Why rising repair costs aren’t boosting auto shop profits
Car repair costs have been rising steadily across the United States, adding to the growing costs of car ownership. Federal data from the U.S. Bureau of Labor Statistics shows that the price index for motor vehicle maintenance and repair has increased by roughly 35%-40% since 2019 (approx. 315 in 2019 to about 440 in late 2025), based on the Consumer Price Index (CPI) for the category. According to Kelley Blue Book, the national average cost for all types of vehicle repairs (across all makes and models) is about $838. Yet despite these higher prices, industry data suggests many auto repair shops are facing rising costs of their own, leaving their profit margins shrinking rather than improving. How did such a paradoxical situation come about? Here, Way.com examines what's driving costs on both sides of the counter.
Why did repair costs spike?
Vehicle repair costs have climbed 43% since 2019, according to data cited by Auto Finance News from Synchrony Financial.
The two main culprits for those huge repair bills are labor and parts. Labor rates at repair shops have gone up in recent years as the industry grapples with a shortage of experienced repair technicians. The U.S. Bureau of Labor Statistics estimates that the industry will need more than 70,000 new automotive service technicians annually (from 2024 to 2034) just to replace retirees and workers leaving the field. At the same time, industry workforce groups report persistent national shortages, forcing shops to raise wages and compete aggressively for talent.
At the same time, replacement parts have also become costlier, especially electronic components and advanced sensors that are now standard in many vehicles. Tariffs on imported parts aren’t helping either.
Changes in car owner behavior also likely play a role, according to USA Today. More and more people are holding on to their cars longer because of the high costs of buying a new one, including the price of a new car and interest rates. This has also increased the demand for repairs and pushed up the cost of keeping older vehicles on the road.
If repairs cost more, why aren’t shops thriving?
Given how expensive car repairs have become, it is only natural to assume that auto repair shops are doing especially well in terms of profits. However, industry data points to a more restrained reality. Research from IBISWorld shows that profit margins at auto repair shops, especially smaller independent shops, remain relatively thin, even as prices charged to customers have increased.
Public financial results from a leading automotive service and tire provider show this playing out in real margins. In the report, operating results swung from about +4.5% of sales to a -2.0% operating loss year over year, and total operating expenses climbed from 32.7% to 37.5% of sales due to higher technician labor and material costs.
Many shops also invest in staying compatible with newer vehicles coming through their doors. Add in rising rent, insurance, utilities, and compliance costs, and even well-run shops can find that higher revenue does not automatically translate to higher profits.
Much of what drivers are paying reflects higher costs that auto repair shops themselves are facing and passing along. Rising technician wages, more expensive parts, rent, insurance, and the growing cost of tools and training needed to service newer vehicles have all made running a repair shop more expensive, leaving limited room for profits to grow.
What’s driving up costs for repair shops?
Much of the answer lies in the rising costs of simply running a repair business. According to a study by IMR Automotive Market Research, labor remains the single biggest pressure point. Repair shops continue to struggle with a shortage of skilled technicians. This has forced many operators to raise wages, offer signing bonuses, or rely on overtime just to keep their bays staffed. Those higher labor costs do not always translate cleanly into higher billable hours, especially as modern vehicles require more diagnostic time that is not fully recoverable.
Parts costs are another challenge. Automotive Market Research notes that replacement part prices remain high, driven by supply chain disruptions, tariffs, and the growing use of advanced electronic components. While parts prices have risen for customers, repair shops often have limited flexibility on markups, particularly when using OEM parts or competing with online pricing. As a result, higher parts costs frequently pass straight through to customers without boosting shop margins.
Technology and overhead costs are also climbing. Newer vehicles require expensive diagnostic tools, software subscriptions, and specialized equipment for tasks such as ADAS calibration.
Many shops must make ongoing investments just to stay compatible with the newer vehicles coming through their doors. Add in rising rent, insurance, utilities, and compliance costs, and even well-run shops can find that higher revenue does not automatically translate to higher profits.
So what exactly does this mean for repair shops?
As auto repair operators see repair costs rise, it is not so much about raising their prices as about managing margins. With the problem of labor shortages and the added complexity of cars, the auto repair industry is facing a distinct challenge whereby the increase in revenue does not automatically equate to an increase in profitability, as there are limits to raising the price to reflect the increase in the cost of repair, especially with the price-conscious nature of auto repair customers.
The broader significance extends beyond the auto repair industry. Many service-based businesses face similar challenges, where balancing rising costs and customer demands is a huge challenge. When wages, equipment, and compliance costs are increasing, it is challenging, even in robust market conditions.
It is becoming increasingly clear that rising repair costs are not really about burdening the consumer. Rather, they reflect the changing nature of skilled service-based business models. There are opportunities for businesses looking to improve cost efficiency. The way forward for business is combining pricing discipline with better use of data, diagnostic technology, and operational insights.
This story was produced by Way.com and reviewed and distributed by Stacker.
