Service Labor Gross Profit: What's a Good Percent?
A healthy dealership service department keeps 78% or more of every labor dollar as gross profit, on customer-pay, warranty and internal work alike (Pocket20 benchmark; best-in-class stores run around 82%). For the whole service department, including sublet and shop supplies, total gross should run at 72% of sales or better.
Two numbers, two different bars
These two figures get mixed up all the time:
Labor gross % (labor sales minus technician labor cost, by pay type): Pocket20 benchmark 78%+, best-in-class about 82%.
Total service gross % of sales (the whole department, including sublet, supplies and unapplied time): Pocket20 benchmark 72%+.
If you compare total department gross to the 78% labor bar, the store looks worse than it is. If you compare labor gross to the 72% department bar, it looks better than it is.
How to find it on the statement
Service detail pages split labor sales and gross by pay type: customer-pay, warranty and internal. For each one:
Labor gross % = labor gross ÷ labor sales
Use year-to-date figures.
What pulls labor gross down
Effective labor rate below the posted door rate. Discounting, policy adjustments and unsold menu time all pull the effective rate down. The Pocket20 benchmark is 85–95% of the posted rate on customer-pay work.
Warranty paid below retail. In most states the dealer is entitled by law to retail-rate reimbursement on warranty labor. If warranty labor gross trails customer-pay, the reimbursement rate may be stale.
Internal work billed at a discount. That moves gross out of fixed ops and into the used car department.
Unapplied time. Paid technician time that never gets billed to a repair order.
Example (hypothetical round numbers): customer-pay labor sales of $1.2 million at 72% gross. At the 78% bar, the same sales would produce another $72,000 of gross over the year to date.
Related
See it on your own statement
Pocket20 grades labor gross by pay type straight from your statement and ranks the dollars behind each gap. Get a free read or see a sample read.