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Increasing Parts Profit

Auto Parts

Most shops think of increasing parts profit as getting a lower price on their parts purchases, or charging the customer a higher price for parts. Of course, both of these methods are correct, but I have found a multitude of shops have already done this…and still, their end-of-the-month parts profit is much lower than the percentage of profit they make on each part. Why? Because of the many parts that get put into vehicles during the repair and service process, lots of parts never get listed on the repair order.

One shop, for instance, makes around 40 percent profits on its parts, on average. This shop sold for the year $250,000 worth of parts; and their costs for the year were $275,000! Yes, that's right, their parts costs were higher than their parts sold, and their parts inventory value did not go up.

Do you think a few parts, ones that were not charged for, made it into the customers' vehicles and not onto the repair order? This shop's parts profit should have been $200,000, but they lost $25,000. Here's how you should manage your parts purchases, inventory, and parts mark-up to your greatest advantage: We have three problems to correct in most cases:

  1. Not all the parts are getting onto the repair order.
  2. We need to modify the way we mark up our parts.
  3. We need better inventory control (at most shops, this means some, or any, inventory control).

Mitchell 1 Manager SE can help you more efficiently manage all aspects of your shop from the front to the back. Contact your local Mitchell 1 rep for more details.