Pricing

Parts pricing and margins nobody considers.

Ask a garage where its profit comes from and most will say labour. Look at the figures and parts often take a larger share than expected, which matters as parts pricing is usually set by habit while labour rates are reviewed.

A flat markup is misguided.

Most garages apply a single percentage to all, over-pricing costly parts and under-pricing cheaper ones.

The cost of handling a part isn’t proportional to its price. Sourcing, ordering, receiving, storing and returning a small item costs much the same as a large one, so a flat percentage means a low-value part barely covers the work while a high-value one has a margin the customer can easily check online.

Banded parts pricing addresses both ends: a higher percentage on cheaper items, tapering as value increases, with a minimum cash margin so nothing is handled for free.

Price based on what the customer can see.

Customers can find a part in seconds, and a margin that seems indefensible online becomes a point of contention at the counter, even if fair.

This doesn’t mean matching online prices, as you’re not selling the same thing: yours arrives correct, fitted, warranted and today. It means knowing the visible price of the parts customers check, which is a short list of common consumables.

For those, a smaller margin confidently defended beats a larger one needing justification each time. For parts no one can price, the market is your supplier network, not a website.

Customer-supplied parts.

Every garage faces this, and those without a policy handle it inconsistently, which is worse than either option.

You lose the parts margin, which is a significant share of the total on many jobs.
You bear the risk if the part is incorrect, substandard or damaged, often without recouping the labour.
Warranties get tricky, as you can't guarantee a part you didn't supply.
Diagnosis suffers if the customer has pre-determined what to fit.
Jobs take longer, as a non-fitting part is found mid-job instead of on the shelf.

Declining outright is a valid policy. Accepting with a higher labour rate and no warranty on the part, confirmed in writing before starting, is too. The issue arises from case-by-case decisions at the counter.

Warranty is included in the price.

A part you supply and fit comes with an obligation, which has a cost that should be in the margin, not a later surprise.

A failed component under warranty typically means the part is replaced free, but the labour is your issue unless the supplier covers it. Knowing their policies beforehand is crucial.

This is the strongest case against the cheapest part for labour-intensive jobs. A budget part on a two-hour job saves little against the risk of two hours you can't invoice.

Review the brands, not the parts

Parts pricing fails like tyre pricing: it’s set once and then drifts as supplier costs change.

Reviewing a few bands biannually is manageable, unlike reviewing a catalogue, and it identifies when a supplier increase has quietly eroded a healthy margin across a category.

Focus on margin by category, not overall. An average can mask a category sold near cost, often where work is won.

Understand which parts truly contribute.

This matters because contributions are often underestimated, and you can't act on figures you lack.

Break down revenue and margin into labour and parts by job type in an afternoon. Most garages find at least one category where parts support the job while labour is near break-even, crucial before competing on labour rates.

It alters your approach to accepted work. A job with low labour margin and high parts content differs from one where the customer supplies their own parts.

Common questions

What markup should a garage apply to parts?

There’s no single figure. Handling costs are similar regardless of price, so a flat percentage undervalues cheap items and overvalues expensive ones. Use bands with a higher percentage at the low end and a minimum cash margin.

Customers can view part prices online. How should I manage this?

Be aware of the visible prices for parts people check, and confidently defend a smaller margin instead of justifying a larger one each time. You’re not selling the same product: yours arrives correct, fitted, warranted, and today.

Should I fit parts supplied by customers?

Both answers are valid, but your policy must be consistent. You lose margin, bear the risk if it’s wrong, can’t warrant it, and often can’t recover labour if it fails. Accepting with a higher labour rate and no part warranty, in writing, is a common compromise.

Is the cheapest part ever the best option?

Rarely on a job with significant labour. A budget component on a two-hour job saves very little against the risk of two hours you cannot invoice if it fails inside warranty, since the part is usually replaced free and the labour is your problem.

How often should parts pricing be assessed?

Twice yearly, at the brand level rather than the catalogue level, monitoring margin by category rather than overall. An average conceals a category sold near cost, often the one winning work.

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