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Parts Pricing: Your Business, Your Call

Parts prices listed in estimating systems are the manufacturer’s suggested retail prices. Despite what insurers would like you to believe, you can price parts based on the gross profits you desire.

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Writer John Shortell is body shop manager at Secor’s Collision Technology in New London, Conn. He’s been in the collision industry for more than 20 years and has developed computer software for body shop scheduling called BodyShop Schedule Pro, for subletting towing called Tow Bill Helper and for printing estimates in dollars called Dollars & Sense. For more information, visit www.bodyshopsolutions.com.

Those of us who work on high-end vehicles have been punished for years. Order some Mercedes or BMW parts, and take a close look at the discount you get. It’s a fraction of the discount you get on GM and Ford parts.

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Why should you be punished for working on high-end vehicles?
Give yourself a good slap in the face. Harder!

Wake up out of that insurance company-induced trance and pay attention. Moses did not carry a heavy stone tablet down the mountain with parts prices chiseled carefully into it. Our Constitution has no mention of body-parts price-markup laws. Your state legislators haven’t passed any laws determining collision repair parts pricing. So run your business like most every other business is run: Price your parts based on desired gross profits.

Location, Location, Location
Go to Home Depot and check the price on a Makita cordless drill. Now go to your local Ma and Pa hardware store and check the price on the same drill. Are they the same price?

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Go to McDonald’s in New York City and buy a cheeseburger. Now go to McDonald’s in Greeneville, Tenn. Do you think the hillbillies are paying the same as the city slickers? Hell no! And why should they?

Labor costs are different in different areas of the country, as are income levels. Why should every body shop charge the same prices for the same parts in different areas of the country? Why should the one-bay, dirt-floor shop located across from a trailer park in the Smokey Mountains charge the same for a part as a 50-bay shop in Palm Springs?

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Invoices: For Your Eyes Only
The insurance industry is a hell of a lot smarter than the collision repair industry, and they’ve convinced us that list prices are laws to be obeyed — with mandatory sentencing for those who dare to break those laws.

For decades, we’ve followed along like a herd of castrated sheep. Ye shepard wields the staff, and Lord help those who don’t follow to the edge of the cliff.

“Where are your invoices? We can’t pay for any parts if we don’t have those invoices.”
Sound familiar?

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Imagine going to McDonald’s and asking for the invoice to the special sauce, lettuce, cheese, pickles, onions and sesame seed buns. They’d call the cops!

So how do you know if they put all these parts in your Big Mac? How do you know they aren’t charging you too much for that pickle? It sounds like a ridiculous analogy, but is it really?
All you have to do is remove the top half of the bun to see the pickle. All the appraiser has to do is open the hood to see the new radiator.

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Does the appraiser really need to see your invoice for that radiator to be sure you installed it? And why should he question what you’re charging for that radiator? Your customer chose you to repair his vehicle because he trusts you. He knows your reputation. You have certain costs to cover and should price your parts accordingly.

Charge What YOU Need
Many of you are cringing at the thought of charging more than list price for parts. But then, many of you consistently charge less than the list price. Shouldn’t that be wrong also?
Actually, neither should be wrong. If you can afford to discount parts, fine. If you need to charge more than the manufacturer’s suggested retail price, that’s fine also.

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Yes folks, those prices listed in the estimating systems are just the manufacturer’s suggested retail prices. Every shop owner still has to determine the gross profit margin he needs and then has to set parts list prices based on that need.

Get out of the habit of disclosing invoices to insurance companies just because they ask for them. It’s none of their damn business what you pay for parts and what you charge for them.

The same goes for used prices. Where’s it written that 25% is the magic markup amount for used parts? That’s only a 20% gross profit margin. That might not be enough for your business.
Just remember, you still have to be somewhat competitive. Don’t get carried away and decide that you want to make a 50% gross profit on parts and double your cost.

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Remember also that unless your shop is losing money, gross profit on parts translates directly into net profit — money in your pocket.

So the next time you agree to a 10% parts discount to appease an insurer you have a DRP relationship with, figure out what that means in actual dollars. It’s like pulling that cash right out of your wallet and handing it to the insurance company.

Writer John Shortell is body shop manager at Secor’s Collision Technology in New London, Conn. He’s been in the collision industry for more than 20 years and has developed computer software for body shop scheduling, for subletting towing and for printing estimates in dollars. For more information, visit www.bodyshopsolutions.com.

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