TIRE PRICING

[Jeff]

OK...so I am getting into the tire biz. I was farming it all out but got a deal on a balancer and I had a mounting machine for a while now. My question is how do you folks mark up your tires? I have one wholesaler set up and in comparing like brands and sizes with other stores ( tires Plus, Kingdom etc.) it doesn't appear to have much margin. Thanks for the input. Jeff.

[mspecperformance]

I have wrestled with the same issue. I am not much of a tire shop at all, I pretty much got my tire equipment to give a better overall service to my customers and to provide every service in house. I have learned though the mark up on tires is abysmal. Most of my customers are savvy with what they can get from tire rack and such and its a tough sell a lot of times. I have not figured out a good way to sell tires and actually dread having to recommend them to my customers. I will often try to recommend the other services needed on their vehicles before mentioning tires (unless they are terribly chewed up) just simply because the profit margin on other services is significantly higher.

[xrac]

On most tires with a wholesale cost less than $100 I try to add $20 sometimes $25 plus $15 for installation. That gives us a final price that it competitive. We have Walmart, Sams Club, Pep Boys, Discount Tire, and a Best One all within less than a mile of us.

[Tires Too]

Selling tires can be your most profitable service you can do in your shop! Forget about profit percentages, look at profit dollars. I'll try to break it down to make sense. Let's say your labor rate is $80 per hour and you sell an additional $80 in parts at 50% profit for each hour of labor billed, your profit dollars are;

 

Labor sale $80

Part Profit $40

 

Total Gross Profit $120 per hour.

 

By selling tires at $20 over cost, plus charging $20 for mounting and balancing you will have the follow gross profit dollars by selling and install 4 tires in an hour of bay time;

 

Labor sale $80 4 tires x $20 each for mounting and balancing

Tire sale $80 - 4 tires x$20 markup on each

 

Total gross profit dollars $160 per bay hour. In addition you get the opportunity to inspect the brakes, shocks, struts, front end components, maybe sell the wheel alignment, road hazard protection plan etc. Tires can be install by an entry level tech or general service tech costing half of what an "A" level tech cost.

 

I know we often look at profit %, but it's really profit $ that pay the bills.

 

Just my opinion.

Russ

 

[xrac]

Selling tires can be your most profitable service you can do in your shop! Forget about profit percentages, look at profit dollars. I'll try to break it down to make sense. Let's say your labor rate is $80 per hour and you sell an additional $80 in parts at 50% profit for each hour of labor billed, your profit dollars are;

 

Labor sale $80

Part Profit $40

 

Total Gross Profit $120 per hour.

 

By selling tires at $20 over cost, plus charging $20 for mounting and balancing you will have the follow gross profit dollars by selling and install 4 tires in an hour of bay time;

 

Labor sale $80 4 tires x $20 each for mounting and balancing

Tire sale $80 - 4 tires x$20 markup on each

 

Total gross profit dollars $160 per bay hour. In addition you get the opportunity to inspect the brakes, shocks, struts, front end components, maybe sell the wheel alignment, road hazard protection plan etc. Tires can be install by an entry level tech or general service tech costing half of what an "A" level tech cost.

 

I know we often look at profit %, but it's really profit $ that pay the bills.

 

Just my opinion.

Russ

 

Russ is correct plus you may be able to have a tire tech that you pay $10-$15 per hour do the tires versus a tech who you are paying $20-$25 per hour.

[ncautoshop]

On most tires with a wholesale cost less than $100 I try to add $20 sometimes $25 plus $15 for installation. That gives us a final price that it competitive. We have Walmart, Sams Club, Pep Boys, Discount Tire, and a Best One all within less than a mile of us.

I must not buy enough tires. If I mark up $20.00 I'm higher than everyone around me!

 

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[xrac]

I must not buy enough tires. If I mark up $20.00 I'm higher than everyone around me!

 

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I was not competitive until some new wholesalers started coming into our market. However, I do get nation account pricing from a couple of them for being a Car-x franchise.

[Joe Marconi]

All great information! One more thing I can add. With tires you need to be competitive, but price is not the only concern. We sell a lot of tires and we know that we are not the cheapest. We track all local tire stores, Sears, etc. But we offer the customer benefits that differentiate us from the competition, such as: Lifetime rotation, road side assistance, road hazard, flats fixed free, etc. We focus on the benefits, not the price. You will be surprised at how many of your good customers will not worry too much on price.

 

I know I cannot compete on price all the time, but I can compete on benefits.

[Jeff]

Thanks folks. I knew there wouldn't be much profit in it. Just trying to keep as much work in house as possible. The real money seems to be in the mounting and inspections. Down side for me is I wont be carrying a huge inventory. I can get next day on about anything. I guess the next step will be to find additional wholesalers in order to be able to shop out the prices. Thanks again!

Edited August 21, 2013 by Jeff

[phynny]

Tires tires tires, I do dread tires and pricing but there is money to be made. Like Joe said, concentrate on what you guarantee and not being the lowest price.

 

For instance, we only do full synthetic oil changes so if you buy tires from us we will rotate your tires every oil change .

[ATLAuto]

All great information! One more thing I can add. With tires you need to be competitive, but price is not the only concern. We sell a lot of tires and we know that we are not the cheapest. We track all local tire stores, Sears, etc. But we offer the customer benefits that differentiate us from the competition, such as: Lifetime rotation, road side assistance, road hazard, flats fixed free, etc. We focus on the benefits, not the price. You will be surprised at how many of your good customers will not worry too much on price.

 

I know I cannot compete on price all the time, but I can compete on benefits.

 

Joe, how does your shop handle the road side assistance aspect? I'm guessing that you outsource this to a towing company or someone like AAA.

[Jeff]

I use BG products. Their road side assistance covers tires if installed here. I also like the added warranty features. Some folks seem to think that the time and mileage requirements for the warranty are a bit much BUUTTT it is cheaper in the long run than a new engine, trans, diff, etc!

[ATSAutomotive]

We have a great wholesaler down the road from us. All tires are marked up 43% for a 30% profit margin.

[Mario]

Very competitive in my area with a tire shop being basically on every major corner. I have had okay results with just marking up $100 on four tires, or $50 on two. That includes mounting, balancing, and I add a $2 fee for tire disposal if they leave the tires with me. Some shops still install all four for what I can buy all four tires for at cost. I have no idea how.

 

I have an old machine and I don't mount tires fast enough to really make money over my hourly rate. I spend too much time with the wire wheel cleaning the wheels but I hate having to redo them over bead leaks.

 

Good luck!

[Carl Atkinson]

Jeff,

I have spent the past 40 years providing services to other auto dealers particularly with used tires, wheels and waste tire services. Of course I tend to deal mostly with those who have found a niche and are successful in selling those items along with the related auto services. I am particularly impressed with those shops who do not bat an eye at the price they charge for tires and they always have the best used tires included in the waste tires they ask me to remove from their stores. One in particular has been a customer of mine for more than 20 years and I have seen two management changes but the business is very much the same today as it was 20 years ago. From the outside looking in it seems to me they approach the tire business from an auto repair standpoint rather than the tire shop perspective I have always known. That means to me that they are very particular about the work they perform and always put the customer first. They do not do partial work on anything and if you as a customer are trying to negotiate prices they tend to suggest other shops for the work. The shop is always full when I call on them about once a month and I get the impression that means they have people waiting to make appointments. The variety of customer vehicles runs from very old restored or classic vehicles to very late model high end luxury cars and includes a lot of everyday mid priced cars probably 5 to 10 years old. The cars all seem to be in good condition by looking at them and the tires I see coming off those that needed tires are normally taken off due to a maximum of 6 years on the date of the tires. That policy is consistent with the general impression I have of these businesses. They do not concern themselves with price on anything and simply insist on doing the best they know how to do on everything. By the way the tires I see them selling are also higher priced brand names.

Now none of that applies to those who sell tires primarily where price is everything and volume is the only way they can make enough to pay their help. That is not to say that this is not a good way to go but if your heart is in Auto Repair instead of tires I suggest you consider the previous style. Good luck, the tire business has been good for me and I am having some pangs in giving it up.

[ATLAuto]

Just spoke with Kauffman Tire. Here is what they are told me:

• Deliveries 2x per day for free. Hot shot delivery for $25.
• Tires sold at the same cost their Kauffman retail stores pay. I found this hard to believe, but the numbers checked out. Kauffman has two distinct businesses ... wholesale and retail with separate business models for each.
• 20 different tire sizes will cover 85% of the vehicles on the road.

I walked into this conversation thinking that I would need to stock like the local Firestone to get decent pricing. Our Firestone keeps over 1,500 tires on hand at all times ... that's around $150k in inventory at all times. Not many shops can float that kind of cash.

 

However, after talking with Kauffman, it looks like getting into the tire game is easier than I thought. Keeping 2 full sets of each of the 20 sizes on hand (8 tires * 20 = 160 tires) would only cost around $20k in inventory. Going to move forward with this one.

 

EDIT: Attaching the tire size matrix showing the most popular sizes. Any tire supplier can give you this.

Edited September 3, 2013 by Wes Daniel

[risingsunmotors]

we sell tires, usually pick a good brand and offer just that (hankook) , we do not stock tires anymore , used to , but was difficult to keep up with ever changing sizes and carrying multiple brands etc. we get 2-4 deliveries a day , we sell of course based on customer need but convenience as well, car is here, needs tires, we can do NOW, you get the idea. what we charge, 23.99 M+B each tire, valve stem, service pack, extra.

tires we price like this , tire cost 87.91 lets say, multiply by 1.5 , sell for 131.86 , if tire is over 100 dollars we multiply by 1.36 102.44 x 1.36 sell for 139.31 . we make some money on tire sales and alignments of course, not record breaking BUT, the car is here, needs tires, why should we lose out on that profit?, right, we shouldnt.

we sell quite a bit of tires, the ones we loose are the ones that like costco, sams club, etc.

 

jeff

[ncautoshop]

we sell tires, usually pick a good brand and offer just that (hankook) , we do not stock tires anymore , used to , but was difficult to keep up with ever changing sizes and carrying multiple brands etc. we get 2-4 deliveries a day , we sell of course based on customer need but convenience as well, car is here, needs tires, we can do NOW, you get the idea. what we charge, 23.99 M+B each tire, valve stem, service pack, extra. 

tires we price like this , tire cost 87.91 lets say, multiply by 1.5 , sell for 131.86 , if tire is over 100 dollars we multiply by 1.36  102.44 x 1.36 sell for 139.31 . we make some money on tire sales and alignments of course, not record breaking BUT, the car is here, needs tires, why should we lose out on that profit?, right, we shouldnt.

we sell quite a bit of tires, the ones we loose are the ones that like costco, sams club, etc. 

 

jeff

Wow! That's some pricing I need to look at. I'm at 12 mount and balance and 10 in markup and my competitors still under cut me!

 

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[xrac]

we sell tires, usually pick a good brand and offer just that (hankook) , we do not stock tires anymore , used to , but was difficult to keep up with ever changing sizes and carrying multiple brands etc. we get 2-4 deliveries a day , we sell of course based on customer need but convenience as well, car is here, needs tires, we can do NOW, you get the idea. what we charge, 23.99 M+B each tire, valve stem, service pack, extra.

tires we price like this , tire cost 87.91 lets say, multiply by 1.5 , sell for 131.86 , if tire is over 100 dollars we multiply by 1.36 102.44 x 1.36 sell for 139.31 . we make some money on tire sales and alignments of course, not record breaking BUT, the car is here, needs tires, why should we lose out on that profit?, right, we shouldnt.

we sell quite a bit of tires, the ones we loose are the ones that like costco, sams club, etc.

 

jeff

 

Wow! Those are great margins. At that markup I wouldn't see a lot of tires.

[risingsunmotors]

using the above method of tire pricing we average 60 tires a month +/- , which i dont think is too bad for a small independent shop

[xrac]

using the above method of tire pricing we average 60 tires a month +/- , which i dont think is too bad for a small independent shop

That is not bad we average about 100 a month.