A shop owner in New York writes:
“I'm trying to get an idea of what the average markup would be on tires. Do most shops go by a percentage markup or straight amount….? I usually try to make at least $30 on a tire, but sometimes I price myself out of the market. I have two tire shops in my area that I compete with. Anyone have any ideas?”
Tom Ham replies:
“As far as margin goes (not markup), the goal for many independent shops and tire stores is in the upper 20s to lower 30s (percent) range.
“From what I have seen, that's a very realistic range for most shops. Go much higher and you get priced out like you mention. Go much lower, and it can fast turn into just swapping dollars with little or no real profit left for the shop.”
A shop owner in Ephrata, Pa., responds:
“Our average margin is 19.87 percent, and we do have trouble selling tires at that percentage because customers state they can find the tires cheaper elsewhere.”
A parts manager in Southern Pines, N.C., replies:
“I find that $25 a tire is enough to keep us in the market with everyone else.”
A shop vice president in Oregon, Ohio, answers:
“We are selling at cost plus our install and road protection package. The issue is that you need top front and rear staff to upsell the items needed—alignment, shocks, struts, brakes, even filter upgrades—to a profitable invoice.
“My question to the shops that want to maintain a nice profit: What does it cost you to advertise and not bring in clients due to unrealistic pricing?
“I would rather cut my profit on tires with upsales than do the cheap oil changes that bring in the wrong clients.”
A shop owner in Saratoga Springs, N.Y., writes:
“We mark up tires at $18 each over cost no matter what the size or brand, plus charge mounting and balancing (at) $84 for four tires. Includes valves, weights, hazard fees, etc. That brings in gross profit around $140 for four tires. Plus any upsales. Works good. I don't try to compete with the low-cost tire stores.”
A shop owner in Chapin, S.C., responds:
“We add $16 to the cost of most tires unless they are low-profile or high-dollar tires, then we add $25 to the cost, plus mount and balance of $15.50 per tire.
“I have found that makes us competitive in this area. We try to maintain a $110 profit on four tires and make upsells. There is no money in tires unless you sell hundreds a month. I think the idea is to upsell alignments, front-end parts, brakes, etc.”
The questions and responses are posted on the Automotive Management Network website, which is operated by Deb and Tom Ham, owners of Ham's Automotive Inc. in Grand Rapids, Mich. (The comments have been edited for clarity and brevity.)