Guides for Canadian shops · Pricing
How to set your auto repair labour rate
Most shops set their labour rate by looking at what other shops charge. That tells you what customers will accept, not what your shop needs to stay open. Here is how to work it out from your own numbers.
- Your rate has to cover tech pay, overhead and the profit you want.
- Divide costs by the hours you actually bill, not the hours you pay.
- Break-even ÷ 0.8 gives you 20 percent profit on labour.
- Billing more of the hours you pay for lowers the rate you need, fast.
On this page
1Add up what your techs really cost
Start with each tech’s hourly wage times the hours you pay them. Then add what you pay on top of wages:
- Your share of CPP and EI contributions
- Vacation pay and statutory holiday pay
- Workers’ compensation premiums (WSIB in Ontario, WorkSafeBC in British Columbia, and so on)
- Any benefits you provide
Your bookkeeper or payroll provider can tell you what these add up to as a share of wages. Many shops land around 10 to 20 percent, but use your own figure.
2Add your monthly overhead
Overhead is everything else it takes to run the shop for a month:
- Rent, utilities and insurance
- Software, equipment and lift payments, tools and shop supplies
- Advertising, bank and card fees
- Wages for anyone not turning wrenches, including your service writer
Average a few months from your books. Guessing low here is the most common reason a rate looks fine on paper and still leaves you short.
3Count the hours you actually bill
A tech paid for 40 hours a week does not bill 40. Waiting on parts, diagnosing cars the customer declines, comebacks and cleanup are paid but not billed.
Add up the labour hours you charged over the last few months, per tech, per week. Billed hours ÷ paid hours is your efficiency, one of the most useful numbers in the shop.
4Work out break-even and your target rate
Break-even rate = (monthly tech cost + monthly overhead) ÷ monthly billed hours
Target rate = break-even ÷ (1 − profit share). For 20 percent profit, divide by 0.8.
Worked example
Two techs at $35 an hour, paid for 40 hours a week, billing 30. Payroll extras 15 percent, overhead $8,000 a month, about 4.33 weeks a month.
| Line | Per month |
|---|---|
| Tech wages (2 × 40 h × $35 × 4.33) | $12,133 |
| Payroll extras (15%) | $1,820 |
| Overhead | $8,000 |
| Total cost | $21,953 |
| Billed hours (2 × 30 h × 4.33) | 260 h |
| Break-even rate | $84.44 / h |
| Rate for 20% profit on labour | $105.54 / h |
Example numbers for illustration. Use your own, or plug them into the labour rate calculator.
If each tech bills 34 hours a week instead of 30, break-even drops from $84.44 to $74.50 and the 20 percent profit rate drops from $105.54 to $93.13. Four more billed hours per tech is worth over $12 an hour.
5Check it against your market
Now look at what shops near you charge.
- Your target is well above theirs: look at efficiency first, then overhead, then whether you bill the full time for diagnostics.
- Your target is well below theirs: you have room. Many shops price closer to the market and keep the difference as a cushion for slow months.
6Put it on every job
A rate only works if it is charged. Build your common jobs with the right hours once, so a brake job or a diagnostic is quoted the same way every time. Review the rate yearly, or whenever wages or rent go up.
In Moibay you set your labour rate once, save common jobs as presets with their hours and parts, and see labour, parts and profit for any month in Reports. Try it with sample data in the demo shop.
Questions shops ask
Should I just charge what the shop down the road charges?
Use it as a check, not a starting point. Their rent, wages and hours are different. Work out your own break-even first, then see where you sit against the local market.
What counts as overhead?
Every monthly cost that is not a tech’s pay: rent, utilities, insurance, software, equipment payments, tools, shop supplies, advertising, bank fees, and your service writer and office wages.
Why use billed hours instead of paid hours?
You pay techs for every hour at work but only earn on the hours you charge customers. Waiting on parts, comebacks and cleanup are paid but not billed.
Does this include my parts markup?
No. This method makes labour cover your costs on its own, so it is a safe floor. Profit on parts comes on top.
How often should I review my rate?
At least once a year, and any time wages, rent or insurance go up. A rate that was right two years ago is probably too low today.