On the surface flat rate sounds simple: A repeatable operation studied enough to develop a reliable expectation of how long it will take to do it. However, it's not quite that easy. To start with, different flat rates have developed. As an example, let's look at replacing a left front lower control arm on a 2005 Chevrolet Impala.
Chevrolet's warranty time guide shows 0.6 for replacement. A service time guide shows 0.8 for the same replacement. Collision estimating guides show from 1.0 to 1.2 for this repair. The highest allowance is twice as much as the lowest. Why such a variance? Each is developed with different assumptions for different markets. One is for a new part failure, one is for older part wear or failure, and one is for part damage.
New Part Failure: Factory warranty flat rate is what the manufacturer will pay for their own repairs to their own vehicles in their own new car dealerships. These rates assume a factory-trained technician is working on new vehicles, performs this repair repeatedly, and has all the information and tools needed. A replacement, possibly due to a casting failure or incorrect bushing mount, is simply removing and installing one new part with another on a new vehicle.
Older Part Wear or Failure: Service flat rate amounts assume the vehicle is a little older with some normal use, wear and/or corrosion. These "aftermarket" repairs are done with commonly available tools and an average technician who is not necessarily specialized on this exact model. A replacement due to corrosion or bushing failure is typically more difficult to remove and requires more cleanup before replacement. There are more variables to deal with and more time is generally allowed.
Part Damage: Collision repair flat rate incorporates the above plus additional variables. With no two collisions being exactly the same in direction and force, parts are broken differently, including attachments. Related parts that also are damaged may interfere with "normal" replacement. A damaged control arm may be distorted or otherwise put pressure on the bushings or ball joint to make removal more challenging. Parts around it also may have been repaired or replaced, adding another dimension of difficulty to installation.
Although anecdotal, this control arm example illustrates that collision flat rate tends to be higher and does bring up another issue. There is another side to the equation that calculates repair costs, dollars per hour.
There are fundamental differences in these three situations. Warranty labor rates are set by the manufacturer based on each local market. Vehicle owners are not paying for these repairs, so price is not a competitive issue for them. Vehicle manufacturers have a captive market here and market forces have little effect.
Service labor rates are set by each independent repair shop, with an eye on competitive shop rates in their area. Each business handles a large number of small, and usually routine jobs, where vehicle owners are paying for repairs themselves. It is in the customer's best interest to shop for the best value, which doesn't always mean the lowest cost. This is the free market at work.
Collision repair labor rates are unusual in that, for the most part, there is a third-party payer involved. Collision repair businesses handle a smaller number of larger, non-routine jobs and vehicle owners are not usually paying the entire bill, perhaps just paying a pre-set deductible. Vehicle owners are generally not as concerned with the final repair cost, as are their insurers. Insurance companies' interest, along with their concentrated buying power, changes market forces for collision repair pricing and helps explain some large variances found between service and collision repair rates in many markets.
Pricing automotive repairs has evolved with the automotive industry, although evolving differently by type of repair and market. As both continue to evolve, be aware of this history to accommodate future changes in both sides of the equation and price your work effectively. Stay profitable to stay in business.
Bruce Burrow, AAM, started writing estimates over 30 years ago, has worked for most of the information providers, and, as an independent instructor for the last 10 years, has trained estimators all across North America. He is ASE Master certified and an instructor for the Automotive Management Institute. Send questions, ideas and comments that you would like to see addressed here to [email protected] and stay tuned.
