"Am I charging enough for parts?" Mark up too little and you give margin away on every job. Too much and you lose customers. This guide covers what NZ workshops typically charge, the difference between markup and margin, and how to set a tiered matrix for your own workshop.
NZ (our estimate)
~40%
typical parts margin
Recommended
50-60%
target gross profit
Left on the table
$40-70k
a year from weak markup (US survey, PartsTech)
In this guide
Markup vs Margin: What’s the Difference?
These two get confused, and the confusion costs money. Use our free Parts Markup Calculator to convert between markup and margin instantly.
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
There’s no published NZ benchmark we can point to. From working with NZ workshops, our estimate is that parts margins commonly sit around 40%: for every $100 in parts sales, roughly $40 gross profit.
It varies by workshop type and part category. As a rough guide:
| Workshop Type | Rough Guide | 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
USA (coach target)
50-58%
The Institute / PartsTech (see Sources)
NZ (our estimate)
~40%
typical NZ workshop
The Tiered Markup Matrix
One markup percentage across the board is the common mistake. A tiered matrix applies higher markups on cheaper parts and lower markups on expensive parts, so small items carry their handling cost and big-ticket items stay 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 to $10 | 150% | ×2.50 | 60% | $5 → $12.50 |
| $10 to $25 | 120% | ×2.20 | 55% | $20 → $44 |
| $25 to $50 | 100% | ×2.00 | 50% | $40 → $80 |
| $50 to $100 | 80% | ×1.80 | 44% | $75 → $135 |
| $100 to $250 | 60% | ×1.60 | 38% | $150 → $240 |
| $250 to $500 | 45% | ×1.45 | 31% | $350 → $507 |
| $500+ | 35% | ×1.35 | 26% | $800 → $1,080 |
Automate it
Hoist’s price matrix applies your markup tiers to parts automatically, and the job card shows the live margin as parts and labour go on. Set it once and every invoice is priced the same way.
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 US PartsTech survey of 618 workshop owners found that 67% are leaving $40,000-$70,000 on the table annually due to insufficient markup practices (US data, see Sources).
4. Customer-Supplied Parts, Warranty, and Retail Price-Checks
Three NZ realities the matrix doesn’t cover on its own:
- Customer-supplied parts. If you fit them, you carry the labour risk with none of the parts margin. Either decline, or charge a higher labour rate for the job and put "no warranty on supplied parts" on the invoice.
- Warranty on marked-up parts. Your margin also pays for the odd part that fails and has to come back off. That’s part of why a 20% markup on everything doesn’t work.
- Retail price-checks. Customers compare your big-ticket parts against Repco or Supercheap Auto shelf prices, not your cost. On the $250+ tiers, sanity-check your sell price against retail before you send the quote.
5. 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 40%?
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.
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 TrialFrequently Asked Questions
What’s a good parts margin for a mechanic workshop? ▼
There’s no published NZ benchmark; our estimate is around 40% gross margin on parts for a typical NZ workshop. US industry coaches recommend targeting 50-58%. As a rough guide, specialist workshops sit higher (45-55%) and dealerships higher again (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.
Related Articles & Tools
Sources & Further Reading