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In the past, many shops had a single diagnostic rate and a single labor rate. However, modern shops should implement tiered system testing (diagnostics), specific system testing (diagnostic) rates, and multiple labor rates.
Most shops already have multiple labor rates, even if they don’t realize it. For example, they may have a lower rate for basic work such as oil changes or competitive jobs like flushes and brakes, while maintaining a regular rate for more complex repairs, such as water pumps, oil leaks, and timing chains.
Due to the complexity of modern vehicles and the varying costs of skilled labor, today’s shops need multiple labor rates based on the type of work, vehicle type, and vehicle age.
Some shops will choose to increase the labor multiple (or time) rather than raise their rates. Whether you choose to increase or vary your rate or use a multiplier to the time you can achieve the same thing: to guarantee that you are able to be profitable on the jobs that you choose to accept and provide fair pricing to your clients.
Example Labor Rates:
Regular labor rate for Asian and American vehicles less than 12 years old - $159.00 per hour
Labor rate for European vehicles less than 12 years old - $179.00 per hour
Labor rate for exotic vehicles less than 12 years old - $229.00 per hour
For vehicles older than 12 years, consider adding an additional $20 (or an amount you find appropriate) per hour to the labor rate. Older vehicles are more prone to rust, broken or seized components, and prior improper repairs (e.g., over-torqued or rounded bolts), all of which require extra time. Additionally, sourcing parts for these vehicles can be more difficult, increasing service advisor and parts department workload.
A shop may also set different labor rates based on the type of work performed. If a less experienced technician can handle a task or if there is high competition for a specific job, you may choose to set a lower rate. Conversely, tasks that involve higher risk, take more time, or require a highly skilled technician should be priced at a higher rate.
Example Work-Specific Labor Rates:
Oil changes - $129.00 per hour
Competitive jobs such as brakes, flushes, or other commonly discounted services - $159.00 per hour
Diagnostics, noise detection, electrical testing, or any job with no parts profit and a high likelihood of extended time, research, or requiring a highly qualified technician - $239.00 per hour
Tiered Diagnostic Rates:
Since most clients cannot accurately diagnose their vehicle's issues, and shops typically begin with one hour of diagnostics based on the customer's description (e.g., drivability problems, MIL or CEL light, or noise complaints), implementing tiered diagnostic rates makes sense.
Example Tiered Diagnostic Rates:
Run-ability complaint, MIL or CEL light, or noise - $239.00 to start
Multiple codes or customer complaints - $500.00 to start
Vehicles previously diagnosed or repaired unsuccessfully by other shops, those worked on by the customer (or a relative), or those with visible disconnected parts, wires, hoses, or newly installed components - $1,000.00 to start
It is always easier to lower the price if the problem is quickly diagnosed and fixed, but it is much harder to increase the price once work has begun.
System-Specific Testing Rates:
Each system test should have a predefined "canned job" outlining the testing process. This keeps technicians focused, ensures thorough diagnostics, and adds value for the client. Additionally, include specific test data to document pre-repair issues and verify the effectiveness of the repair.
Example System Testing Rates:
Brake, steering, and suspension system tests (diagnostics) - $129.00 or 0.8 hours at $159.00 for Asian and American vehicles less than 12 years old
HVAC system tests (diagnostics) - $191.00 or 1.2 hours at $159.00 for Asian and American vehicles less than 12 years old
Starting and charging system tests (diagnostics) - $159.00 for Asian and American vehicles less than 12 years old
Cooling system tests (diagnostics) - $191.00 or 1.2 hours at $159.00 for Asian and American vehicles less than 12 years old
Creating standardized canned jobs will save time for service advisors, keep technicians on track, improve clarity in work orders, and enhance the perceived value of your services. These predefined jobs should include before-and-after repair data, such as battery voltage, amperage, load test results, A/C compressor data, tire pressures, tread depth, brake pad depth, ball joint play, etc.
By structuring your labor and diagnostic rates appropriately, you can ensure fair pricing for customers while maintaining profitability and efficiency in your business.