Auto Repair Labor Rate Break-Even Calculator

Find the hourly labor rate your shop needs to cover overhead and technician pay, then the rate that reaches your target profit margin.

Your estimate

Billed hours per month...

Monthly cost to cover...

Break-even labor rate...

Labor rate at target margin...

Estimates only. Assumptions are listed below, and you can change every input.

Most independent shops set their labor rate by looking at the dealer across town and knocking off a few dollars. That works until a rent increase or a new hire quietly pushes the shop under water, because nobody re-ran the math. The honest starting point is the rate that actually covers what it costs to open the doors.

This calculator adds your monthly overhead to what you pay technicians (paid hours, not billed hours, since you pay them either way), then divides by the hours you actually bill. That is your break-even labor rate. Applying your target margin on top gives the rate you should be charging. It treats labor as covering all overhead and ignores parts profit, which makes it deliberately conservative.

How to use this tool

Enter your total monthly overhead: rent, utilities, insurance, software, advisor and office pay, marketing, everything except technician wages and parts.
Enter the number of technicians, their average loaded hourly wage, the hours you pay them per week and the hours you actually bill per tech per week.
Read the break-even rate, then set a target margin to see the rate that meets your profit goal.

What the math assumes

Uses 4.33 weeks per month to convert weekly hours into monthly figures.
All overhead is assigned to labor; parts and sublet gross profit are ignored, so the true break-even rate is somewhat lower if your parts sales are strong.
Technicians are paid for their paid hours regardless of billed hours (hourly pay); flat rate pay plans need a different model.
Technician wage should be the fully loaded cost including payroll taxes and benefits.
Target margin is applied as a net margin on labor revenue, not as a markup on cost, and the default of 20 percent is a placeholder rather than a recommendation.

Frequently asked questions

What counts as monthly overhead?

Anything you pay whether or not a car comes in: rent or mortgage, utilities, insurance, equipment leases, software subscriptions, advisor and office salaries, uniforms, advertising and loan payments. Leave out technician wages, which the calculator handles separately, and parts costs.

Why are billed hours lower than paid hours?

Technicians spend time on training, shop cleanup, waiting for parts, moving cars and inspecting jobs that never sell. The ratio of billed to paid hours is your productivity, and raising it lowers your break-even rate without raising prices.

Is a 20 percent margin the right target?

There is no universal number. The default is only a placeholder to show how the math works. Pick a margin that reflects your risk, reinvestment plans and what your local market will bear, then check it against the rate other shops in your area charge.

Link to this toolhttps://garagetrackr.com/tools/labor-rate-break-even/

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