For years, dealerships could often rely on the traditional 40% gross profit rule. The calculation is straightforward: cost plus 67% produces approximately a 40% gross profit margin.
However, manufacturer suggested-retail pricing is no longer consistent across every part or manufacturer.
Chuck compared examples from several manufacturers, showing parts with margins around 50%, 40%, the mid-30% range, and even 26%. Tires presented another challenge, with the difference between cost and suggested retail often falling between 10% and 13%, depending on the manufacturer.
These differences make it important for dealerships to evaluate their own parts inventory instead of assuming the same margin applies across the board.
To do this, Chuck recommended pulling a report containing part numbers, cost, and suggested list price. Dealerships can then calculate gross profit and gross profit percentage in a spreadsheet and sort the results to see how actual manufacturer pricing compares with the traditional 40% benchmark.
The 40% rule can be a useful starting point, but your own parts data should guide your pricing strategy.
“What he really taught me was that… suggested retail that comes off that manufacturer master tape does not mean that you can't change it every day, every week, every month.”
Chuck Hartle
A pricing matrix is only effective when parts are actually sold using it.
Chuck shared an example of a dealership whose matrix was set at approximately 51.8% gross profit, yet only 1.18% of its parts were being sold through the matrix. The remaining 98.82% were sold at or below the matrix price, and the dealership's overall gross profit was 34.79%.
The problem wasn't necessarily that the matrix was too low. The bigger issue was that the matrix wasn't being used consistently.
This is why simply increasing matrix percentages may not solve a dealership's profitability challenges. If most customer-pay parts are sold at menu prices or discounted below the matrix, a higher matrix won't necessarily improve the overall result.
Chuck recommended reviewing customer-pay sales data over a period of roughly 90 days, with 60 days as a minimum and up to 120 days when appropriate. By sorting sales according to gross profit percentage, parts managers can identify individual parts and categories that are underperforming.
They can then make targeted pricing adjustments instead of applying large increases across the entire matrix.
A realistic, consistently used pricing matrix can be more effective than an aggressive matrix that gets overridden.
One of the most practical lessons from Chuck's presentation was that dealerships don't necessarily need dramatic price increases to improve profitability.
He shared his own experience as a fixed operations director. After implementing a revised matrix, his customer-pay gross profit increased from approximately 39.5% to just over 40%. When a consultant asked whether customers had complained about the changes, the answer was no.
The consultant recommended increasing the pricing escalators by another couple of percentage points. After repeating the process over three successive months, gross profit exceeded 42%.
The lesson was not to raise every price indiscriminately. Instead, dealerships should evaluate their results, make measured adjustments, and monitor customer response.
Chuck also emphasized that manufacturer suggested-retail pricing does not have to be treated as a permanent ceiling. Dealerships can review and adjust their pricing strategy as they learn more about their customers, sales mix, and profitability.
This approach allows parts managers to identify pricing opportunities without automatically making every category more expensive.
Menu-priced parts can create another challenge because their prices may remain unchanged while manufacturer costs increase.
Chuck used an air filter priced at $29.95 for two years as an example. If the manufacturer's cost increases during that period but the dealership continues charging the same price, the dealership's gross profit margin shrinks.
Even when the original price seemed reasonable, it may no longer deliver the same return.
To address this, parts managers should review menu-priced items and identify where sale prices have failed to keep pace with manufacturer cost increases. Working with the service department can help dealerships evaluate these items and make appropriate adjustments.
Chuck also explained that maintenance items can have a significant effect on customer-pay gross profit because they represent a substantial share of customer-pay business. If too many of these items carry low margins, stronger margins on other parts may not be enough to offset the difference.
Regularly reviewing menu prices helps prevent rising costs from quietly eroding profitability.
Protecting dealership parts gross profit requires more than setting a pricing matrix and hoping it produces the desired results.
Chuck Hartle's presentation highlighted several opportunities for improvement: validating the traditional 40% rule against actual manufacturer pricing, reviewing matrix usage, identifying low-margin menu items, monitoring sales overrides, and making measured pricing adjustments.
The numbers also need to be interpreted in context. Tire sales and maintenance-heavy order mixes can lower overall gross profit percentages even when total sales increase, so parts managers must understand what is driving the results rather than relying on a single number.
Ultimately, dealerships have the ability to influence customer-pay profitability by regularly evaluating the data and adjusting the pricing strategy accordingly.
When parts managers understand where margins are being lost and why, they can make targeted decisions that help protect gross profit without relying on blanket price increases.
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