Pricing Out Tires

[insomniac]

How is everyone pricing tire jobs? I just got into tires. Marking up the tires 20-30 bucks and charging 14.95 per wheel to mount and balance... I also charge a supply and disposal fee on all ro's 3.5% up to 19 dollars...

 

 

not very profitable... am i missing something

Edited December 1, 2014 by insomniac

[xrac]

Premium Member Content 

This content is hidden to guests, one of the benefits of a paid membership. Please login or register to view this content.

[mmotley]

Interested to see what others report here. I'm getting a (used) hunter road force balancer this week, hopefully. Next will be a tire machine, then an alignment rack.

 

Are others just mounting and balancing, and is it worth it. Or is the real money in selling an alignment with every set of tires? Road hazard? Life-time balance? Warranty? Are you stocking tires or do you set an appointment and order before hand?

[Mario]

I'd comment but your current formula is more then me.

[mspecperformance]

For my shop tires are not very profitable however my 2c is if you can push some volume when it comes to tires that would be the move. It is very expensive to have an experienced certified technician performing tire service all day. I'd must rather have a steady stream of tire customers to hire a tire tech. Also you have to have a solid tire matrix to stay profitable. Tire warranty, alignments, front end work etc is where you can really maximize on tires.

[Tires Too]

Tire sales are the most profitable work, per hour, that you can do in your shop. Using your figure of $30 markup, plus $14.95 plus a shop charge of $5 - $10 you end up with about $50 per tire profit. When you sell 4 tires, you make $200 gross profit per hour(assuming it take about 1 hour to install 4 tires).

Assuming a labor rate of $100 with an additional $100 part sale(at 50% gross profit) you make $150 in gross profit on repairs in 1 hour.

We can look further at what you costs for labor are for a tire tech vs an "A" or "B" level tech, the additional sales that you get with tires(Alignments, ball joints, tie rods, brakes, etc), the fact that a tire customer will be back for rotations, alignment checks etc, but I think this shows that tire sales are very profitable.

[Shopcat]

It's important to make what you can on tires. What the traffic will bear is important to consider. I think the best reason to be in the tire business is the additional work that will be found on those tire deals. For example front end work. Steering and suspension, brakes and everything else you discover during the inspection. After all they will usually do what is needed to protect their tire investment. While it is important to profit on tires, the big picture is where the focus should be!

[Mario]

I add around $120 of my cost to a set of four tires. That is mark up, mount & balance, disposal.

 

Weather permitting we run the car through the touchless car wash a few doors down and apply tire shine to the tires.

 

Putting new tires on a vehicle are one of the biggest improvements any driver is going to notice. You give the car a quick wash and shine the tires up and they love it. As mentioned above it is a good opportunity to find worn front end parts and sell an alignment as well.

[mspecperformance]

Tire sales are the most profitable work, per hour, that you can do in your shop. Using your figure of $30 markup, plus $14.95 plus a shop charge of $5 - $10 you end up with about $50 per tire profit. When you sell 4 tires, you make $200 gross profit per hour(assuming it take about 1 hour to install 4 tires).

Assuming a labor rate of $100 with an additional $100 part sale(at 50% gross profit) you make $150 in gross profit on repairs in 1 hour.

We can look further at what you costs for labor are for a tire tech vs an "A" or "B" level tech, the additional sales that you get with tires(Alignments, ball joints, tie rods, brakes, etc), the fact that a tire customer will be back for rotations, alignment checks etc, but I think this shows that tire sales are very profitable.

 

 

Great post, the way you calculated the numbers definitely makes sense however as most of our repairs go most of the time when we are putting in an hour worth of work we are normally charging well over that 1 hour. For example a booked job is 2.5 hours but my tech completes the work in 1 hour. I understand what you are saying in terms of GP percentages per job however I am speaking in terms of actual Time where we can squeeze out more work in 1 hour than it is worth dealing with tires. I struggle to find the $ motivation in pushing tire sales. We also have an issue where a lot of our vehicles need a lot of work and a set of tires becomes lost in the middle or last of the priorities. I will look at the numbers again and see what it would take to make tire sales more profitable.

[flacvabeach]

We were slow to adopt a real approach to tire sales and just considered them a relatively low profit item that we had to deal with if we want to be our customers' "one stop shop." We can't compete with the clubs and the high-volume tire outlets, so we decided to make the most of our position as sort of the 7-11 of tire sales. We're fast and convenient and we have access to all major brands. We settled on targeting a 34% margin (34% of the retail price is profit) based on a matrix in RO Writer. With the help of our coach, we developed a road hazard policy that goes on each tire sale and is quoted to the customer. Of course, the customer can decline the policy, but many take advantage of it. After a couple of years, we have had very few claims on the policy and when you do have to replace a tire, it's a good will win. We signed an agreement with the biggest local tire distributor and they give us great service on delivery and pricing. Tires are still a small portion of our business, but we feel like we have it under control. Also very important, we NEVER do plugs. We do internal patch-plugs within RMA guidelines. When you tell somebody their tire with 30% tread is going to cost $35 to repair, it's a great time to offer a new pair of tires and alignment.

[mspecperformance]

We were slow to adopt a real approach to tire sales and just considered them a relatively low profit item that we had to deal with if we want to be our customers' "one stop shop." We can't compete with the clubs and the high-volume tire outlets, so we decided to make the most of our position as sort of the 7-11 of tire sales. We're fast and convenient and we have access to all major brands. We settled on targeting a 34% margin (34% of the retail price is profit) based on a matrix in RO Writer. With the help of our coach, we developed a road hazard policy that goes on each tire sale and is quoted to the customer. Of course, the customer can decline the policy, but many take advantage of it. After a couple of years, we have had very few claims on the policy and when you do have to replace a tire, it's a good will win. We signed an agreement with the biggest local tire distributor and they give us great service on delivery and pricing. Tires are still a small portion of our business, but we feel like we have it under control. Also very important, we NEVER do plugs. We do internal patch-plugs within RMA guidelines. When you tell somebody their tire with 30% tread is going to cost $35 to repair, it's a great time to offer a new pair of tires and alignment.

 

 

I'll be looking into boosting my tire sales in the new year. Thanks for the post.

[jarlington727]

Hey guys,

 

Our shop has been doing more and more tire volume as the months go on and we’ve hit a glass ceiling here!! We are getting tires pretty close to the cost the average consumer can get them for from tire rack for so there isn’t too much of profit in it for us. We are looking to take it to our business to the next level and become a distributor we just can’t seem to get our foot in the door anywhere. We’ve reach out to a couple of different brands over the months to no avail must of the time no response at all. Any information or insight on this subject would be greatly appreciated!

Edited December 3, 2014 by jarlington727

[mspecperformance]

how many tires do you actually do?

[Tires Too]

Jake's,

The wholesale distributor level is really being dominated by the BIG National Distributors (American Tire Dist, Carroll Tire, Max Finkelstien, TCI etc). I don't think you can compete with them. We are a Michelin Dealer through American Tire Distributor. Their BIB 1 Level requires you sell 500 Michelin and/or BFGoodrich Tires per year. The incentives when reaching those numbers are pretty significant. They also have other programs for other brands, but you need to be selling 25 to 30 tires per week to qualify for many of these programs. You probably need to contact one of these distributors and not the manufacturers directly.

Edited December 3, 2014 by Tires Too

[xrac]

Premium Member Content 

This content is hidden to guests, one of the benefits of a paid membership. Please login or register to view this content.

[jarlington727]

Thanks guys, I found this very helpful and appreciate you taking the time out of your day to respond.

[Elon Block]

My assistant let me know about this conversation. So I thought I would mention a couple of things

when it comes to adding tire sales to your business.

You've already gotten some great insight in this thread. Here are a few other things to consider.

There are two big benefits to selling tires.

One is the benefit to your shop. The other is the benefit to your customer.

From your shop's standpoint... there's an opportunity to either KEEP an existing customer or

to GAIN a new customer.

Looking at the big picture, it's not just that one single sale. It's the lifetime value of the customer.

In other words, when you calculate how much a customer spends maintaining their vehicles

over their lifetime, that's equal to thousands of dollars.

Someone's going to get that customer and all of their tire, maintenance and repair work -

it might as well be you.

If we're talking about an existing customer... and they have to go up the street to purchase their tires...

chances are: your competitor is not only going to sell them tires...

They're going to start poking around that car and first thing you know... you're lost that customer.

If it's a new customer that stopped in or called, asking about tires...

There's an opportunity right in front of you, to get another new customer. You can either help them out and

begin a relationship with them, or you can turn them away.

One thing to note is: many cars are equipped with high-performance tires. And the margins are even

better on those, compared to just a regular passenger car or light truck tires.

Even if you're not a tire dealer, there are huge opportunities - not just in selling the tires but all of the

other work it naturally leads to such as: brakes, suspension work, alignments, TPMS work, etc.

Now, from a customer's standpoint, it may seem like they're just interested in shoppping prices

when they call you.

Calling about prices is the only way they know how to educate themselves on where they should go -

to solve whatever their problem is.

The reality is: price is way down on their list of priorities (whether we're talking about tires or service).

For most people, they're not looking for the cheapest prices.

They're actually looking for someone they can TRUST to help them take care of all of their vehicle needs -

hopefully at one shop - because the're busy, just like you.

If you can gain their trust - whatever the opportunity is - there will never be any questions or haggling

about any of your pricing.

I'll keep an eye on this thread and if you have any specific questions about tire sales, I'd be happy to

answer them for you.

[insomniac]

lets say you buy 4 tires that cost you 75 each. what does you invoice look like? (roughly)

 

Mine would show something like: (obviously it isnt going to be as neat as my invoice in a forum)

 

4 New Tires (Brand) (Size) 105 each = 420

4 Mount and Balance 14.95 = 59.80

subtotal 479.80

 

Supply & Disposal Fees 16.79

Sales Tax 34.76

------------------------------------------------

Total 531.38

 

is that about right?

[jarlington727]

4 New Tires =$380.00

4 Mount and Balance = $98.00

Tire Disposal Fee =$8.00 (2.00) per tire

New Jersey Tire Fee =$6.00 ($1.50) per tire

Haz Mat and Shop Supplies =$6.00 (per R.O)

Tax =$34.44

-----------------------------------------------------------------------

Total $532.44

[xrac]

Premium Member Content 

This content is hidden to guests, one of the benefits of a paid membership. Please login or register to view this content.

[Elon Block]

Are you guys offering road hazard warranties?

The reason I asked is: I noticed on your invoice examples, there was no mention of a

road hazard warranty.

There are two big benefits for offering a road hazard warranty to your customers.

One is the benefit to your shop. The other is the benefit to your customer.

From your shop's standpoint... there's an opportunity to add to your bottom-line,

create loyalty with your customers and help them avoid a potential problem down the road.

It can either be an in-house program or you can use an outside vendor to manage the program.

There are also a handful of manufacturers that offer a road hazard program on their product line

at no additional cost to the customer - or you. This is one manufacturer, for example:
http://www.kumhousa.com/owners/tire/replacement-and-original-equipment-warranty-policies

(I'm not affiliated with them, in any way. I just happen to know about their program.)

Regardless of how you set your program up, road hazard warranties are profitable,

when sold properly. It's 100% profit and even if there's a claim, you're still going to be way ahead.

Not only that... you will look like hero in the customer's mind, if they need to use it.

Now, from a customer's standpoint, there are a huge number of people that believe in

protectiing their investments. They will almost always purchase a warranty - if offered properly -

when they buy computers, appliances, electronics or anything that has a potential of failing

or being problematic.

Tires fit into this category.

What they don't want to have happen is: they buy tires and then, all of a sudden, one of them needs to

be replaced because of a road hazard.

If they don't have a warranty, they now have to pay full price again - to replace that tire. (They're going to

be pretty upset if they find out, at that time... they could have purchased a warranty, but it wasn't offered

by your sales person.)

What they do want is to: have peace of mind - that if something should happen, it's never going to cost

them full price to replace that tire.

So, they view purchasing a road hazard warranty, as a small price to pay for that peace of mind.

Now, not everyone will buy it. Some people just don't believe in insurance of any kind - period. And that's okay.

But there's no way of knowing unless you offer it to them. So, your sales person's job is to offer the warranty

every time - to every customer.

But, they need to know how to offer it in a manner that doesn't confuse or overwhelm the customer.

If you're interested, I would be happy to share a sales process, including a work track for selling the warranty.

Just let me know.

[xrac]

Premium Member Content 

This content is hidden to guests, one of the benefits of a paid membership. Please login or register to view this content.

[Joe Marconi]

Premium Member Content 

This content is hidden to guests, one of the benefits of a paid membership. Please login or register to view this content.

[mspecperformance]

Elon, I am going to private message you. Thanks for sharing.

[xrac]

Premium Member Content 

This content is hidden to guests, one of the benefits of a paid membership. Please login or register to view this content.

[JimO]

I would not want to send a customer to my competitor to purchase tires. Not that I am the answer to every problem that can arise, to the contrary I realize my limitations based on experience. Tires happen to be profitable and basically problem free. They also open the door to other services as many other people noted. Why turn them away?

 

If you sell enough tires you should be able to purchase them at a low enough cost price to have a decent profit margin and remain competitive. We use a matrix table that modestly increases the selling price as our cost price increases.

 

Based on your example of a $75.00 cost price per tire my invoice would read as follows:

 

4 New Tires = $400.00 ($100.00 per tire)

4 Mount = $56.00 ($14.00 per tire)

4 Balance = $56.00 ($14.00 per tire)

4 Tire Disposal Fee = $10.00 ($2.50 per tire)

4 NJ New Tire Tax = $6.00 ($1.50 per tire)

4 Valve core = $4.00 ($1.00 per core)

-----------------------------------------------------------------------

Total $532.00 + sales tax

 

We see a lot of bead corrosion and charge $12.00 per rim to clean and then reseal the bead with clear coat.

If there is just slight/minor corrosion we take care of that at no charge.

What is everyone else doing when bead corrosion is encountered?

 

While on the subject of tires - I keep hearing about shops and new car dealers continuing to use old style rope tire plugs installed from outside the tire.

This is no longer considered an acceptable repair and should not be done.

Is everyone now performing an approved type, plug/patch tire repair installed from inside the tire?

How much are you charging to perform a proper plug/patch repair ?

We presently charge $40.00 + tax

 

If the injury is in the shoulder or sidewall of the tire it should NOT be repaired.

Do you follow those guidelines?

Someone must be ignoring these guidelines since we continue to see rope plugs in shoulders and sidewalls.

Why would someone want to expose themselves to the liability of performing a tire repair using improper methods?

The court systems does not care that someone performed thousands of "improper" repairs previously without a problem.

[Elon Block]

In response to the requests for the word tracks for selling road hazard,

I started typing it up and when I looked at it, I realized it was going to be
pages and pages of information which read more like a dry text book.

So, I decided it would be more effective to just provide you with a video.
The video will do a way better job of explaining it.

My webmaster is working on it and should have the information for me
later in the week.

As soon as he's done with it... I'll post it.

[xrac]

Premium Member Content 

This content is hidden to guests, one of the benefits of a paid membership. Please login or register to view this content.

[Pat]

While on the subject of tires - I keep hearing about shops and new car dealers continuing to use old style rope tire plugs installed from outside the tire.

This is no longer considered an acceptable repair and should not be done.

Is everyone now performing an approved type, plug/patch tire repair installed from inside the tire?

How much are you charging to perform a proper plug/patch repair ?

We presently charge $40.00 + tax

 

If the injury is in the shoulder or sidewall of the tire it should NOT be repaired.

Do you follow those guidelines?

Someone must be ignoring these guidelines since we continue to see rope plugs in shoulders and sidewalls.

Why would someone want to expose themselves to the liability of performing a tire repair using improper methods?

The court systems does not care that someone performed thousands of "improper" repairs previously without a problem.

 

This is really two different subjects but they're related.

The first subject is what's happening in the bay.

And the second is what's happening at the counter.

From a best practices standpont...

Plugs have never been considered an acceptable permanent repair. That method was designed

to be a temporary fix only - to basically get you back on the road until you could get somewhere

to replace the tire.

Think about it. When you do a plug or a plug patch repair, you're destroying the integrity of the tire

because you're making the original injury larger.

A patch done correctly maintains the integrity of the tire and is a permanent repair. When you do a patch,

you don't have to worry about weakening the belt package and ruining the tire.

Now, let's talk about what happens at the counter...

If I had to guess why you're seeing a lot of this in your area, it's because one or more of your competitors

are looking at the most profitable way to do a flat repair. It's not necessarily good for the customer but

it's a quick and easy sale.

Even though we're talking about flat repairs, it's an example of how they may be selling ALL of their services

and products meaning...

• Either they don't understand the proper method (of repairing something)
• They're trying to compete on price for (those products and services)
• They're looking at the quickest and easiest way to get the job done
• Their counter people are unable to communicate effectively why (that product or service) done properly

  is in the customer's best interest - even if it costs a little more

Look at it this way: the customer has no idea if there are different ways to fix their problem - like you do.

 

They think a repair is a repair. They think a tire is a tire. To them, cars are complicated and they're counting on

the shop to help them keep their car running properly.

The fact that you're seeing a lot of this in your area is really good news for you because if a customer calls

or comes in asking for prices, this is your opportunity to educate them about the proper way to repair their tire

(or anything else).

As with all sales, it's never about price. It's all about what makes your shop different and why doing business

with you is in the customer's best interest.

In the example of the flat repair, when you explain it properly and the fact that it's a permanent repair,

all pricing conversations are over.

Selling is all about communicating effectively - and the person who gets really good at it - will automatically

become known as the "go to" shop in your area.

 

Bottom-line: All successful shop owners know that what happens at the counter is the SINGLE most important thing...

they had to "get right"... to have a thriving, profitable business.

[Elon Block]

Sorry everyone, I just realized my assistant was logged into this forum on her account. The above post

was written by me.

[ATSAutomotive]

I am confused, are you saying that a plug/patch combo is NOT the correct repair? That a patch alone IS the correct repair? If so, you are indeed mistaken. The Tire Industry Association (TIA) has approved ONLY a plug/patch combo as a permanent repair.

 

As quoted directly from their website "A plug by itself or a patch by itself is not an acceptable repair because the plug does not permanently seal the innerliner and the patch does not fill the void left by the penetrating object, which allows water to enter the body of the tire and starting corroding the steel belts."

[Elon Block]

Thank you for your comment. Feedback is always good because it's an opportunity
to improve my communications skills to make sure I explain things as clearly
as possible.

I can see how what I posted was not clear and confusing because I used the wrong
terminology. Let me start over.

First of all, you're correct. The patch/plug repair is the correct method of
repair - when done correctly. The TIA has clear standards on what size injury
is repairable and what size is not.

This is what I was thinking when I posted:
I have seen many cases of ignoring the maximum allowable damage size of 1/4"
and repairing injuries as large as 1/2" - rather than having the tough
conversation with the customer about the tire not being repairable.

In this type of a situation, the customer had been told they are only going
to be paying a fairly small amount of money to fix their issue and now,
the counter person has to go back to them with a surprise conversation
about having to buy a new tire instead. If that sales person is not skilled
at handling this properly, they may feel pressured to just go ahead and
repair it as they had promised, rather than face the customer with the bad news.

This scenario is a pretty common one, unfortunately.

[Elon Block]

Here's an update on the training I promised you on how to sell road hazard.

 

My webmaster is almost finished with the video recording. I'm also waiting to get clarity on the best way
to provide this to you without breaking any rules of the forum by posting links.

[xrac]

Premium Member Content 

This content is hidden to guests, one of the benefits of a paid membership. Please login or register to view this content.

[Elon Block]

I started a new thread about the road hazard warranty here:
http://www.autoshopowner.com/topic/9790-selling-road-hazard-warranties/

[xrac]

Premium Member Content 

This content is hidden to guests, one of the benefits of a paid membership. Please login or register to view this content.

[alfredauto]

We sell a ton of tires and our formula is a little different. We mark up each tire $30 over our cost and give the mounting/balancing/rotations/flat repairs/roadhazard/bead sealing/disposal and rim grinding away free. No upselling. 4 tires takes 20 minutes on average, maybe an hour if were grinding all 4 wheels and balancing with stick on weights. So $360/hr average profit and happy customers. Plus 3% gets added for wheel weights/valve stems but that's a break even deal. Customer pays the tax. Any problems we fix. Customers like that real mechanics are changing their tires, no minimum wage kids like at some places. It has been working good for us but try doing 50 tires a day and see how your body feels at the end of the day. I'll guess that 99℅ of our tire customers return for regular service. I based my pricing on tire rack's price + shipping + mount and balance and we come in within a couple bucks one way or the other. The idea is volume plus the tire companies offer free trips and stuff with enough volume. If I had my way we would do just tires all day every day - no wrong parts, no rusted bolts, etc 20 minutes and the car goes from junk to jewel with no surprises. Problem is tires are expensive and people only buy them every other year or so. There's just not that many people in my area.

[alfredauto]

I won't get started on the plug/patch/combo debate. Even the biggest players can't agree. In my experience I have seen exactly zero properly plugged tires fail. The issue is plugging a tire that's garbage (run flat). For the record We use the plug/patch method because we can inspect the inside of the tire. If there's any loose rubber inside they get a new tire prorated of course.

[mspecperformance]

20 mins to rack, remove from car, dismount, clean bead, mount, balance, install on car is impressive. I have never seen that done and probably couldn't count on hitting those times.

[alfredauto]

Thats with 2 guys working together. One guy sets the car on the lift and pulls the wheels the 2nd guy mounts and balances. We have 4 lifts and a jack but only 2 mechanics so while the tires are getting mounted another car is getting pulled on a lift. Now if we're bead blasting every 35" tire it takes longer obviously. Now to be honest there are holdups because "oh yea real quick can you change the oil, check the rattle, fix the headlight, inspect it, check my brakes..." So we end up working late most days. Tire giants who normally set up in highly populated areas don't do any repairs except tires for that reason, we don't have that luxury. We do tires heavily Oct-Dec and again in May so when nobody's buying tires the other 8 months we go back to being a normal general repair shop.

[CAZM]

In my area the dealerships have taken the profit right out of selling tires, We now make sure every tire job gets a complete suspension check we never open the hood on a tire job. Most of the time we are getting additional work tie rod ends ball joints wheel bearings shocks struts brakes alignments

[KMS]

We mark up all tyres 30%, and charge to roadforce balance with $3.00 disposal fee per tyre. The real money I see is in selling road hazard warranty on all tyres at 9.75%. Dealers use dealer tire to buy in bulk, and it is hard to beat their prices. We do not try to compete with dealer pricing. We earn our customers with great customer service!

[FROGFINDER]

Tires cost plus $35.00 each Mount and speed balance $16.00 each stems? new tpms seals? extra disposal $3.50 per tire.

FREE Brake and suspension check.

Free alignment check but will perform alignment if needed to protect new tires at customer cost.

 

ps. We check under hood fluids and exterior lights on all vehicles. It's amazing how many vehicles come in with no oil shown on stick, No coolant in jug, low brake or power steering fluid, no brake lights, etc.

[KMS]

We sell a 4W alignment with every new set of 4 tyres purchased. We let the customer know that it is the only way to get the manufacturers thread wear warranty.