DealersEdge Professional Forums

Service labor GP guide used tobe 70% but most consultants now are recomending 75%.

Our 20 group has an average of 70.2% and a recomended guide of 72%.

As to why 60%, obviously either tech pay is too high for the current effective labor rate, possibly dispatching lower rate jobs to the wrong tech, or the labor rates are to low. Do you used a labor grid that could help with your effective rate? Are the advisors pricing labor correctly?

Sorry I had to start a new post as I could not reply on your original post.

techs are telling the advisors what to pay them...........the tail is wagging the dog!!

as stated above......(for starters) what's avg tech rate vs labor rate and city state?

We just raised our rate 2 months ago to 98.00 hr. I think we are inline. It looks to be both the tail wagging the dog and the tech pay is very high.

Should we look at anything besides those 2 items? Is there anything else that could cause that?

Thanks

What is your actual efective labor rate?

You want to remember all the things that can effect your gross profit. Tech pay may be fine but the advisors may be paying the technician 2hrs for a job that they charge the customer one hour. They may be discounting the labor amount.
The best thing to do is review every cp repair order for a day or two and just look at the billed time and $ to the cost(tech pay) dollar- if you know what your tech pay rate is it is real easy to see. If you dont see it on the repair orders then it must be happening in the account department.
Most of the DMS systems have a way to find these low gross or adjusted repair order through some reporting method. Some underlying things that I have seen in the past that can effect your gross profit that are not that easy to spot are
1-Unapplied labor getting charged to your cost of sale account.
2- Technicians being costed out at actual time instead of billed time.

Happy Hunting

what do you pay tech for basic oil change.. 3 tenths on a standard oil change/checksheet?
what do you collect on oil changes(labor?).....

and do you have state inspections...what you paying tech for those? what are you charging?.....

do you have cashiers or do the advisors cashier the customer...if you have cashiers make sure they aren't "feeling sorry" for the customer and doing a discount on the ro that you are unaware of!....

what's the gp% on your cp parts 40%-43% if it's lower you need to start looking at the discounts given per line on each ro.....

if you are a Toyota store you should be probably more than 76% gp and your cp parts should be upward of 43%-45%......

I bet when you dig in you'll find your best tech is doing services and timing belt/water pumps instead of the diagnose and heavier repair he is qualified to do and that there is one advisor/dispatcher feeding him the work..."the ole for every hour of cp I turn i'll pay you a buck cash under the table, so what's he going to get...all "gravy" cp work. This of course is just a thought and place to start digging in..!! as stated by above posts all great areas to start reviewing.

[This message has been edited by sp7128 (edited 07-31-2008).]

I am Toyota as well and mine runs 78%. I have a few questions..Are you looking at page 5 before sublet or after ?? Also are you doing coupons at a discounted rate or advertising your regular price ?? Mine used to be at 64% when i did discounted coupons and ran lateral support teams and no central dispatch..i now have central dispatch with the work being distributed correctly ...also i pay my techs on percentage of labor not hours so its easier to control..

First - Evaluate your overall effective labor rate; it needs to be equal to or greater than your warranty labor rate.

Second - Our work mix has been changing away from repair towards maintenance over the years and has taken a significant jump in the last 3 years. The skill mix of your technicians needs to match the work mix that is being sold on the syrvice lane. The reduction of maintenance by the factories has also impacted the mix of work.

Third - You may want to consider paying technicians based on the skill level of each job, called skill level paying.