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How a workshop hourly rate is calculated
The hourly rate isn't a price you choose, it's a floor you observe: everything the workshop costs over the year, divided by the hours it actually sells.
Annual overheadsthe sum of all the workshop's cost items over 12 months
Billable hoursproductive hours on site × utilisation rate (often 70 to 80%)
Minimum hourly rateannual overheads ÷ billable hours
Recommended hourly rateminimum rate × (1 + target margin ÷ 100)
What each term means
- Annual overheads
- Everything the workshop costs over a year: loaded wages (yours included), rent, electricity and heating, tooling, lift, diagnostic scanner and technical-data subscriptions, insurance, accountant, software, waste disposal. Put everything in — except the parts, which are billed on separately.
- Billable hours
- The hours actually sold to the customer, not the hours on site. A mechanic paid for 1 600 h a year often only bills 1 200 to 1 300: reception, quotes, sourcing parts, road tests, tidying up, warranty fixes.
- Minimum hourly rate
- Your hourly break-even. Below it, every hour sold makes you poorer, whatever the volume of work coming in.
- Target margin
- What you add to the floor to make a profit and fund investment — 25 to 40% is common in an independent workshop.
A worked example: a two-mechanic garage
An independent workshop, two mechanics plus the owner at the bench. These are the calculator's pre-filled values.
- Loaded wages (2 mechanics + owner)= 70 000 €
- Workshop rent= 24 000 €
- Tooling, lift, diagnostic scanner, subscriptions= 16 000 €
- Insurance, energy, accountant, sundries= 10 000 €
- Total annual overheads70 000 + 24 000 + 16 000 + 10 000 = 120 000 €
- Billable hours2 × 1 500 h on site = 3 000 h, at 80% utilisation = 2 400 h
- Minimum hourly rate120 000 ÷ 2 400 = 50,00 €/h
- Recommended rate, 30% margin50 × 1,30 = 65,00 €/h
Floor 50 €/h · recommended selling rate 65 €/h excl. VAT.
Two figures to take away from this example. Billing 45 €/h in this garage means losing 5 € on every hour sold, i.e. 12 000 € over the year. And if utilisation drops from 80% to 70% — 2 100 h instead of 2 400 — the floor climbs by itself to 57,14 €/h without a single cost rising: being under-loaded costs as much as a rent increase. The garage job cost and margin app tracks this rate and the margin of every repair through the month.
FAQ
Garage hourly rate: frequently asked questions
Hourly rate, billable hours, parts margin: the workshop's benchmarks.
How do you calculate a garage's hourly rate?
Divide the workshop's total annual overheads by the number of hours actually billed in the year. Example: 120 000 € of overheads (loaded wages, rent, tooling, insurance, energy) ÷ 2 400 billed h = 50 €/h in cost. That's the floor: the advertised rate comes from adding your margin, i.e. 65 €/h at 30%. Parts don't go into this calculation, they have their own multiplier.
How many billable hours should you count per mechanic per year?
Count 1 200 to 1 600 billable hours per mechanic per year, i.e. 70 to 80% of the time on site. The rest goes on greeting customers, quotes, looking up part numbers, test drives, cleaning the bay and warranty rework. Using 1 800 h in the calculation artificially divides your overheads and gives you a floor rate a good third too low — the most common mistake.
What hourly rate do garages charge?
Advertised rates commonly run from 50 to 80 €/h excl. VAT in an independent garage, and top 100 €/h at a dealership or on premium brands. But the rate across the road tells you nothing about your situation: if your overheads divided by your hours come to 62 €/h and you bill 55 €/h because that's the going local rate, you're subsidising their customers. Calculate first, compare second.
Should parts be included in the hourly rate calculation?
No. Parts are bought then billed on with their own multiplier — commonly 1,3 to 2 on the purchase price excl. VAT depending on the category. Mixing them into the overheads throws everything off: the hourly rate should only cover the workshop's time and resources. That said, always think per repair: any discount given on parts has to be made up on the labour, otherwise it's your profit that ends up as the adjustment variable.
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