An auto repair shop is one of the few retail businesses where you set your own gross margin — the labor rate is yours to price. The trap is confusing the door rate (what the customer pays) with the labor margin (what you keep after tech pay and burden).
The repair-shop cost stack
| Line | Range (% of revenue) |
|---|---|
| Parts cost | 25-35% |
| Technician labor (wage + burden) | 20-30% |
| Non-technician payroll | 8-12% |
| Rent / occupancy | 5-10% (some sources 8-15%) |
| Total overhead | 30-40% |
Gross margins by line
| Line | Healthy margin |
|---|---|
| Labor (billed) | 60-75% (target 65-75%) |
| Parts | 40-55% (target 45-55%) |
| Blended | 50-60% |
Net profit and the key numbers
| Metric | Range |
|---|---|
| Net profit (struggling) | 2-5% |
| Net profit (average) | 10-15% |
| Net profit (good) | 15-20% |
| Net profit (top) | 20-25%+ |
| Labor rate | $75-$135/hour |
| Average repair order (ARO) | $350-$450 |
Effective labor rate > door rate: track labor sales divided by labor hours actually sold. A $135 door rate with loose time-keeping can collapse to an effective rate that no longer clears tech pay plus burden — the margin leaks per job, not per bay.
Sources (retrieved 2026-08-13): industry labor-guide benchmarks (labor gross margin 60-75%, parts 40-55%, blended 50-60%); auto-repair financial summaries (net 2-25% by tier, ARO $350-$450, labor rate $75-$135/hr); equipment and parts-inventory startup ranges from SBA-style guides.