Why Your Garage Costs Are Skyrocketing and How to Bring those Costs Down

Small business owners, specifically in the auto industry, still feel the impact of a covid-era world. With the post-pandemic market rebound, many supply chain stages have become costlier and more restrictive. While increasing your repair fees is always an option for balancing these increased costs, many small business owners aren't willing to risk losing their loyal customer base. Here, we dive into some of the most significant factors causing your auto garage costs to skyrocket and explore ways to reduce those expenses.

What's Causing The Increase

Material Costs

According to a recent study, widespread inflation has led to the highest raw material cost per U.S. vehicle since 2011. This increase in raw materials cost has been reflected heavily in high steel prices. Reports estimate that the average cost per pound for steel used in automotive manufacturing has increased 106% year over year as of 2021. The costs of raw materials have risen so dramatically that they now make up a substantially larger percentage of a vehicle's overall price. By the end of Spring of 2021, raw material costs reached historic levels, and the average transaction cost mainly remained unchanged. These costs caused a significant disparity for auto shop owners and companies at the front end of the value chain.

Inventory Shortage and Delays

Since the lifting of pandemic lockdown procedures, the automotive industry has also suffered from an inventory shortage and higher vehicle demand, further driving inflation. These supply and demand imbalances have contributed heavily to recent price increases. Even when the supplies are available, shipping delays create a headache for shop owners who can't begin repairs without the necessary auto parts. The rising cost of inflation, coupled with the damage to supply chains, has caused significant issues for both suppliers and original equipment manufacturers.

Labor Shortages

Auto shop owners are also experiencing difficulty maintaining staff. Much of the current workforce is moving towards retirement. Also, the younger talent pool is shrinking due to the competitive labor market, post-pandemic career changes, and a de-emphasis on technical programs starting from the high school level. Many auto shops are having trouble filling their employment gap, which contributes to delays in repairs and strain on the business.

How to Reduce Your Costs

Outsource your accounting One easy way to reduce overhead costs in your auto repair shop is by outsourcing your accounting to a trusted partner who will do the heavy lifting for you. Outsourcing allows you to spend more time focusing on your business and staff rather than tedious administrative tasks. You will also better understand where your finances currently stand and how you can strategize for the future. PABS has provided unparalleled auto repair shop accounting and bookkeeping services to the auto care industry for more than a decade. We are a trusted partner for 180+ auto care locations that benefit from our deep domain expertise and insights, resulting in improved business profitability. Learn more by giving us a call today!