How to Calculate the Break-Even Point for an Auto Repair Garage Without Undervaluing Your Labour

At the end of a busy month, an auto repair garage can have a full schedule and still generate less profit than expected. The problem is often not a lack of work, but an incomplete view of each repair order: labour hours are sold, yet the mechanic’s real cost and the garage’s fixed overhead are not fully included in the calculation.

This worked example shows how a mechanic workshop can calculate its break-even point using euros excl. VAT, while keeping labour properly valued. All amounts below are hypothetical assumptions for teaching purposes. Salaries are shown without the excl. VAT mention because wages are not subject to VAT; the other business amounts are stated excl. VAT.

The principle of break-even for an auto repair garage

The break-even point is reached when the garage’s contribution covers all its fixed costs. At that point, the business has neither a profit nor a loss.

For a repair order, the calculation is:

Contribution per repair order = Revenue − Variable costs

Then:

Break-even repair orders = Monthly fixed costs ÷ Contribution per repair order

You can also calculate the required monthly revenue:

Break-even revenue = Monthly fixed costs ÷ Contribution margin rate

For a complete explanation of the break-even point formula, the same logic applies whether you measure activity in repair orders, revenue, or billable labour hours.

Step 1: Separate fixed costs from variable costs

The first step is to classify every cost line correctly.

Fixed costs

Fixed costs generally remain stable during the month, whether the garage completes 20 repair orders or 40. In this example, they include:

• Garage rent
• Insurance
• Accounting
• Software and telecommunications
• Equipment depreciation
• Electricity and heating
• Administrative salary
• Sundry fixed costs
• Mechanic salary

Variable costs

Variable costs increase with each repair order. For this example, they include:

• Parts purchased for the vehicle
• Consumables used during the repair

This distinction matters. If the mechanic’s salary is already included in monthly fixed costs, do not subtract that salary again as a variable cost from each repair order. Otherwise, you would count the same cost twice.

Step 2: Calculate the full cost of a billable labour hour

A mechanic is paid for more hours than the garage can invoice to customers. Time is needed for diagnostics, preparation, cleaning, administration, training, vehicle movements, and interruptions.

In this hypothetical example:

• Monthly mechanic salary: 5 120 €
• Paid hours per month: 160 hours
• Billable hours per month: 128 hours

The internal cost of one billable hour is therefore:

5 120 € ÷ 128 billable hours = 40 € per billable hour

The 40 € figure is the mechanic’s internal labour cost for each hour that can be sold. It is not the customer-facing labour rate.

If the garage invoices labour at 85 € excl. VAT per hour, the labour line creates a contribution before parts and other variable costs:

85 € excl. VAT − 40 € = 45 € excl. VAT per billable hour

Using billable hours rather than paid hours prevents the garage from underestimating the cost of productive labour. Dividing 5 120 € by 160 hours would produce 32 € per hour, but that would ignore the 32 hours that are paid but not directly invoiced.

Quick tip: Review paid hours and billable hours separately every month. If the number of billable hours falls while the salary remains unchanged, the internal cost of each billable hour rises.

Step 3: Analyse one complete repair order

Now consider one hypothetical repair order for the auto repair garage.

Revenue from the repair order

• Labour: 2.5 hours × 85 € excl. VAT = 212.50 € excl. VAT
• Parts billed to the customer: 286 € excl. VAT
• Consumables billed to the customer: 30 € excl. VAT

Total revenue:

212.50 € excl. VAT + 286 € excl. VAT + 30 € excl. VAT = 528.50 € excl. VAT

Variable costs for the repair order

• Parts purchased: 220 € excl. VAT
• Consumables used: 18 € excl. VAT

Total variable costs:

220 € excl. VAT + 18 € excl. VAT = 238 € excl. VAT

Contribution from the repair order

528.50 € excl. VAT − 238 € excl. VAT = 290.50 € excl. VAT

The repair order therefore contributes 290.50 € excl. VAT towards the garage’s fixed costs and eventual profit.

The contribution margin rate is:

290.50 € excl. VAT ÷ 528.50 € excl. VAT × 100 = 54.97%

The labour cost is not subtracted again here because the mechanic’s monthly salary is included in fixed costs in Step 4. The 40 € per billable hour remains useful for checking whether the 85 € excl. VAT labour rate adequately covers the mechanic’s available productive capacity.

Step 4: Add the monthly fixed costs

List every fixed monthly cost explicitly:

The total is:

2 500 + 250 + 250 + 200 + 450 + 350 + 2 000 + 300 + 5 120 = 11 420 € excl. VAT

The administrative and mechanic salaries are listed without the excl. VAT label because they are wages rather than VAT-invoiced expenses.

Calculate the break-even revenue

Using the contribution margin rate of 54.97%:

11 420 € excl. VAT ÷ 54.97% = 20 776 € excl. VAT approximately

The garage needs approximately 20 776 € excl. VAT in monthly revenue to cover its fixed costs.

Calculate the break-even number of repair orders

Using the average repair order revenue of 528.50 € excl. VAT:

20 776 € excl. VAT ÷ 528.50 € excl. VAT = 39.31 repair orders

Because a garage cannot complete 39.31 repair orders, it must plan for at least:

40 repair orders per month

Verify the result

At 40 repair orders:

• Contribution: 40 × 290.50 € excl. VAT = 11 620 € excl. VAT
• Result: 11 620 € excl. VAT − 11 420 € excl. VAT = +200 € excl. VAT

At 39 repair orders:

• Contribution: 39 × 290.50 € excl. VAT = 11 329.50 € excl. VAT
• Result: 11 329.50 € excl. VAT − 11 420 € excl. VAT = −90.50 € excl. VAT

The calculation is therefore consistent: the auto repair garage reaches break-even between 39 and 40 repair orders and slightly exceeds it at 40.

Check the required billable hours per month

Each repair order contains 2.5 billable labour hours.

At 40 repair orders:

40 × 2.5 hours = 100 billable hours

The mechanic has a monthly capacity of 128 billable hours, so the remaining capacity is:

128 − 100 = 28 hours

Those 28 hours provide room for additional repair orders, more complex work, or scheduling uncertainty. However, unused capacity is not automatically profitable. The garage still needs enough customer demand and correctly priced work to convert that capacity into contribution.

Use ProCalc.app to test garage scenarios

You can enter fixed costs, selling prices, variable costs, and expected activity in ProCalc.app to calculate the break-even point and update the result as you change an assumption.

For an auto repair garage, this makes it easier to compare scenarios such as:

• Increasing the labour rate from 85 € excl. VAT
• Changing the average number of repair orders
• Adjusting parts or consumables pricing
• Adding another mechanic
• Reviewing the effect of higher rent or equipment costs
• Testing a target monthly profit

ProCalc.app is available as a one-time purchase: pay once and keep it forever. It does not require a subscription, and the app is designed to update calculations as you change the figures.

Mistakes to avoid when calculating garage break-even

1. Dividing salary by paid hours only

Using 160 paid hours instead of 128 billable hours would underestimate the internal cost of productive labour. The relevant calculation here is 5 120 € ÷ 128 hours = 40 € per billable hour.

2. Treating all sales as contribution

Parts billed at 286 € excl. VAT do not contribute 286 € excl. VAT to fixed costs when the garage paid 220 € excl. VAT to obtain them. Only the difference, after variable costs, is available to cover overhead.

3. Counting mechanic salary twice

If the mechanic salary is included in fixed monthly costs, do not deduct it again from the repair order contribution.

4. Using a rounded order target without checking it

A result of 39.31 orders means the practical target is 40 orders. Always verify both 39 and 40 orders to show the expected loss or surplus.

5. Ignoring non-billable time

A mechanic may be present for 160 paid hours but produce only 128 billable hours. The difference must be reflected in the internal labour cost.

Frequently asked questions

What is the break-even point for an auto repair garage?

It is the activity level at which the garage’s contribution covers all fixed costs. In this hypothetical example, the break-even point is approximately 20 776 € excl. VAT in monthly revenue, or 40 repair orders per month in practical terms.

How do you calculate break-even repair orders?

Divide monthly fixed costs by the contribution from one repair order:

11 420 € excl. VAT ÷ 290.50 € excl. VAT = 39.31 orders

The garage therefore needs to complete 40 repair orders to reach or exceed break-even.

Should mechanic wages be treated as fixed or variable costs?

It depends on the payment structure and the model used. In this example, the mechanic’s monthly salary is treated as a fixed cost of 5 120 €. It is therefore not deducted again from each repair order.

Why should a garage calculate the cost of a billable hour?

A garage needs to know how much each invoiced hour really costs. Here, 5 120 € ÷ 128 billable hours = 40 € per billable hour. This prevents the labour rate from being set using paid hours that cannot all be invoiced.

What happens if the garage completes only 39 repair orders?

Using the assumptions above, 39 repair orders generate 11 329.50 € excl. VAT of contribution. Against 11 420 € excl. VAT of fixed costs, the monthly result is −90.50 € excl. VAT.

Can ProCalc.app calculate a garage’s break-even point?

Yes. ProCalc.app can help you test fixed costs, variable costs, selling prices, repair orders, and target results. It is a one-time purchase: pay once and keep it forever, with no subscription required.

Summary

To calculate the break-even point for an auto repair garage without undervaluing labour:

1. Separate fixed costs from variable costs.
2. Divide the mechanic’s monthly salary by realistic billable hours.
3. Calculate the revenue and variable costs of a complete repair order.
4. Determine the contribution per repair order and its margin rate.
5. Add all monthly fixed costs.
6. Divide fixed costs by the contribution per order.
7. Round the result up to a complete number of repair orders.
8. Compare the required billable hours with the mechanic’s actual capacity.

In this hypothetical example, the garage must generate approximately 20 776 € excl. VAT per month, equivalent to 40 repair orders, to cover 11 420 € excl. VAT of fixed costs. The mechanic’s labour is valued using 128 billable hours, producing an internal cost of 40 € per billable hour rather than an artificially low cost based on all paid hours.