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Why are auto-repair labor costs so expensive?

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I recently asked a service advisor at my nearby dealer for the shop’s hourly labor rate. My jaw dropped: just under $200. Now, I understand paying hundreds of dollars an hour for a medical doctor who deals in life-and-death issues. But for some dude who twists wrenches on a car at a fancy dealership? What gives? Here are four factors that influence auto labor costs.


Repair folks' hourly wages are only a percentage of the shop’s hourly labor rate. The rest goes to, yes, profit, but also to cover costs of the facility, equipment, diagnostic programs, insurance, and so on. Complimentary loaner cars, chocolate-chip cookies, lattes, and car washes offered at many tony new-car establishments cost the dealer money, too.


Pay for shop specialists isn’t excessive when you consider that today’s cars are less like Fordson tractors from a century ago and more like lunar landers—and repairing them is as much about complex electronics as it is about wielding wrenches. That helps explain why repair folk are now called technicians rather than mechanics.

Technology and training

Many car owners think all a tech does is connect a computer to the car’s electronic brain and wait for the problem’s identity to pop up on a screen. Not so. It takes an abundance of training just to diagnose a modern car’s ills. Even entry-level techs typically have a postsecondary degree, plus ongoing education.

Most of today’s cars and light trucks incorporate multiple computer modules that do things such as monitor engine emissions and control the automatic transmission; even windshields and bumpers are home to various kinds of cameras and sensors that need to be recalibrated or replaced when they’re damaged in an accident.

The scan tool does read the car’s powertrain-control module for stored diagnostic trouble codes. But the codes don’t say that a specific doohickey is busted, only that something’s not right in a certain circuit. It might be an electrical issue or a mechanical one. It takes the tech’s time, skill, and expertise to pinpoint the problem. That’s why shops may charge a diagnostic fee in addition to the cost of the actual repair.

Flat-rate time

As for the repair, most shops charge for labor based on a so-called flat-rate time. The automaker or some worthy entity determines the average time necessary to perform a given repair. Customers are quoted the flat-rate time multiplied by the shop’s hourly labor rate, which can range from $50 to $220 an hour.

Techs are paid the flat-rate time multiplied by their hourly wage (the national average is about $17 per hour). If they do the job faster than the flat-rate time, they’ll effectively earn a higher wage. If rookies take longer, they’ll earn less. Either way, the customer pays the quoted amount. Independent auto-repair shops often have lower hourly labor rates than repair shops at new-car dealers because their overhead is lower.

Veteran automotive journalist Peter Bohr has been writing about cars for more than four decades.

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