Auto Parts Pricing and negotiating purchase prices for your auto repair shop - ProRevTech


Auto Parts Pricing and negotiating purchase prices for your auto repair shop

If you currently own or are looking to start your auto repair shop, you would think that pricing parts are easy. You already know the part costs, and you just set a price based on profit margin and competition. Simple, right?

Of course, the answer is it’s not always so black and white, and there is sometimes a wide grey area. Parts manufacturers often have policies that specify retail pricing, and failing to follow these policies can be trouble. What’s more, it’s not always easy to figure out your part cost because different companies use slightly different terminology.

To understand parts pricing and how the price you pay for parts gets set you have to understand how the parts flow from the manufacturer to you and who those players are.

WDs is a term you will see often, and it refers to wholesale distributors. They buy large quantities of parts from manufacturers and then warehouse them. WDs resell these parts to retailers and shops that do installs (aka jobbers). Jobbers are shops that sell and (usually) install parts- this is where you fit in as a repair shop owner.

The price that a Wholesale Distributor (WD) pays for a part when they buy direct from the manufacturer is called wholesale price. It’s often used to indicate a part’s actual cost, regardless of who purchases it.

“WD Price” or “Wholesale Distributor Price” is when a wholesale distributor pays for a part when they buy directly from the manufacturer. Generally speaking, a wholesale distributor will mark this price up before they resell the part to a retailer or to you.

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How To Minimize Part Costs

As an installer, you always want to pay as little for a part as possible. That way, when you sell the part to the consumer, you maximize your profits.

There are a lot of things that can be done to find a better price for parts:

You can negotiate your pricing with different Wholesale distributors, but this only works if your shop is buying a significant volume of parts. This may be the case one day, but it’s doubtful that you will be buying with enough volume to request a negotiated price.

You can try and buy direct from the manufacturer if you think you can sell enough of the parts to compensate for inventory costs, however, you’ll probably have to buy a minimum dollar amount of inventory. Some manufacturers set their “buy-in” at $5,000 or $10,000, and some require $50,000.

If you are familiar with a few jobbers and retailers, you can ask them if they have a direct relationship with the manufacturer. If a local shop is buying parts direct from the manufacturer, they might be happy to resell those parts to you for a small markup.

It is worth mentioning that wholesale distributors offer a lot of extras to shops. Most distributors provide a simple, low-cost returns program, obtain warranty reimbursement, tools and training, and a wide variety of delivery options. They’re also happy to sell one part to a jobber or retailer without requiring a minimum annual buy, and they answer the phone when you call, etc.

All these extras aren’t free. Wholesale distributors ask a higher price for parts than a manufacturer, but they usually provide more customer service. The trade-offs are typically worth the slightly higher price paid.

When establishing your shop in the early days, it is vital to begin building relationships with your parts suppliers as you will be purchasing lots of parts from them over the years.

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