How does an auto repair shop make money?

An auto repair shop makes money primarily through labor charges and the sale of parts. Labor is billed at an hourly rate, which covers the technician’s time, expertise, and overhead costs, while parts are sold at a markup, typically with profit margins ranging from 20% to 28%. The key to profitability is balancing competitive pricing with healthy margins, ensuring customers feel they’re getting fair value while the shop maintains enough revenue to cover expenses and grow. By managing costs, sourcing quality parts at good prices, and delivering excellent service, an auto repair shop can build a loyal customer base and steadily increase profits.