealerships, I would guess that 30-40% profit margin is appropriate. That is entirely dependent of the service. Many dealerships vary in quality of service. I tend to do all preventative maintenance myself and will take the vehicle in for either warranty work or complacated repairs. Still it is comes down to whether I was treated properly or not and the work was satisfactory.

  14. Bottom Line Avatar
    Bottom Line

    They should charge the same as anyone else. Period.
    I am glad you have a monstrous heated/cooled place, does not matter to me.
    You have the latest diagnostics, great for you.
    If you have more overhead and inventory, why should I pay for it ?
    If you take 1 hour or the independent takes 3 hours does not matter. Flat rate is flat rate.
    Give me a price/time and let me compare prices.

  15. engineerd Avatar

    A dealership's service department should be able to be very competitive with independent shops. This means they should be able to charge the same premium as Joe Bob's Garage down the street. More if they have something special to offer. Less if they suck and Joe Bob is kicking their ass. I think most dealers charge more because they do have more to offer, as Jim pointed out (service advisers, all the latest diagnostic tools, etc.). I think the problem arises when those extras don't make for a better customer experience. If Joe Bob figures out the problem without the DiagnosTECH3000, and can charge $100 less for the repair then he will win, no matter how many service advisers he has.

  16. Eggwich James Dio Avatar
    Eggwich James Dio

    Forget the question, I just hope the best for you and your parents. Handling that situation with one parent is difficult enough, but two at once is very challenging. You'll be in my thoughts. Wishing them both a healthy recovery and all the best to you.

  17. Tim Odell Avatar
    Tim Odell

    The question is one of value.
    What value does the dealer offer for their higher prices over Subie Specialties or Mario's Garage?
    If the dealer's hooking me up with a rental, knows my car better than anyone else, and is using all OEM parts, then they've made a case for their higher prices. Not something I'm always willing to pay, mind you.
    I would go to a dealer over any random garage based on the assumption that a dealer tech who's been looking at Subie flat 4s for a couple of decades now is going to know what needs to be done before I finish my sentence describing the problem. "Oh, yeah, on the 06-07s, the clutch slave cylinder squeaks like that…" kind of thing.
    Alas, when I recently went to Glendale Subaru to get a new key cut, I had to explain to them what kind of key it was, and what was supposed to take 30-45 minutes to 1:15. Despite being nearly walking distance from my house, their lousy service has lost them my 90k service, which I'll get from another dealer. After that, it'll be all independent.

    1. Scoutdude Avatar

      That is pretty lame service for cutting a key. When I purchased my Marauder it only came with the valet key. Not realizing that the only difference was that it was thicker but with the same cut I went to the Ford dealer I get my parts from. I had them look up the key code based on the VIN ($15 charge) and cut a Transponder key. The entire process including looking at my registration comparing it to my drivers licenese, photo copying it and paying the cashier took less than 15min and under $45 with tax. Of course they would have charged more to program the car to accept the key but thankfully we have a scan tool that can "open" the security system and program keys.

      1. Tim Odell Avatar
        Tim Odell

        Yeah, they had to do the cutting and the programming, and apparently the cutting tool was across the street at the Mitsu dealership (same family).
        Still, when I'm dropping nearly $150 for a key + cutting + programming and I come in first-thing on a Tuesday AM, there's really no excuse for the lag. Doesn't help when the service manager isn't remotely apologetic for it.
        Not to mention that none of the sales guys even bothered to come hit me up while I was swilling coffee on the couch. Captive audience…hello?

  18. Froggmann_ Avatar

    To me it's not a question of profit, it's of the value the dealership can bring to the customer. From what I know about dealerships, most of the techs that do the complex diagnostics and repair work on vehicles are fresh out of the schools. Hence the multitude of diagnostics and missed diagnosis of vehicle problems that just add to your bill. Knowing this I can't take a vehicle to the dealer. I know I won't get the same class of service as I would from my choice of automotive repair shop, which coincidentally, offers a shuttle, has 8 bays, stores cars INDOORS and even cleans your vehicle before giving it back to you. As an added plus his technician have a minimum of 10 years of experience and keep up to date on their skills on the types of vehicles that enter the shop.
    With all that in mind his prices are still about 10% lower than your average dealer.

    1. texan_idiot25 Avatar

      The complex stuff is rarely left to new techs at a good dealership. They'll do basic line work, monkey stuff, but when it comes to "complex" diagnostics, it'll goto the higher level techs.

      1. Froggmann_ Avatar

        I don't know if dealership service centers are better staffed in your neck of the woods but around here save for the premium brands you have 3 levels of service tech: The kid just out of Wyotech or UTI, the tech that never left after getting his first job out of tech school and the guy who stays because for one reason or another is safe in his job.
        Typically, the better techs stay their 2 years then move on to a independent shop with better wages and bennies.

  19. TurboBrick Avatar

    Well why should the dealership be more expensive than an independent specialist garage? Isn't there some kind of economy of scale at work here, where they get better wholesale pricing on all of those parts & fluids? You pay x-amount for licenses for the diagnostic software, and with 15 bays sharing that resource you can kill off that expense a lot quicker than if you had 5 bays. Plus, you have a captive audience for all the (albeit poorly compensated) warranty work + "complimentary maintenance".

  20. craymor Avatar

    I took my "new" (to me) 2008 mazda to the dealer for it's first oil change, they lost me as a customer when they checked all the tires as "good". the fronts were, maybe 2k from showing steel, and the rears maybe 4K out. I mean really? Warrenty work only for me, otherwise I figure out how to do it myself, or take it to an indepentant.