Toyota Dealers' Compensation from Toyota vs Customer's Price

Discussion in 'Fred's House of Pancakes' started by stevepea, May 14, 2020.

  1. stevepea

    stevepea Senior Member

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    Had a question for anyone who knows this:
    I thought I might've needed a new 12v battery for my Prime. Thankfully, it just needed a good charge after some non-use.

    But the dealership wanted about $345 (yup!) incl tax, to install a new 12v battery.
    A local mechanic I've gone to for years wanted $141 to install a decent brand, 5yr warranty 12v batt.
    The dealer is not just a slightly higher markup or price, for just a stock 12v battery, that's kind of highway robbery.

    This got me thinking about how dealerships set prices. I'm assuming (but someone who knows, please chime in) that when a Toyota dealer is reimbursed by Toyota for in-warranty service, there's a set amount for the procedure -- a max that Toyota will reimburse them... but that the dealership is free to charge whatever inflated price they want to their retail customers? In other words, had my car needed a battery replacement and it was still covered under the warranty, I don't think the dealership would've been able to get $345 from Toyota for putting in a new 12v battery, right? Or would they have?

    How much profit margin (if any) are the dealers allowed, or do they make, off of in-warranty repairs? Is that the reason why normal out-of-warranty repairs costs at dealers are so high?

    Honestly, once it's out of warranty, I rarely go to the dealer because of markups like these.
     
  2. John321

    John321 Active Member

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    That is a hard question to answer. A beginning is maybe a short discussion. Automotive repair prices vary from area to area. Markets are going to be a little different in each area. A new battery will cost a set amount. A new battery for my 2008 Prius years ago cost almost $180 when I ordered it from Optima . The Dealer must have an employee order and receive and stock the battery. He must add those cost to the battery and then add a markup to make a profit. For a Technician to install the battery the employer must pay the Technicians salary, health benefits and pay for training to keep the employee up to date and qualified to work on your vehicle. After charging enough to cover these cost the employer must cover the cost of shop materials used, battery recycling cost, overhead for the building and utilities and cost for maintaining the Dealership. Then the Dealer must add some costs to make a profit. As you can see this adds up exponentially very quickly.

    Is $345 expensive- you bet your life it is but probably justified when you consider everything mentioned above. Independent Dealers are cheaper but not always the best option. Toyota Technicians are trained on Toyotas and can make short work of troubleshooting problems due to their training, resources and familiarity with these activities. An Independent mechanic may take longer and have real issues troubleshooting an odd problem with these modern vehicles.

    Do it yourself is another option to cut cost

    Most shops have automotive repair cost software programs that help them give reliable estimates to their customers for labor cost and parts prices but almost every repair will have different twist and turns that might increase the estimated cost.

    Warranty work may be the best reason of all to go to a Dealer.
     
    #2 John321, May 14, 2020
    Last edited: May 14, 2020
  3. bisco

    bisco cookie crumbler

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    the premise is wrong, because the dealer must sell a toyota approved battery, and the mech can quote whatever they want.
    warranty work is always paid by toyota on a set rate of time for repair, and of course the battery is at toyotas cost, not the $200. retail price the public would pay.
    and sometimes dealers will offer discounts on parts.

    idk for a fact, but it is often said that service is the profit center for dealers, not car sales
     
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  4. NewHybridOwner

    NewHybridOwner Active Member

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    And it has been said on PriusChat (certainly by me, but i was echoing what others had written) that the "Service Advisor" is in fact a salesperson (although probably not without some technical knowledge).
     
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  5. Salamander_King

    Salamander_King Senior Member

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    Genuine Toyota 12v battery for PRIME Part Number: 0054421171325 is MSRP $220.76. Add labor and fees, you can easily get over $300. That being said, yeah many dealers do mark-up the price of parts and service one way or another. They rely on the service dept revenue to stay afloat. However, most of dealership service dept are in direct competition against local non-dealer auto shops. They have to retain certain customer base in order to keep their business. When I need any service on my cars, I always get multiple estimates from several shops including a dealer. If the dealer cost is far off from non-dealer, I can often negotiate the price to come down to competitive range. You just need to ask right questions. If you don't they will take an advantage of you.
     
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  6. Elektroingenieur

    Elektroingenieur Senior Member

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    For customer-paid repairs, dealers are free to set their own prices, by any method they choose, subject only to state laws. In California, see BAR’s Write it Right (PDF) booklet for a summary of these.

    Warranty labor is typically reimbursed at an hourly rate agreed between the dealer and Toyota, multiplied by the times allowed in Toyota’s Universal Flat Rate Manual for the repair operations done; these times vary from model to model. Unless state law requires a different procedure, the hourly rate is set periodically by examining customer-paid repair orders, with some exclusions, and making a survey of competing dealers’ rates; the rate can also be adjusted for changes in the Consumer Price Index. The details are in the Toyota Warranty Policy and Procedures Manual, available, as is the Flat Rate Manual, by subscription to techinfo.toyota.com.
    They’d usually be reimbursed at MSRP for the part, kindly shared above by @Salamander_King, plus 0.2 hours at the warranty labor rate for removing and replacing it (operation number 190011; ZVW50 series).

    For more on the economics of automotive dealers and their service departments, see NADA’s NADA Data and Dealership Financial Profiles reports.
     
  7. Mendel Leisk

    Mendel Leisk Senior Member

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  8. Kenny94945

    Kenny94945 Active Member

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    OEM Battery List $220.
    California Sales Tax $22
    California Disposal Fee $10.
    Shop Supplies $10
    That's $262.
    Plus the labor $83. (Not knowing the labor rate, but Calif at $145 an hour is possible - but .2 [or 12 minutes] for book time, is that correct?)
    Total totals $345.
    Go Calif !
     
  9. mikefocke

    mikefocke Prius v Three 2012, Avalon 2011

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    Today I received my golf cart back from its annual service. For the record, it has covered 11k plus miles in about 20 years. It has 6 batteries. One cable needed replacing and a hold down clamp. The bill was $960 for the 6 7-year-old batteries. And ~$100 for pick up at my house and return to my house, hauling it to the shop 30 miles away (with 3 others on the same truck), installing the batteries and cables, polishing the cart, cleaning everything, checking everything, completing a written check list, calling me with an estimate and processing a credit card transaction.

    OTOH, a car dealership makes its money on financing car purchases, selling insurance, selling optional add-ons, and maintenance. They make a bit on most used car sales. Not so much on new car sales if you are smart.

    They have a huge overhead compared to the golf cart sales shop.

    Ever received a hospital bill and compared the price they would charge you without insurance and the price the insurance company pays. Vastly different because one buys in bulk and has leverage, you don't.

    I've often gotten a discount at car repair places just by remarking how much the estimate is and asking if they can do better.
     
  10. bisco

    bisco cookie crumbler

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    i just replaced my golf cart batteries, $720. plus tax, diy. 8 volt batteries aren't easy to come by
     
  11. mikefocke

    mikefocke Prius v Three 2012, Avalon 2011

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    4 or 6 batteries? I golf on two courses with lots of hills (tee to green maybe 120 feet) so I need the extra.
     
  12. The Electric Me

    The Electric Me Go Speed Go!

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    That's dark magic.
    You don't want venture that way, especially while social isolating.
    I always assumed Dealerships employ "Seers" that sacrifice chickens and read entrails to come to a final price. How else does my local Honda Dealer arrive at $130+ being a fair price to change my engine air filter and my cabin air filter? There had to be incense, blood and PETA involved.

    In reality I always assumed that dealerships get paid a set amount for definable repeated warranty work. But as far as out of warranty work it was free enterprise and up to the dealership what they want to charge.
     
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  13. bisco

    bisco cookie crumbler

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    6 8v batteries = 48 volt system. i only putt around the yard in it. picked it up for cheap many years ago, and the used batteries that came with it lasted until 2018. and that was without checking the water or keeping them charged :oops:
    i know better now, but these are duracells, and those were trojans, which i suspect were a higher quality.
     
  14. John321

    John321 Active Member

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    There are software programs that Dealers and car repair centers use for repair costs-

    Here are some examples

    Best Auto Repair Software | 2020 Reviews of the Most Popular Tools & Systems

    Auto Repair Estimating Software | Mitchell 1

    Toyota recommended Repair Procedures for Mitchel Software

    Toyota Recommended Repair Procedures for Mitchell Estimating :: Mitchell


    Automobile Body Repair shops also use software programs to get accurate estimates.

    Consumer Reports Car Estimator Tool for Consumers
    Car Repair Estimator - Consumer Reports
     
    #14 John321, May 15, 2020
    Last edited: May 15, 2020
  15. mikefocke

    mikefocke Prius v Three 2012, Avalon 2011

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    And using those estimators, the dealer has to absorb any unknowns that come up, difficulty in diagnosing, skill of the mechanic, etc. Like so many things in life, you can pay by the hour and you absorb the unknowns. Or you accept the flat rate pricing.
     
  16. Zythryn

    Zythryn Senior Member

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    You forgot:
    Slush money so they can sponsor local little league so they can look like good guys: $5
    Money so they can afford politicians: $50
     
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  17. ETC(SS)

    ETC(SS) The OTHER One Percenter.....

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    Shop rates of $150/hr are not all that unreasonable - even in Caly.
    Usually they have a 1/2 hour minimum.

    IMHO this is a “whatever the market will bear” thing, and some people insist on having a Gen-U-Wine OEM battery installed at the dealer, by a dealer employee (despite the fact that, in many cases, aftermarket batteries are better.)

    As much as I love to hate dealerships.....this really isn’t on THEM.

    Most people know or SHOULD know that wear items (tires, batteries, filters, etc) are available outside the mothership. I’ve heard many MANY posts about tires in this forum, but relatively few comments about how it’s better to go to the dealership for replacement tires.
    I treat batteries the same way.

    YMMV
     
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  18. NewHybridOwner

    NewHybridOwner Active Member

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    I haven't actually counted, but it does seem to me that when it comes to batteries the prevailing view is to go for the OEM ones -- but not necessarily have the dealer install them; does that affect the warranty?
     
  19. ETC(SS)

    ETC(SS) The OTHER One Percenter.....

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    No more than going with aftermarket tires would.
     
  20. NewHybridOwner

    NewHybridOwner Active Member

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    I meant the warranty on the battery itself: does the OEM battery's warranty depend on it being installed by the dealer?
     
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