PartsTech surveyed 618 auto repair shops and found that 67% are not maximizing parts profit due to inadequate markup practices. The Institute for Automotive Business Excellence puts the cost of this at $40,000 to $70,000 per year for the average independent shop. That is not potential revenue from future customers. That is money walking out the door on every single repair order the shop is already closing.
The math is quiet enough that most shop owners never see it clearly, which is exactly why it keeps happening.
The markup versus margin confusion
This is where most shops lose the ground. Markup and margin are not the same number, and the difference matters more than it sounds.
A 40% markup means you added 40% to your cost. You paid $100 for the part and you charged $140. Your margin on that part is $40 out of $140, which is 28.6%. Not 40%.
A 40% margin means your gross profit is 40% of the selling price. You paid $100 for the part and you charged $166.67. Your markup was 66.7%.
Shops that think they are running 40% margin on parts because they are applying a 40% markup are actually running 28.6% margin. That 11.4-point gap compounds across every part on every repair order every day the shop is open. On $500,000 in annual parts revenue, that gap is $57,000.
The parts matrix
A parts matrix is a tiered markup structure based on part cost. Lower-cost parts carry a higher markup. Higher-cost parts carry a lower markup. The logic is that a $6 air filter can support a larger percentage markup than a $400 control arm, and the customer will not feel the difference on the filter but will notice a 60% markup on the control arm.
A typical parts matrix in Tekmetric or Shop-Ware might look like: parts under $25 at 100% markup, $25 to $100 at 60%, $100 to $300 at 40%, over $300 at 25%. The exact tiers and percentages vary by market, labor rate, and competition, but the principle is consistent: parts pricing should be structured and systematic, not estimated on the fly by whoever is writing the repair order.
Most shops set a flat markup percentage once and apply it to everything. Or they never set it at all and they are pricing from habit.
The supplier side of the equation
The landed cost of the part is the other half of the problem. A shop ordering from one supplier out of relationship and habit is frequently not getting the best price on the part. PartsTech shows real-time availability and pricing from multiple suppliers simultaneously. A shop that checks two or three suppliers before ordering and consistently lands 8 to 12% lower on parts cost is creating margin improvement on every order without changing anything about how they price to the customer.
The two levers work together. Buying better and pricing better are not mutually exclusive, and the shop working on both simultaneously compounds the improvement.
Connecting it to the report
Tekmetric's parts gross profit report shows margin by repair order and by job type. It is generated automatically from every closed RO and requires no manual calculation. Most shops have never opened it. The ones that do find out within the first month which job categories are running healthy parts margin and which are being written at cost without anyone noticing.
$40,000 to $70,000 is not a rounding error. It is a parts pricing configuration problem that most shops are carrying silently because no one has ever built the matrix or looked at the report.
Michelle Onizuka is co-founder and Systems Architect at Onizuka Studio. She builds automation and AI systems for small businesses — including automotive operations across Tampa Bay and beyond.