Monday, September 27, 2010

Labour Rates and Flat Rates - why does this cost so damn much?!?!?!

A lot of what I hear from people after they've had their car repaired centres around the labour rates and he flat-rate system of estimating, so I'll do my best to explain it here.

The hourly labour rate charged by a shop doesn't only go to pay for the mechanic (In fact, not nearly enough of it does!), it also has to cover all of the expenses of operating the shop: Counter staff, equipment, training, insurance, rent, maintenance and environmental compliance all factor in to the amount charged per unit of labour.  Many shops are now charging more for diagnostic labour than mechanical labour, because of the more specialized skills and equipment necessary for troubleshooting modern electronics.

There is also a variation in the way the mechanics themselves are paid - some shops pay based on the flat-rate system, where the tech's pay is directly proportional to the number of labour hours he bills.  This (obviously) leads to the techs trying to bill as many hours in a day as possible (I've personally seen almost 40 hours in ONE DAY).  Other shops pay their techs a regular hourly wage, or hourly plus a bonus.  This fosters a much more honest shop from the customer's point of view, since the guy looking under you car isn't trying to find every .2 of labour he can under there!

The amount of labour charged for any particular job is usually governed by a Flat-Rate Manual, usually published by either Chilton or Mitchell, which gives the rates in tenths of an hour for any given repair operation.  In theory, this standard keeps everyone honest because the times are the same from shop to shop, even if the rates differ..

Where a lot of shops find a little extra padding, though, is by creatively reading in the "extras".  If "replace water pump" calls for 2.3, then "-with serpentine belt" adds .3, "-with coolant replace" adds .2, the job comes out at 2.8 units of labour.  Now, a cooling system flush is usually a flat price, $39.95 or something, which may show up on your bill anyway on top of the labour, so you're basically paying for it twice.

Another questionable one is when certain jobs end up costing the same for every car - the "$89.95 Brake Special" becomes a lot more when they've added on labour for rotors (Which fall off in your hands if you're changing the pads) and "Caliper Slider Service", when the estimating guide specifies that this is part of a brake job anyway.  If you decline the service, you generally lose your warranty, so you're stuck with an extra .6 on your bill to have the job done properly, which it should have been in the first place.

This is by no means a blanket accusation of the entire industry - since cars last a lot longer, they seriously do have trouble making money these days, but a little honesty goes a lot further than milking every invoice for every penny you can find.  Finding a shop that will be totally transparent about where your labour dollars are going can save you a lot of frustration as well as money!

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