Auto Shop Labor Rates: Explained

There's a lot of confusion regarding how exactly the "labor rate" or "shop rate" works in a typical automotive repair shop.

Labor Rate(definition): A dollar amount that the customer pays the shop for labor costs incurred while repairing the vehicle. The rate is billed per hour of time. So let's say the labor rate for a shop is $100 per hour. That means that if the repair is quoted as 1 hour, you'll pay $100 for labor plus any parts costs, shop fees, etc.

In the automotive labor cost world, you don't always get exactly what you think you're paying for. Let's say that you need to have the transmission repaired in your car. The auto repair shop takes a look at it, gives you a call, and says that the labor cost will be $800 dollars (8hrs x 100/hr) plus parts. But where did the 8 hours number come from?

Almost every shop uses a large standardized database, such as 'AllData', that provides labor times. The reason that shops need a standardized list is because all cars are not created equal. Removing a radiator on one car might be a snap, on another car it might take hours. The database provides a labor time that they feel should be a fair compromise for the customer and the mechanic. A skilled mechanic should usually be able to get the repair done in the amount of alloted time without overcharging the customer for labor. Some repairs are not covered by the labor database. In that case, it's up to the shop to provide a fair estimate.

So back to the transmission problem for which you were quoted 8 hours labor. The mechanic works on the car, but ends up finishing the repair in 6 hours, instead of 8. And then you still get charged the full 8 hours of labor cost. What gives? This is what's called the flat rate system. The mechanic gets paid what was quoted, not how much time it actually took to repair.

Flat rate time is broken down into 1/10ths of an hour, which could also be looked at as 6 minute intervals (1/10 of 60 minutes = 6 minutes). Not all repairs are even chunks of time like 1 hour, some repairs fall in between. For example, an oil change would be something like 0.4 labor hours. So your mechanic is getting paid, and you are being charged, for 24 minutes of labor to change your oil.

And that all ties in with the way that mechanics actually get paid. It's an hourly job in the sense that they get paid for being there, but only at a base rate, similar to a waitress. If mechanics want to make any more money above the base rate, they have to beat the clock. If a mechanic can finish a job that pays 8 labor hours in 6 hours of time, the mechanic gets paid for 8 hours. So on a good day a mechanic can "book" 12-16 hours of flat rate pay, when he was only in the shop for 8 hours. Then again, if it's a slow day at the shop, and the mechanic only makes 4 hours, he goes home hungry. So it does go both ways.

This system is good in that it gives incentives for the mechanic to make themselves and the shop as much money as they can. However, it can also promote greed. Some mechanics will sell expensive repairs that don't need to be performed. Others will rush through and do half-ass repairs to increase their paychecks. Just like any other incentive based job that isn't directly supervised, there's always going to be a few bad apples.

That being said, the flat rate labor system still seems to be the fairest compromise for the shop, the mechanic, and the customer. The customer knows beforehand exactly how much the repairs will cost, the mechanic is given an incentive to work quickly and efficiently, and the shop makes some money as well. Now we just need to figure out why those labor rates keep going up every year, even though the mechanics aren't getting raises........

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Comments 20 comments

karl 6 years ago

I am a mechanic and I think the Flat Rate system for mechanics should be outlawed. I have worked with some guys that would always have the sparkplug you needed if the parts dept. didn't have them. They only give you 8 for a V8 engine, ot 6 for a V6, they NEVER gave extras. So why did he have them, because HE DIDN'T INSTALL THE BACK ONES!!!

I am discusted at the fact the Flat Rate system makes the

weak minded mechanics cheat. OUTLAW THE FLAT RATE SYSTEM!!!


joe 6 years ago

Karl you are not a mechanic.You are an idiot!


paul 6 years ago

Joe. karl may be "a" idiot but your grammer sucks.


earnestshub profile image

earnestshub 6 years ago from Melbourne Australia

In Australia mechanics work mostly for a salary and the pay is good and related to experience and mechanical courses completed. I too don't like the flat rate as it is wildly inaccurate on many jobs. I have 35 years experience and have hired dozens of mechanics. In one of my recent hubs I told of a $1,200 clutch replacement where the owner was charged for the mechanic to learn how to do the job.

The job was crap and I had to do it again properly. I was able to replace it in a fraction of the time allotted. It was a small car with an east/west engine layout with the gearbox on the left side and the time given for the repair was ridiculous in my view.

I had motorcycle shops as well, and some motorcycle mechanics could do the work in less than half the time of others.


cob automobile 6 years ago

i think the flat rate should be looked into because customers may be charged more or less depending on the nature of the repairs and lazy mechanics have using that as a get away not do a proper job

However, the flat rate has assisted customers to budget for the cost of repair on their vehicles


Mico 5 years ago

Mechanics make good money all over the world.


Leonard 5 years ago

I am a shop owner and an automotive technician. The flat rate format is the most fair for the customer and the mechanic or tech. An experianced tech can be rewarded for doing the same job in a quicker time than a none experianced on. All good techs under stand and enjoy the benefits of this pay structure.


wayne 5 years ago

the flat rate system is ok but i have seen services that don't need performed just because they are quick and pay good then others that don't get done because they don't pay and when the shop is slow there needs to be some kind of payment to the techs that have to wait around for an oil change


mike 5 years ago

falt rate works if your working on newer iron. on the rez rockets i see you would loose your pants on rusty bolts, brackets........


hs 4 years ago

Most techs have to supply there own tools. This is a significant cost to be able to work. The flat rate system is fair if you have the propper tools and knowledge to do the repair. It does not allow for educating yourself on how to do the job. True some techs abuse the system. But they also don't work for the same shop very long. There quality of work will show in there comebacks which they usually don't get paid for to repair a second time. Too many comebacks , and there usually not working for that shop very long. i have to spend an average of $2000 a year just to keep up with new tools needed ( basic tools) and what is lost. The shop owner does not reimburse for lost tools. Most people have very few expenses just to go to work. Tech have to invest allot of money in tools just to have the opertunity to work. The flat rate system allows the tech to be able to keep up with expenses, if they are good. If they do poor work , it cost them money.


maniijii 4 years ago

very nice and beautiful helping site i hope this is most benefits provide in future


tommy 4 years ago

a mechanic spends an hour and a half on my car and is able to charge me four hrs labor because of some miracle book . it is still fraud


Sean 3 years ago

Ok don't think of it as hours, think of it as job pricing. So if the shop quoted 150.00 or 400.00 it's your decision to have service performed! If I hire a plumber to install a water heater and I get a quote of 200.00 and another for 300.00 it's my decision to hire this person and I would base my decision on experience and reputation. Do your homework.


Davejjj 3 years ago

tommy, if you do not feel as though it is fair that they can charge for 4 hours of labor, then do it yourself. I'm pretty sure that whatever job it is will take you longer than the 4 hours allotted for the job. Why should the technician be screwed out of some money because they work efficiently? wouldn't you rather have your car back in an hour and a half than in 4? Just because someone is good at what they do, why should they be paid less than the guy who has no clue what he is doing?


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Mylindaminka 3 years ago

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Armando 2 years ago

I've worked on vehicles for year and I believe the flat rate has helped me gadget the time that it might take me to do a job but I do believe in honesty. Do to the large margin of error within the flat rate system, I believe the system should be reviewed and, as we mechanics do, “fixed". This will help correct the mistakes in the field as well as the view world has of mechanics.


Emy gal 2 years ago

The flat rate system keeps everyone honest to an extent.

It is more or less a way to judge how long it takes to do a job. Experience and the tools to do it may make your mechanic faster than the book. If you paid for all the tools and experience this would not be a question. The people you need to worry about is the dealership. They don't go by standards and most high end dealers owned by Penske do not follow All Data or Shop Key. They tried to charge me 600.00 for a 15 minute job that calls for 1.2 hours Aka BMW


Clyde Horseman 19 months ago

So really relevant, I've actually just recently had my transmission go out on me just like you stated as an example in the beginning of your article. Anyway I was quoted at about 5,000 dollars for a fix, so I have no idea how these things vary but it seems like that's a big disparity if they pull all of there rates from a legally standardized database. So I guess my question is, do they have to? Or is it just better for business to adhere to the status quo.

http://alloutcustomsandcollision.com/auto-body-rep...

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