Auto shop invoice basics: To diagnostic fee or not to diagnostic fee?
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Posted on Dec 20th 2019
A diagnostic fee is one of the most confusing and misunderstood charges for both auto repair shops and their customers.
If you work in an auto shop or garage, the argument in favor of garage diagnostic fees is simple: automotive shops need a certain amount of time and man hours to diagnose an issue with a vehicle. Time is money, so the repair shop deserves to be compensated for its diagnosis.
For customers, this idea can be counterintuitive. Particularly for issues that can be perceived as minor or quick fixes, it can be hard for customers to understand why there’s a fee associated with just diagnosing an issue.
Customers may say:
"I already know what the issue is with my car."
"I don't need to understand why it's broken. I just need someone to fix it.”
So if you work in management at an auto repair shop or garage, should you charge a diagnostic fee? Or should you offer your diagnosis for free, in hopes of getting more potential customers in your door? And if you do choose to include a diagnostic fee, how can you do so without offending or surprising customers? We’ll explore all of this further below.
What is a diagnostic fee?
To get started, let’s define exactly what we mean when we talk about a diagnosis.
Say a customer drives into a garage or auto shop with a broken taillight. If the auto shop tech simply told the customer “you have a broken taillight”, this would not count as a diagnosis. A full diagnosis would require the auto repair tech identify the specific root cause behind why the tail light is broken. Is the tail light not working due to a blown bulb? Is it because of an electrical or wiring issue? Questions like these are what a full diagnosis should definitively answer.
Let's boil it down: a full diagnosis does not just describe “what” issue is happening, it explains the “why” behind an issue.
A full diagnosis does not just describe 'what' issue is happening, it explains the 'why' behind a particular issue.
So a diagnostic fee is simply the fee paid in order to understand the "why" behind an issue.
This is important for both customers and garages to understand. Customers should know that figuring out why an issue is occurring takes far more time, training, and experience than simply seeing an issue’s symptoms. A proper diagnosis is crucial for auto shops too: it provides a clear direction on the fix that needs to be put in place to resolve the issue. Most people have probably had experiences with auto shops that simply "throw parts" an issue, AKA haphazardly replace car parts to temporarily fix an issue only for the same issue to pop up again a week later. This ends up being a frustration for the customer, who has to take additional time to return to an auto shop and potentially pay for another repair. All of this can be avoided with a solid diagnosis.
Should garages and auto repair shops charge a diagnostic fee?
Our take here at Autoshopinvoice is that most auto repair shops should charge a diagnostic fee. As stated earlier, time is money. Ultimately, you’re providing a necessary service to the customer in diagnosing the issue which gets the customer one step closer to their end goal: fixing their car. Your shop and its employees deserve to be compensated for the value you’re providing. This also helps weed out any dishonest customers who are only looking for free advice to repair the issue themselves.
There are a couple exceptions to the rule:
- If your auto shop is in a town or location where no other surrounding auto shops or competitors charge for diagnostic fees, you may want to consider implementing a diagnostic fee carefully.
- If you’re a brand new shop that does not yet have a consistent stream of customers, then you may want to hold off on implementing a diagnostic fee until you have an established base of regulars and enough positive word-of-mouth to bring in new customers.
Outside of these special cases, a diagnostic fee is strongly recommended for the majority of shops. So with that being said, if you’re an auto shop owner and you’d like to implement a diagnostic fee into your bills and invoices, how should you go about it?
Fixed fee vs hourly fee
Let’s say you own an auto shop and you’ve decided to implement a diagnostic fee moving forward. Should the fee be a flat rate, or should it vary depending on how much time it took your auto repair techs to diagnose the issue?
The reality is that some diagnoses will take hours to perform, while others will take half an hour or no time at all. In an ideal world, you’d be able to explain to customers exactly what went into their individual car’s diagnosis, however we all know that this would be near impossible to put into practice. Because some customers won’t understand the level of work that goes into diagnosing a given issue, it is far simpler and cleaner to simply charge a flat rate for all diagnoses, regardless of the issue. This is a much better customer experience since they’ll know what to expect with each visit to your shop, and it also makes invoicing and billing easier for the shop.
What to do if the customer goes through with the repair
If a customer decides to retrieve their vehicle after learning the diagnosis without fixing the issue, then your diagnosis fee should help recoup costs for your shop’s lost man hours. But let’s say a customer receives the results of a diagnosis and chooses to proceed with having the necessary repair work done - hopefully this is the majority of cases for your auto shop. If this happens, we’d strongly advocate deducting the original diagnostic fee from the invoice and total bill.
The reason for this? Once the customer commits to the fix, your shop has gained back the revenue and margin it would’ve missed out on if the customer had decided to walk away after receiving the diagnosis. Since you’ll be able to charge the customer for parts and labor on the fix itself, simplify things for the customer: rather than adding a separate line item for the diagnosis in addition to the parts and labor of the fix, take the opportunity to thank the customer for trusting your shop to fix the issue by throwing in the diagnosis fee free of charge.
Your shop will have made its necessary margin and the customer goes home happier. It’s a win-win.
How much should you charge for a diagnosis fee?
When deciding on the amount a fixed diagnosis fee should be, take into account that this will vary on many different factors: your auto shop’s location and its cost of living, the number of competitors in the area, and the amount of existing business you have, to name a few. Here in the United States where autoshopinvoice.com was started, you’ll see a wide range of fixed diagnostic fees. It’s not uncommon for shops to charge the equivalent of ½ to 1 hour of labor, or anywhere from $50 - $150.
Ultimately, you’re providing a necessary service to the customer in diagnosing the issue which gets the customer one step closer to their end goal: fixing their car.
If you’re just getting started implementing a diagnostic fee, our advice is to charge on the low end of that range. In other words, charge a fee that’s as low as possible to partially cover your costs enough to sustain your business. Note that we say “partially” covering your costs here. The reason? Remember that the diagnosis fee is solely there to compensate your for the service you’re providing and recoup potential losses. However it’s not possible to run a sustainable auto repair business only off diagnosis fees.
At the end of the day, you need to complete repairs in order to make a profit. If your fee is so high that it becomes a deterrent to new customers walking through your doors, then you are losing potential business and are better off lowering your fee. And here’s the thing: you may not know that your diagnosis fee is thwarting customers from your shop; a customer may have read about your diagnosis fee online and decided it was too high, and then simply called another shop with a lower fee. It’s much better to start with a lower fee and gradually increase it once you have a consistent stream of business.
Tips for successfully implementing a diagnostic fee
So let’s say that your auto shop has decided on adding a diagnostic fee for the first time. What steps should you take to ensure that implementing the fee goes smoothly, and doesn’t confuse or scare away potential customers?
- Communicate, communicate, communicate
By far, the most important piece of advice when implementing a fee is to ensure that the fee is always communicated to the customer early on.
If customers primarily contact your auto repair shop via phone, then your receptionist or auto tech that answers the phones should make a note to always mention to the fee during their initial conversations. If your customers primarily book repair appointments using an online system, then your website should have a note mentioning the diagnostic fee. If you have a high number of walk-in customers, then make a note to mention the diagnostic fee to the customer before they leave your auto shop and drop off their car.
What should never happen is that a customer leaves their car at your auto repair shop only to find out later when they receive the quote or estimate for the fix that they will be charged a diagnostic fee if they don’t choose to proceed with the fix. Even worse, let’s say a customer drops of their car at the shop, receives a quote for the fix, and then decides that they aren’t able to afford the cost of the fix. As they’re leaving, they receive a bill for a diagnostic fee they were unaware of up to that point. This is a surefire recipe for disaster. You can almost guarantee a bad online review or negative reviews to their friends and family, and ensure that this customer will not return to your shop.
It’s crucial that all potential charges and fees are communicated upfront with a customer before they ever see an invoice. There should be no surprises when customers receive an invoice or a bill from your auto shop. For auto shop owners and management, building trust with customers is the most valuable business tool for earning repeat customers and growing your business. Once that trust is broken, it’ll be difficult to gain it back.
- Educate the customer
In this day and age, customers have more resources at their disposal than ever before. With a simple Google search, your customers will most likely have some ideas on potential diagnoses for issues before they even come to your shop. Additionally, online review sites and forums mean that customers have the ability to shop around on pricing, fees and quality of work between auto shops. If you own an auto shop, how can you use this to your advantage and distinguish yourself from the competition?
The answer: take some time to educate the customer. Specifically, teach them about the steps your auto techs have taken to diagnose a particular issue, the issue itself, and the steps required for the fix. Inevitably, some of your customers will say that they could care less about how cars work and the work that your shop does to diagnose an issue. However, for the customers that do care and are actively invested in your work, educating them about your shop’s work will build credibility and trust and lead to more repeat business. Additionally, customers will be more likely to understand the amount of work that goes into diagnosing and fixing an issue, and better appreciate the quality of the diagnosis and fix.
Simply put, most mechanics know a lot about cars and automobiles, but not as many are experts in customer service and communication skills. If you make an effort to take the time to communicate the quality of work your shop does, it will pay off in the long run.
- Look for instances to waive the diagnostic fee and build trust.
Once a diagnostic fee is implemented, you’ll more than likely have numerous situations where you’ll be able to waive the fee without taking a huge loss to your business. For example, if a customer brings in a car with an issue that is diagnosed and fixed in 10 minutes, why not consider waiving all fees to provide the service for free? The customer will no doubt be pleasantly surprised, you’ll have established trust with the customer, and chances are that customer will inevitably continue to return to your shop the next time they need repairs.
The point is, a diagnostic fee should never be the primary profit-driver for an auto repair shop or garage. The fee is more of a way to recoup and recover what would otherwise have been a missed opportunity for more lucrative repair work. Communicate the fee clearly and openly to customers early on for the best results when implementing a fee for the first time. Educate the customer on the reason behind the fee, and look for opportunities to waive the fee to help build trust and increase customer satisfaction.
Interested in learning more about the automotive software industry? Check out our Ultimate Guide to Auto Repair Shop Management Software and Automotive Invoice Programs for more.