Dealer Repair Parts Pricing Secrets
Jason Lancaster | May 17, 2010 | Comments 10
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.
Good luck!
Filed Under: Maintenance Tips
yep, usually the OEM parts are better quality than aftermarket parts MOST of the time. My wife hit a concrete barrier while driving and somehow it only ripped the black plastic wheel well in the left front tire housing. I went aftermarket for around 25 bucks and let me tell you, it wasn’t worth 5 bucks it was so thin and flexible. Had to go to dealer for almost 50 bucks, but decent quality. Shop around, each dealers’ pricing was close, but some were cheaper by 5-10 bucks on a 50 dollar part.
While I agree OEM parts are almost always better quality, however the aftermarket parts keep the pricing honest. They have to compete in order to sell parts. That being said, its still not right to charge the prices that Toyota wants for those air pumps. If aftermarket air pumps were available you could bet Toyota would lower their prices!
Agree with both posts.
While my 2007 has not given me any trouble related to the air induction pump, I have gotten a bit wporried about that possibility since it seems like such a widespread issue. I definitely do not like the idea of spending 4 grand on replacing a non essential eco-nazi mandated part. My questions are these:
Are the new air pumps just as vulnerable to moisture damage as the ones that they replace? No one wants to be replacing these things every 30000 miles for that kind of money. If they are the same pump with no change in design, then my next question is this; is there any concievable way that some electronics guru could figure out how the unit could be bypassed altogether and the sensor that connects it to the check engine light and the limp mode system be disabled? If someone could figure out how to accomplish this without damaging anything, then replacing the pumps would be pointless.
i agree that prices vary drastically from dealer to dealer. I broke the interior door handle on my 95 z-71 some time around 1998. I went to Pyrimid Pontiac/GMC in Southaven MS and they said the part was 260 bucks and another 250 to install it. I started to leave and the salesman said “have fun rolling down your window to unlock it from the outside”. I went up the road to Chuck Hutton Chevy in Memphis (about 10 miles away) and picked up the part for 24 dollars. The sales person also gave me pointers on how to drill out the single pop rivit that holds it in. He then explained that they were a “hub” for parts in that area and they sell these parts to other dealerships (or is that Stealerships). I broke the handle again around 2007 and bought an aftermarket one on ebay for 12 bucks with shipping included. the aftermarket part felt very cheap but it worked. Sold my Z in late 2009 and the aftermarket part was still working.
But, i agree with matt. why cant we just disconnect or bypass it some how?
mk – Good to know. I can’t tell you how many times I’ve seen a quantifiable difference between an OEM part and one made by the after-market. They’re almost always a little lower quality (but, they’re also cheaper…so you get what you pay for, right?).
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Rich – Agreed. If I was smarter – or if I knew someone that was an expert on tricking sensors – I’d come up with some sort of sensor bypass that would just ‘trick’ the computer into thinking the air injection system was working rather than fix it. It’s not necessary equipment, and it’s not worth $1,000’s to me to have it working.
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Mickey – Agree with the agreement! LOL 🙂
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Matt – I do believe the pumps are the same, but I’m not certain. It IS possible to come up with a bypass – if you search for O2 Sensor Simulator, you’ll find a few companies that make them.
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Danny – For a long time, dealerships have argued about two different business models: volume or gross? Volume dealers don’t make a lot of money on any single transaction, but they do thousands of transactions to make up for that. Gross dealers make a sizable profit on each transaction, but they don’t get to do it very often. Most of the time, the “volume” model succeeds and the “gross” model results in a dealership’s closure. To make a labored point: Pyramid GMC is out of business for a reason! 🙂
Suspention componets are the exception to that. OEM will usally fall in the middle of the line. You can get cheap parts that are worse than OEM or parts for about the same price or slightly more than are better than OEM. We had to replace part of a MItsubishi PU front steering and ordered Moog parts for it. OMG, the lower assembly for the right side had more metal and was heavier than the entire front steering system. The price was less than a dollar cheaper than OEM. But that is like a Mastercard moment, For everything else there is OEM.
Jeremy – Good point – there’s always an exception to the rule.
Ran across this article looking for something else, but an extremely important reason for high markups which you’re missing (slot it in there ahead of “because they can”) is that dealers are often required (as part of their franchise agreement) to carry a specific inventory of parts in stock.
In other words, they have to pay in advance for thousands of parts even though much of it may NEVER be used — which means the parts are paid for by the other things which do get used.
TANSTAAFL
Problem is NOT confined to 2007 model tundra. Had the
SAME problem with my 2005 V8 Tundra with 65000 miles Turned it off it was fine. When next turned on “Check
Engine” lite came on & truck would only “CREEP” Local
Toyota dealer diagnosed the problem for $99 (1hr), and
priced repair cost at $2,280!! Shop was full of other
Toyota vehicles with the same problem???WHAT A RIP-OFF!!
I have been a Toyota owner/supporter for many years. They
need to fix this problem NOW!