Every workshop owner has wondered: "Am I charging enough for parts?" Mark up too little and you're leaving money on the table. Too much and you lose customers. This guide breaks down what NZ workshops actually charge and how to set your own markup strategy.
We'll cover industry benchmarks, tiered markup matrices, the difference between margin and markup, and how to calculate what works for your workshop.
NZ Average
41%
parts margin (MTA data)
Recommended
50-60%
target gross profit
Lost Profit
$40-70k
from poor markup (annually)
↓ In this guide
📊 Markup vs Margin: What's the Difference?
These terms are often confused, but understanding the difference is crucial for pricing correctly.
Markup
The percentage added to the cost price to get the selling price.
Cost: $100
Markup: 50%
Sell Price: $150
Formula: Cost × (1 + Markup%)
Margin (Gross Profit)
The percentage of the selling price that is profit.
Sell Price: $150
Cost: $100
Margin: 33.3%
Formula: (Sell - Cost) ÷ Sell × 100
⚠️ This Matters More Than You Think
A 50% markup only gives you 33% margin. To achieve 50% margin, you need a 100% markup. Many workshop owners think they're making 50% when they're actually making 33%.
Markup to Margin Conversion Table
| Markup % | Multiplier | Gross Margin % | Example ($100 cost) |
|---|---|---|---|
| 25% | ×1.25 | 20% | Sell $125, Profit $25 |
| 33% | ×1.33 | 25% | Sell $133, Profit $33 |
| 50% | ×1.50 | 33% | Sell $150, Profit $50 |
| 66% | ×1.66 | 40% | Sell $166, Profit $66 |
| 100% | ×2.00 | 50% | Sell $200, Profit $100 |
| 150% | ×2.50 | 60% | Sell $250, Profit $150 |
📈 Industry Benchmarks: What Others Charge
New Zealand Data
According to MTA (Motor Trade Association) data, the average parts margin across NZ workshops is 41%. That means for every $100 in parts sales, the average workshop makes $41 gross profit.
However, this varies significantly by workshop type and part category:
| Workshop Type | Typical Margin | Notes |
|---|---|---|
| Independent General Mechanic | 35-45% | Competitive pricing, volume-focused |
| Specialist Workshop | 45-55% | European, performance, diesel specialists |
| Dealership Service | 50-65% | OEM parts, captive customer base |
| Auto Electrical | 40-50% | Specialist electrical parts |
| Panel & Paint | 25-35% | Insurance work, lower margins on body parts |
International Comparisons
Australia
20-28%
More competitive market
USA (Recommended)
50-58%
Industry coach target
NZ Average
41%
MTA member data
🧮 The Tiered Markup Matrix
Smart workshops don't use a single markup percentage. They use a tiered matrix that applies higher markups on cheaper parts and lower markups on expensive parts. This maximizes profit while keeping big-ticket items competitive.
Why Tiered Pricing Works
- Small parts have hidden costs - A $5 filter takes the same time to order, receive, and invoice as a $500 part
- Customers notice big numbers - They'll price-check a $600 alternator but not $15 in hose clamps
- It averages out - High margins on small parts offset competitive pricing on large parts
Example Tiered Markup Matrix
| Part Cost Range | Markup % | Multiplier | Margin % | Example |
|---|---|---|---|---|
| $0 - $10 | 150% | ×2.50 | 60% | $5 → $12.50 |
| $10 - $25 | 120% | ×2.20 | 55% | $20 → $44 |
| $25 - $50 | 100% | ×2.00 | 50% | $40 → $80 |
| $50 - $100 | 80% | ×1.80 | 44% | $75 → $135 |
| $100 - $250 | 60% | ×1.60 | 38% | $150 → $240 |
| $250 - $500 | 45% | ×1.45 | 31% | $350 → $507 |
| $500+ | 35% | ×1.35 | 26% | $800 → $1,080 |
💡 Pro Tip: Automate It
Workshop management software like Hoist can automatically apply your markup matrix to parts, saving time and ensuring consistency. Set it once and every invoice is priced correctly.
💡 Pricing Strategies That Work
1. Stocked vs Procured Parts
Many NZ workshops use different markups for parts they stock versus parts they order in:
Stocked Parts
Parts you keep in inventory (filters, brake pads, common service items)
40-50% margin
Lower margin acceptable - fast turnover, no ordering time
Procured Parts
Parts ordered specifically for a job (alternators, sensors, body parts)
50-60% margin
Higher margin justified - ordering time, delivery handling
2. Account for Hidden Costs
What looks like 50% markup might only be 10-15% net profit after accounting for:
📦
Freight
Delivery costs
⏱️
Time
Ordering, receiving
🔄
Returns
Wrong parts, warranty
📊
Dead Stock
Unsold inventory
3. Don't Race to the Bottom
The $40-70k Mistake
A survey of 618 workshop owners found that 67% are leaving $40,000-$70,000 on the table annually due to insufficient markup practices. Don't be one of them.
4. Review Regularly
Parts prices change. Review your matrix quarterly:
- Check supplier price increases
- Review your actual achieved margins (not just targets)
- Compare to competitors if possible
- Adjust for inflation
✅ Action Steps
Calculate Your Current Margin
Run a report on last month's parts sales. Divide total parts profit by total parts revenue. Is it above or below 41%?
Set Up a Tiered Matrix
Use the example matrix above as a starting point. Adjust based on your market and customer base.
Automate in Your Software
Configure your workshop management software to apply markup automatically. No more manual calculations on every invoice.
Review Monthly
Check your actual achieved margin monthly. If it's below target, investigate why and adjust.
📊
Track Your Parts Margins Automatically
Hoist workshop software applies your markup matrix automatically and shows real-time margin reports. Know exactly what you're making on every job.
Start Free Trial❓ Frequently Asked Questions
What's a good parts margin for a mechanic workshop? ▼
The NZ average is 41% gross margin on parts. However, industry coaches recommend targeting 50-58% for optimal profitability. Specialist workshops often achieve 45-55%, while dealerships may reach 50-65%.
How much should I mark up car parts? ▼
Use a tiered approach: 100-150% markup on parts under $25, 60-80% on parts $50-$250, and 35-45% on expensive parts over $500. This keeps small parts profitable while staying competitive on big-ticket items.
What's the difference between markup and margin? ▼
Markup is the percentage added to cost price. Margin is the percentage of selling price that's profit. A 50% markup only gives you 33% margin. To achieve 50% margin, you need 100% markup. Many workshop owners confuse these and undercharge as a result.
Should I charge more for ordered parts vs stocked parts? ▼
Yes. Procured (ordered) parts should have 5-10% higher margin than stocked parts. You're spending extra time ordering, receiving, and handling these parts. That time has value.
Sources & Further Reading