Unlocking Revenue: Why Auto Repair Shops Should Itemize Diagnostic Time

Understanding the Value of Diagnostic Billing in Auto Repair

In the ever-evolving landscape of automotive maintenance, 1 in 3 auto repair shops have recognized the importance of detailing diagnostic labor time on their invoices. According to a recent survey by Collision Advice and CRASH Network, about a third of these shops now itemize the diagnostic labor time spent researching diagnostic trouble codes (DTCs), separate from the vehicle scan charges. This change marks a significant shift in an industry that is increasingly relying on technology to diagnose and repair vehicles.

The Survey Insights: A Shift Towards Transparency

The survey, which collected responses from over 500 shops, revealed that only 40% refrain from including an itemized charge for diagnostic time, a decrease from 50% in 2020. This change indicates a growing trend among mechanics to ensure that they are compensated for the sometimes extensive time spent analyzing DTCs. Specifically, only 21% of businesses reporting that they were reimbursed for this time 'always' or 'most of the time' by the eight largest auto insurers points to challenges in aligning diagnostic billing practices with compensation from insurance providers.

Why Itemizing Diagnostic Time Matters

Diagnostic labor time is becoming a critical component of collision repair work. As Mike Anderson from Collision Advice highlights, each vehicle's diagnostic process can vary significantly depending on the issues presented and the technician's familiarity with the vehicle’s systems. The need for itemization is essential not only for transparency but also for maximizing profits, especially since accurate diagnostic troubleshooting often requires specialized knowledge and tools.

Challenges in the Current Climate

Despite the clear need for itemization, many shops still grapple with the practice of undercharging for diagnostic work. According to the findings reported by MOTOR, outdated pricing techniques are commonplace, where labor is quoted based solely on time rather than procedures or comprehensive diagnostics. This practice leads to significant revenue losses, eroding profit margins that are already tight in today's harsh economic conditions for auto repair shops.

The Emotional Costs of Changing Pricing Practices

One key barrier to more accurate billing for diagnostic time is the emotional hesitation from shop owners and advisors. Many fear that fully charging for the diagnostics may alienate customers or outprice themselves compared to competitors. This concern stems from an 'emotional bank account' concept, where shop owners underestimate the value of their technicians' labor and expertise. To rectify this, fostering confidence in the technicians' abilities and regular training is paramount. Only then will shops feel justified in charging their full worth for the extensive diagnostic processes involved.

Tracking Time: The Path to Profitability

To charge effectively for diagnostic time, repair shops must implement robust tracking of the different types of working hours: available time, elapsed time, and sold time. These metrics enable shop owners to better gauge productivity and efficiency, a practice critically underscored by the industry benchmarks set for automotive repair.

For instance, if a technician works 40 hours in a week but only manages to complete 30 hours of billed work, the productivity is only 75% — significantly below the 90% industry benchmark. Understanding these metrics allows shop owners to implement necessary changes to improve their counts and maximize revenue.

Future Trends: How the Industry Might Evolve

The future of diagnostic billing is likely to see increased standardization across auto repair shops. As more technicians are trained to view diagnostics as a valuable part of their labor, we can expect further integration of technology to assist in diagnostics. More shops may begin utilizing advanced systems that track diagnostic times alongside repair times, enabling clearer billing structures that reflect the true work done.

Importantly, with rising complexity in vehicle systems, the demand for skilled diagnostic technicians will continue to grow. Emphasizing this skill set will not only improve shop profitability but also enhance customer satisfaction through faster, more accurate repairs.

Conclusion: A Call to Action for the Industry

For automotive repair shops to survive and thrive amidst evolving market dynamics, there will need to be a cultural shift towards valuing diagnostic labor appropriately. By fully understanding and accurately billing for diagnostic time, shops can not only enhance their bottom lines but also contribute to a more transparent and effective auto repair industry. As the saying goes: "The more we know about our worth, the better we can ensure we receive it." This applies equally to shop owners as it does to technicians diagnosing today’s increasingly complex vehicles.

For those still hesitant about charging for diagnostics, consider analyzing current practices and evaluating whether implementing a new billing strategy could yield significant returns on your investment.