For a repair shop, there is little profit in the $29.95 oil change. By the time a shop pays its technician, pays for the oil, the filter, and the hazardous waste disposal fees, there’s no money left.
This low profit margin is worsened by the extremely competitive “Quick Lube” business, which forces local repair shops to refrain from raising prices, despite rising costs.
This all begs the question: If oil change specials, which range from $15.95 to $29.95, clearly produce very low profits, then why do so many service facilities advertise oil change specials?
The answer is actually very simple: It gets you in the door. Service centers know that once they have your vehicle, they can sell you additional work.
Suggesting additional work is called upselling, and it’s a primary profit tactic of every service facility.
Here’s a typical example. You drop your vehicle off for “just an oil change.” Upon completion your service representative smiles and proudly states, “We noticed that your air filter was dirty; so we popped in a new one.” You may think “Great; what wonderful service!”
What really occurred is that you were casually upsold an air filter. It probably wasn’t needed; it certainly wasn’t replaced according to any factory recommendation, and you were definitely overcharged for what was most likely a poorly-fitting, aftermarket, inferior air filter.
Here’s a real-life example that occurred recently. This particular vehicle had 54,000 miles on it, and was dropped off at a local shop for “just an oil change.” Upon paying the bill, the customer was handed an estimate for $199 to replace his air filter and top radiator hose.
Shocked at the price, he called me.
After review, I found that the air filter suggestion was premature. It didn’t need replacement until the manufacturer’s recommended 60,000-mile service interval. The top hose was also premature. In fact, it did not need replacement at all, despite a very minor problem easily addressed during the factory maintenance schedule—at no extra cost.
Check out the aftermarket part prices quoted below (including the unnecessary radiator hose). Compare these to the manufacturer’s suggested retail price (MSRP) for the factory OEM parts (Original Equipment Manufacturer).
Local Shop Aftermarket Air Filter: $32
Manufacturer OEM Filter, MSRP: $17
Local Shop Aftermarket Top Hose: $36
Manufacturer OEM Top Hose, MSRP: $19
Notice that this local shop was doubling the price of the OEM parts with its inferior aftermarket parts.
Now, let’s look at the labor time quoted.
Local Shop Labor Time: 2.0 @ $60 per hour = $120
Manufacturer Labor Time: 0.9 @ $60 per hour = $81
Notice that the shop labor time estimate for the repairs was 2 hours. This is more than “twice” the manufacturer’s recommendations (even after calculating manufacturer times against the industry standard multiplier).
Had the local shop abided by the vehicle’s particular maintenance intervals instead of trying to make a quick buck, it should have recommended a 60,000-mile service at the next visit. This would have better served the client, saved him $199, and maintained the vehicle properly.
Instead, the service center lost a customer, forever!
What needs to be made crystal clear is that this type of price-gouging occurs every day in every type of service facility in one form or another across the automotive service industry.
This type of price-gouging is considered normal!