For a repair shop, there is little profit in a oil change. By the time an auto repair shop pays its technician, pays for the oil, the filter, and the hazardous waste disposal fees, there’s no money left. This low profit margin is worsened by the extremely competitive “Quick Lube” business, which forces local repair shops to refrain from raising prices, despite rising costs.
This all begs the question: If oil change specials, which range from $15.95 to $29.95, clearly produce very low ROI, then why do so many service facilities advertise oil change specials?
The answer is actually very simple: It gets you in the door. Service centers know that once they have your vehicle, they can sell you additional work.
Suggesting additional work is called upselling, and it’s a primary profit machine of every auto service facility. Here’s a typical example. You drop your vehicle off for “just an oil change,” and your offered a host of other services such as fuel injection cleaning, coolant flush, alignment…etc. Or, upon completion of your service representative smiles and proudly states, “We noticed that your air filter was dirty; so we popped in a new one.”
You “may” think great; what wonderful service!”
What really occurred is that you were sold services that were easy to perform with a high profit margin, but have very little impact on your vehicle.
Here’s a real-life example. A vehicle with 54,000 miles on it was dropped off at a local shop for an oil change. Upon paying the bill, the customer was handed an estimate for $199 to replace his air filter and top radiator hose.
Shocked at the auto repair prices, he contacted us.
After review, we found that the air filter suggestion was premature. It didn’t need replacement until the manufacturer’s recommended 60,000-mile service interval. The top hose was also premature. In fact, it did not need replacement at all, despite a very minor problem easily addressed during the factory maintenance schedule—at no extra cost.
Check out the aftermarket part prices quoted below (including the unnecessary radiator hose). Compare these to the manufacturer’s suggested retail price (MSRP) for the factory OEM parts (Original Equipment Manufacturer).
- Local Shop Aftermarket Air Filter: $32
- Manufacturer OEM Air Filter, MSRP: $17
- Local Shop Aftermarket Top Hose: $36
- Manufacturer OEM Top Hose, MSRP: $19
Notice that this local shop was doubling the price of the OEM parts with its aftermarket parts.
Now, let’s look at the labor time quoted.
- Local Shop Labor Time: 2.0 @ $60 per hour = $120
- Manufacturer Labor Time: 0.9 @ $60 per hour = $81
Notice that the shop labor time estimate for the repairs was 2 hours. This is more than twice the manufacturer’s recommendations (even after calculating manufacturer times against the industry standard multiplier).
Had the local repair shop followed the vehicle’s regular maintenance interval instead of trying to make a quick buck, it would have recommended a 60,000-mile service at the next visit. This would have better served the client, saved him $199, and maintained the vehicle properly.
Instead, the repair shop lost a client, forever.
This type of price-gouging occurs every day across the automotive service industry.