Dealer Repair Parts Pricing Secrets
Comments in our recent post about the Tundra-Sequoia Air Pump TSB have uncovered wild price ranges for repair parts. Some people are able to purchase after-market air pumps from their local national parts chain (Pep Boys, for example) for less than $900, while others are being quoted nearly $1200 by their local Toyota dealer…30% higher than after-market. Obviously, this is frustrating some Tundra owners.
Also frustrating Tundra owners is the fact that a relatively simple electric pump costs $900-$1200 in the first place.
Here’s the how and why of how dealers and manufacturers price repair parts.
How Auto Manufacturers Buy and Sell Parts
Because new vehicle parts are supplied “just in time” for assembly, suppliers often agree to produce some extra parts for use in repairs. These factory spare parts often represent an opportunity to make a tidy little profit. The factory is buying these 100’s of thousands of parts a year, and they get a very good price on them. If the after-market decides to sell a competing part, they’re not buying 100’s of thousands of these parts at a time…which means they don’t get nearly as good of a price on each individual part.
As a result, after-market companies usually focus on building and selling commonly needed repair items like alternators, fuel pumps, and “wearables.” Specialty repair parts like air injection pumps – which are rarely needed on most vehicles – aren’t built and sold by most after-market parts companies. This means that the factory doesn’t have to price many of their repair parts too aggressively…unless an after-market company can manufacturer thousands of repair parts at a time, the factory has a pretty sizable cost advantage.
Bottom line – the factory is selling most of their repair parts for 2-20 times more than they paid.
Dealer Mark-up On Repair Parts
Once the manufacturer gets done marking-up a part, one of the biggest profit centers in any dealership is parts mark-up. Typically, dealers charge consumer 100-120% of suggested retail value for repair parts. They do this because:
- On a low-cost part like a spark plug or an oil filter, 20% over suggested retail is only slightly more than you might pay for a non-Toyota part at your local parts store.
- Some parts don’t have a whole lot of mark-up in the first place.
- Because they can.
The thing is, dealers sell parts to wholesale customers (like independent repair shops) for 10-15% over wholesale…with is significantly less than retail. This is why we’re seeing some pretty wild discrepancies in parts costs from dealer to dealer. Some dealers, in an effort to keep costs down, are giving their customers wholesale pricing. Other dealers are trying to make a killing on an unwitting customer and charging 120% of retail.
To be clear – charging 20% over retail is never acceptable, but paying an extra dollar or two for an air filter isn’t a big deal. Paying more than retail on a cheap part is not a problem. What IS a problem is paying over retail for an expensive part like an air pump, alternator, set of 4 shocks, etc. Some dealers don’t seem to understand that pigs get fat while hogs gets slaughtered.
What You Can Do To Get a Good Price On Dealer Parts
1. Ask for a discount. Explain that you understand some dealers charge full retail (or more) and that you’re not going to accept that.
2. Call other dealers for pricing info and compare it to the discounted price you’ve been quoted.
3. Go online. We’ve got a list of Toyota dealers who sell parts online, and their pricing is aggressive.
4. Remember, your dealer can’t force you to buy parts from them – you can provide the parts for a repair yourself. However, some dealers will not repair your vehicle with after-market parts because they feel those parts are inferior…and sometimes they are.
5. Buy OEM quality parts when you can. All things being equal, the manufacturer’s parts are better. Work with your dealer to get the best price and buy factory parts if at all possible.
Filed Under: Maintenance Tips