In the dynamic world of auto repair, businesses are always on the lookout for innovative ways to increase revenue. One often overlooked avenue that offers substantial profit potential is the sale and servicing of tires. While the idea of selling tires might seem straightforward, the layers of profit within each sale are diverse. Let’s unravel this potential profit powerhouse.
1. The Fundamental Tire Margin
At the core of tire sales is the actual profit margin. Essentially, the margin is the difference between the tire’s cost price and the retail price at which it’s sold to the customer. Depending on the brand, type, and region, the profit margins on tires can vary considerably, often ranging from 20% to 50%. For businesses, it’s crucial to select tire brands and types that provide a balance between quality and profitability. By offering a blend of economy, mid-range, and premium tire options, auto repair shops can cater to a broader customer base, maximizing the potential for sales. I recommend using a tire matrix similar to our parts matrix to optimize your margins.
2. Road Hazard Warranties – An Underestimated Goldmine
After the tire sale, there lies the opportunity to upsell a road hazard warranty. This warranty is a promise to the customer that should their tires suffer damage from everyday road challenges like potholes, nails, or debris, they’re covered for repairs or replacements. From the business perspective, this is a significant profit avenue. The majority of tires sold with a road hazard warranty never face a claim. As such, while there’s a potential cost associated with offering this warranty, the additional revenue generally outweighs the occasional claim expenses. The price of the road hazard should be in line with how good your warranty and or service after the sale is going to be for the customer.
3. Aligning Profits with Alignment Services
The sale of a new set of tires presents another lucrative opportunity: alignments. A proper wheel alignment not only extends the life of the tire but also ensures optimal fuel efficiency and safety for the vehicle. By emphasizing the importance of alignments to customers, auto repair shops can often upsell this service. Furthermore, since the machinery used for alignments is generally a one-time investment, the ongoing profits from this service can be substantial. Make sure you use alignments in your preventative maintenance program as well and not just for when you sell tires and perform front suspension repairs.
4. The Balancing Act: Mounting and Balancing
Mounting (fitting the new tire onto a wheel) and balancing (ensuring even weight distribution on the wheel) are essential services accompanying any tire sale. These processes ensure the tire’s optimal performance, longevity, and safety. For auto repair shops, the labor and material costs associated with these services are relatively low, especially when compared to the fees charged. Thus, mounting and balancing can quickly become significant contributors to a shop’s profit margin.
5. The “Backside Money” from Tire Manufacturers
Beyond the direct customer-facing profits, there’s another layer of revenue potential in tire sales. Many tire manufacturers offer incentives or rebates to businesses based on sales volume. The more tires of a particular brand sold, the higher the rebate or bonus the shop earns. These manufacturer incentives, often referred to as “backside money”, can significantly augment a shop’s profitability, especially during promotional periods where rebates may be even more substantial. These manufacturers also typically give you co-op funds to use for advertising, clothing etc…….
Conclusion
For auto repair shops aiming to diversify revenue streams and boost profitability, tires present a multifaceted opportunity. Beyond the initial sale, the potential for profit spans warranties, alignments, mounting, balancing, and manufacturer incentives. By integrating tire sales and services into their offerings, auto repair shops can drive growth, improve customer retention, and pave a smoother road to financial success.
