How do I calculate parts markup for auto repair?

Multiply what the part cost you by one plus the markup expressed as a decimal. A cost of one hundred dollars with a forty percent markup is one hundred multiplied by one point four, which is a price of one hundred and forty dollars and a gross profit of forty.

What is the difference between markup and margin on parts?

Markup is the profit as a percentage of your cost. Margin is the same profit as a percentage of the selling price. Because the selling price is larger than the cost, the margin is always the smaller of the two numbers, and confusing them is the most common way a parts price ends up lower than intended.

What markup do I need for a specific margin?

Divide the margin you want by one minus that margin, both as decimals. A thirty five percent margin is zero point three five divided by zero point six five, which is a markup of about fifty four percent. The calculator on this page does the conversion for whatever margin you type in.

Should the customer see the parts markup on the invoice?

That is a policy question rather than an arithmetic one, and either answer works as long as it is consistent. What causes arguments is a line that says one thing on the estimate and another on the final invoice. Whichever way you present it, price the part from the delivered cost, not the sticker cost.

Calculator

Parts markup calculator for auto repair

Put in what the part cost you and the markup you are adding. The calculator gives you the price, the gross profit and the margin that markup actually produces, and works backwards from the margin you wanted. No email box anywhere on the page.

What the part cost you

Delivered cost, including freight and any core charge you do not get back.

Markup you are adding

A percentage of your cost, added on top of it.

Margin you actually want

A percentage of the selling price, which is the number your accounts care about.

Price at that markup

$168.00

What you charge the customer for the part.

Gross profit on the part: $48.00
Margin that markup produces: 28.6%

Markup that hits the margin you asked for

53.8%

Margin and markup are different numbers. This is the markup that reaches your target.

Price at that markup: $184.62
Margin you asked for: 35.0%

The formula, written out

Markup is a percentage of what the part cost you. Multiply the cost by one plus the markup written as a decimal, and you have the price. Subtract the cost from the price and you have the gross profit in dollars.

Margin is a percentage of what you sold it for. Divide the gross profit by the price, not by the cost. That single difference in the denominator is the whole subject of this page, and it is why a part marked up by a given percentage never carries a margin of the same size.

Going the other way takes one more step. To reach a margin you have chosen, divide the margin by one minus the margin, both written as decimals, and that is the markup you need. The price itself is the cost divided by one minus the margin.

Markup and margin are not the same number, and the gap grows

Take the example the calculator opens with. A part that cost $120.00, marked up by 40.0%, sells for $168.00 and makes $48.00. Ask what margin that is and the answer is 28.6%, not the markup you typed. The profit is the same money either way. Only the number you divide it by changed.

Now go the other direction. To end up with a margin of 35.0%, the same part needs a markup of 53.8% and a price of $184.62. That is most of a third again on top of the markup somebody would have guessed at.

The gap is small at low percentages and widens fast at high ones, which is exactly where it does the most damage: doubling a cost is a markup of one hundred percent and a margin of fifty. Anyone quoting a target margin to you and a markup back at you without doing this conversion is out by a wide margin, in the direction that costs them money.

Why one percentage across the whole parts bin does not work

A single markup applied to everything produces two problems at opposite ends of the price range. On a cheap part it produces a price that is not worth the paperwork: the ordering, the collection, the warranty risk and the return if it is wrong all cost roughly the same whether the part is small or large. On an expensive part the same percentage produces a number that makes the customer go and price the part online, and they will find it.

The usual answer is a matrix: a higher percentage on cheap parts, tapering as the cost goes up. This calculator does one row of that matrix at a time, which is enough to build one, because a matrix is only a list of cost bands each with its own percentage.

The other input worth thinking about is the cost itself. Freight, a core charge you do not get back and the fuel spent collecting the part are all part of what the part cost you, and leaving them out understates the cost and overstates every margin that follows.

About the defaults on this page

The cost, the markup and the target margin the page opens with are placeholders picked so the example works, not recommendations and not an industry benchmark. This repo has no sourced parts pricing survey behind it, so the page does not name one and does not tell you what other shops charge.

What it can tell you is the arithmetic, which is the same everywhere and does not go out of date. Put your own numbers in and the two directions will always agree with each other, because they are computed by the same function.

The example the calculator opens with, done by hand

What the part cost you: $120.00
Markup added: 40.0%
Cost multiplied by one plus the markup: $168.00
Price minus cost, the gross profit: $48.00
Gross profit divided by price, the margin: 28.6%
Margin wanted instead: 35.0%
Markup that reaches it: 53.8%
Price at the margin you wanted: $184.62

Questions people ask about parts pricing

How do I calculate parts markup for auto repair?: Multiply what the part cost you by one plus the markup expressed as a decimal. A cost of one hundred dollars with a forty percent markup is one hundred multiplied by one point four, which is a price of one hundred and forty dollars and a gross profit of forty.
What is the difference between markup and margin on parts?: Markup is the profit as a percentage of your cost. Margin is the same profit as a percentage of the selling price. Because the selling price is larger than the cost, the margin is always the smaller of the two numbers, and confusing them is the most common way a parts price ends up lower than intended.
What markup do I need for a specific margin?: Divide the margin you want by one minus that margin, both as decimals. A thirty five percent margin is zero point three five divided by zero point six five, which is a markup of about fifty four percent. The calculator on this page does the conversion for whatever margin you type in.
Should the customer see the parts markup on the invoice?: That is a policy question rather than an arithmetic one, and either answer works as long as it is consistent. What causes arguments is a line that says one thing on the estimate and another on the final invoice. Whichever way you present it, price the part from the delivered cost, not the sticker cost.