WHAT DOES AN OIL CHANGE TRULY COSTS AN AUTO REPAIR SHOP.

[HarrytheCarGeek]

Thank goodness we are having an incredible season!

 

I just drop by to share with you this little bit of info:

 

THINK TWICE BEFORE PULLING THAT CAR INTO YOUR BAY FOR A CHEAP OIL CHANGE!

 

 

 

 

[bstewart]

Do you have a copy of that spreadsheet to share? I'd like a copy please.

EDIT: Nevermind, I just found the article where this was posted. I was under the assumption that it was your spreadsheet.

Edited December 23, 2016 by bstewart

[alfredauto]

How much does it cost to say "No" to all the customers that want an oil change at market price? It'll never be a money maker but a good service to my customers. Same as inspections, free air, go for a ride real quick what's that noise type stuff. I'll never try to attract customers with $14.99 coupons but even at $32.99 or whatever it isn't a profit center on it's own.

[HarrytheCarGeek]

How much does it cost to say "No" to all the customers that want an oil change at market price? It'll never be a money maker but a good service to my customers. Same as inspections, free air, go for a ride real quick what's that noise type stuff. I'll never try to attract customers with $14.99 coupons but even at $32.99 or whatever it isn't a profit center on it's own.

 

My point in opening the thread was to open up the discussion of giving away services.

 

It should be repugnant to you to keep doing oil changes at below your cost for the sake of bringing in customers that do not pay their way and basically get from you a subsidy.

 

It should be ingrained into your brain that it costs you hard dollars every car that you pull into your bays. If you don't know what your costs are, you are subsidizing your customers with your old age suffering, you will not always will be young and strong and not putting money away for retirement will be a painful sin to bear once you are old.

 

If the competition around you is too stupid to figure it out, tie up their bays with oil changes, send them all the cheap oil change work to them, pull the gravy work off the vehicle and send it up the road to get the oil change done, see how fast they learn.

 

btw, some will not learn and go out of business.

[alfredauto]

I totally agree with your point Harry, none of us should compete in the race to the bottom as Joe describes it. "If the competition around you is too stupid to figure it out, tie up their bays with oil changes, send them all the cheap oil change work to them, pull the gravy work off the vehicle and send it up the road to get the oil change done, see how fast they learn." see how fast you need to attract new customers is more like it. Most people don't like going to two mechanics, that guy that did your unwanted work will get the next batch of gravy.

 

We give away free flat repairs and tire rotations with a tire purchase. I offer free fluid top offs between oil changes. I do a lot of checks for free (not diagnosis) It eats time doing free work, but overall we gain much more than we lose.

 

"You can have everything in life you want, if you will just help other people get what they want." - Zig Ziglar

[HarrytheCarGeek]

I totally agree with your point Harry, none of us should compete in the race to the bottom as Joe describes it. "If the competition around you is too stupid to figure it out, tie up their bays with oil changes, send them all the cheap oil change work to them, pull the gravy work off the vehicle and send it up the road to get the oil change done, see how fast they learn." see how fast you need to attract new customers is more like it. Most people don't like going to two mechanics, that guy that did your unwanted work will get the next batch of gravy.

 

We give away free flat repairs and tire rotations with a tire purchase. I offer free fluid top offs between oil changes. I do a lot of checks for free (not diagnosis) It eats time doing free work, but overall we gain much more than we lose.

 

"You can have everything in life you want, if you will just help other people get what they want." - Zig Ziglar

 

Alfred,

 

I speak from experience, I don't do cheap oil changes. My conventional oil change price is $49.95 and that is only if we already have the car on the lift for other work. If you are coming off the street the price is $59.95, synthetics are $99.95+

 

Try this simple exercise, go into your database, print out how many oil changes you did for the past five years, then deduct your costs from it, how much money did you made or lose?

 

I haven't lost any money on LOFs in the past 7 years.

 

Here is the kicker, the amount of revenue you are losing is tremendous once you see it and internalize it. What is worse, the time taken on oil changes that lose you money could have been used to make money and give better customer service to a much better class of customers.

Edited December 29, 2016 by HarrytheCarGeek

[FROGFINDER]

Somebody sold that "oil change customer" a car,clothes,watch,sell phone,place to stay,etc. I figure it costs $100.00 each to get a new customer to brag about my shop. Give every oil change customer a reason to sell your shop to others. I would change oil with filter, hand car and clean windows, place $2.00 bill with discount card behind his fuel door and ask for their referrals. I keep track of all referrals. After years of doing this i a few customers just swing by for a free hand wash, fluid level and tire air checks. My co-worker scolded me for wasting my time. I then pulled up the "time wasting" customers account showing that in the last few years they spent $6k but referred $40k worth of work to our shop.

[HarrytheCarGeek]

Somebody sold that "oil change customer" a car,clothes,watch,sell phone,place to stay,etc. I figure it costs $100.00 each to get a new customer to brag about my shop. Give every oil change customer a reason to sell your shop to others. I would change oil with filter, hand car and clean windows, place $2.00 bill with discount card behind his fuel door and ask for their referrals. I keep track of all referrals. After years of doing this i a few customers just swing by for a free hand wash, fluid level and tire air checks. My co-worker scolded me for wasting my time. I then pulled up the "time wasting" customers account showing that in the last few years they spent $6k but referred $40k worth of work to our shop.

No buying it. We all have that unicorn account, too. simple math. 1+1=2. How many oil changes did you do last year? How much did they cost you? How much revenue did you receive? Simple as that.

Edited December 29, 2016 by HarrytheCarGeek

[FROGFINDER]

No buying it. We all have that unicorn account, too. simple math. 1+1=2. How many oil changes did you do last year? How much did they cost you? How much revenue did you receive? Simple as that.

I duplicated that "Unicorn account" so many times that i was known as the "Richest Car washer in town" My very first customer in 1969 brought me a car that needed $75.00 to fix. When i quoted that repair he said i was too high and wanted to pick the car up. I told him give me 30 minutes. I washed his car and cleaned the windows so good it looked like a new car. The customer came up the driveway and asked where his car was because he could not believe that the cleaned up car was his. He asked me why i cleaned up his car when he did not buy anything. I told him that Jesus washed feet and i wash cars. I told him that i don't need his money but i need his referrals! He never spent a penny with me but over the next few months referred $4k worth of work to me. Our business is all about referrals. I spend my "Advertising money" on my customers and ask everyone for referrals. I even cut customer yards for referrals. The last time i did that before i retired it netted me a $25k mechanical restoration.

[HarrytheCarGeek]

I duplicated that "Unicorn account" so many times that i was known as the "Richest Car washer in town" My very first customer in 1969 brought me a car that needed $75.00 to fix. When i quoted that repair he said i was too high and wanted to pick the car up. I told him give me 30 minutes. I washed his car and cleaned the windows so good it looked like a new car. The customer came up the driveway and asked where his car was because he could not believe that the cleaned up car was his. He asked me why i cleaned up his car when he did not buy anything. I told him that Jesus washed feet and i wash cars. I told him that i don't need his money but i need his referrals! He never spent a penny with me but over the next few months referred $4k worth of work to me. Our business is all about referrals. I spend my "Advertising money" on my customers and ask everyone for referrals. I even cut customer yards for referrals. The last time i did that before i retired it netted me a $25k mechanical restoration.

 

I am still in the trenches, and I am not giving away my work. Yes, i do complementary work and services to those customer that value my work. I do depend on referrals too, but I am not losing money on my bread and butter work.

 

Again, for those of you still in the trenches, do the math, print out the report listing all the oil changes you have done up to date in the last five years and do the math. Then tell me you think you can survive the next five years doing the same.

[FROGFINDER]

 

I am still in the trenches, and I am not giving away my work. Yes, i do complementary work and services to those customer that value my work. I do depend on referrals too, but I am not losing money on my bread and butter work.

 

Again, for those of you still in the trenches, do the math, print out the report listing all the oil changes you have done up to date in the last five years and do the math. Then tell me you think you can survive the next five years doing the same.

The fact that i was located in and near one of the richest zip code in Texas helped alot.

[Jeff]

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[HarrytheCarGeek]

Jeff,

 

Mechanics are service employees, they are not factory workers. You capture the value of a mechanic when services are rendered, a factory worker's value is capture when the product is made.

 

One man shops should not be competing in price on oil changes with franchise or chain shops, the cost of management and facilities cannot be spread out to multiple mechanics. If you think you will go out of business by charging full price on oil changes, you have no idea what it will cost you on your old age cost of living.

 

I will not beat a dead horse, all I will say is this, if you did over 1,000 LOFs you are losing serious money, hurting yourself, those that work for you, and the industry in general.

 

Customers don't know you are losing money and they will expect further discounts from you!

[FROGFINDER]

 

I am still in the trenches, and I am not giving away my work. Yes, i do complementary work and services to those customer that value my work. I do depend on referrals too, but I am not losing money on my bread and butter work.

 

Again, for those of you still in the trenches, do the math, print out the report listing all the oil changes you have done up to date in the last five years and do the math. Then tell me you think you can survive the next five years doing the same.

You are not giving it away if you use it as a tool for your advertising and salesperson recruitment expense. I would give a tire shop a pizza on fridays in my area. I kept track of referrals. In a year it developed into $250k per year of business. I gave a bike shop a box of donuts every couple of weeks and serviced their fleet of vehicles and trailers. I gave a body shop a pizza a month and referred that body work that i made a profit on every job. They repaired two wrecked personal vehicles and minor shop caused customer car dings n/c $8k.

[Jay Huh]

My oil changes are $30 and $50 for full synthetic. We don't lose money on them but I think of it more of a service for my customers. I share the same wall with big franchises that advertise $19.99 oil changes. They still stick with me

[flacvabeach]

We used to have a sign in the front window that said "We fix $19.95 oil changes." We recently decided to switch our bulk oil to full synthetic and offer that in a $79.95 oil change as our standard.

[HarrytheCarGeek]

....

Edited January 2, 2017 by HarrytheCarGeek

[HarrytheCarGeek]

The way we moved away from cheap oil changes was by first doing away with all signs that had low oil change pricing.

 

The main shop had a big sign that said oil change $24.95, I got rid of it and all the other signs at the other shops that said the same thing.

 

Then, I got rid of all printed materials that said anything about cheap oil changes.

 

While I had the signs removed, I had the computers updated with new job definitions. For example, LOF $24.95 became NLOF $59.95.

 

I also had new discount lines made in case the Service Advisors needed to apply a quick discount to avoid a scene for example, LOFDIS1 -$5.00, LOFDIS2 -$10.00

 

I kept the old job codes active until we had moved away completely from the cheap oil change routine. I kept a sharp eye out on the reports every week to make sure they were not applying discounts unnecessarily.I made them explain what happened on the conference call to make sure they understood how critical this move was for us.

 

Now, there is a psychological barrier and fear about doing this that I had to have my guys overcome. If you don't believe in what you are doing, neither will your guys.

 

What help me made the transition, was that the mechanics now had 30 minutes credit for and LOF, but they had to give me an inspection report on the vehicle.

 

Moving on, I had the menu board graphics updated. I had one that said Bronze conventional oil change $59.95 and it had only two items listed under it, 1. Up to 5 quarts 10w30, 2. Economy Oil Filter.

The other choice became, Silver-Plus, Which listed choice of semi-synthetic oil, oem quality filter, top washer fluid, inspect wipers, etc. for $74.95, Then, the next level said GOLD-Pro and gave choice of Full synthetic, oem or premium filter, top off washer fluid, set tire pressure, 30 points safety inspect for $99.99 Plus. Then the season package for $149.00 with tire rotation and balance, or new wipers, etc. The point being, making sure to recover our full costs and make an acceptable margin.

 

Your psychology into making this a reality is very important, if you don't understand your business this will not help you prosper, it will fail miserably. I had to fire a shop manager because he was the only one that didn't do anything to improve his numbers. Telling me how wrong I was when the other shops were doing extremely well.

 

So what were the results?

 

One of the shops saw about a 19% loss in LOF's 1059 vs 858. Revenue on conventional LOFs when up over 45%! From about $26.4K to over $48K!

We loss many trouble customers.

The mechanics attitude improved.

Compensation improved due to improved cash flow.

The class of cars improved too.

 

Now, there are other things I learned that I would like to point out.

 

Yes, customer referrals are essential, but poor customers hang out with poor customers, Good and Excellent customer tend to refer other Good and Excellent customers.

Cheap customers will make their poor life choices your problems too, learn to fire them and send them down to your competition.

Treat your excellent customers well, they will stick with you, learn how to profile and identify your best customers.

 

These are some of the things we went through, I hope you can benefit from our experience in this new year.

 

[xrac]

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[FROGFINDER]

Thank goodness we are having an incredible season!

 

I just drop by to share with you this little bit of info:

 

THINK TWICE BEFORE PULLING THAT CAR INTO YOUR BAY FOR A CHEAP OIL CHANGE!

 

 

 

 

Check the oil level ,last oil change sticker if it has one, fluid levels and report on leaks at check in when people come in for service. Many cars come in low on oil or fluids and it is good to document that on the invoice. When people then blame you for a blown engine or fluid leaks you will have a record.