There is a chain of quick oil change stores in my area called Prompto. All they do is oil changes, and the only thing they might try to sell you is a $2 bottle of wiper fluid. Their oil changes are $21. Even if you buy the cheapest oil and filter at Advance, it costs $25. Then they have employees to pay, shops and equipment to maintain, etc. How do they make a profit on that?
They’re not paying retail. Wholesale is a lot lower, even if it were on the same one-off basis retail customers pay.
Then you can be damn sure they’re negotiating sharp discounts with their suppliers, both in volume (do you buy 5w30 by the millions of gallons?) and probably discounts for “preferred provider” status (which is why you see some chains advertising one brand of oil or another… kinda like a restaurant chain featuring only Coke or Pepsi products.)
Their material costs are trivial compared to yours. They can afford the labor and overhead and still make a sliver of profit.
Of course, having said all of this, I admit I don’t have any citations. So feel free to ignore it. But that’s the general principle.
Don’t know about your spot, but the last time I went to something similar, they tried to upsell me like a son of a bitch with various flushes and other questionable services. I’m guessing that is a huge part of their business model.
Let’s see if we can price it out:
So if you have a $21 oil change, and it takes probably 15 minutes, that’s:
5 quarts of motor oil. This probably costs them somewhere around $12.50, assuming $2.50/qt bulk motor oil. (which is probably very high)
1 filter. Probably another bulk buy; probably $2 or so.
Labor- one guy for 15 minutes - even if he’s paid $10/hr, that’s $2.50.
Admin overhead (office staff, rent, A/C, etc…) probably another dollar or two. Could be low; $2 is a wild-assed guess.
So in total, we’re looking at $19 per oil change, and they’re charging $21. A decent profit margin for a low-cost service provider.
This shop doesn’t even offer those services at all.
One thing I’ve noticed is that the cost differential between doing it yourself versus the quick-change places is WAY higher for synthetic oil changes. I think part of what’s happened is that because the conventional oil change price is what they put in big letters on the sign, they tend to keep the prices down for those even as material costs have gone up. The way they’re making it up is that there’s a lot more cars that require or recommend synthetic, so they’re selling a lot more of those higher profit margin synthetic oil changes.
I assume this is the chain: Prompto 10 Minute Oil Change: Portland, ME: Quick Oil Change
It looks like they make money the same way every quick lube place makes money. They roughly break even or make a tiny profit on standard oil changes. If your car needs another quart of oil, they probably charge at least $3 and $5 wouldn’t surprise me. Then they upsell you on the other services. You can upgrade to synthetic oil or high mileage oil. It’s an extra $40 for an upgrade to Mobil 1, which works out to $8 extra per quart if you use five quarts. You can buy it at Walmart for less than $5 per quart and Prompto buys it in bulk for even less. They can also sell you an air filter, a cabin air filter, windshield wipers, etc. None of those are sold at the same low margin as a standard oil change.
You’re WAY overestimating the cost of supplies. Here’s the first listing I found on Google for a55 gallon drum of* synthetic oil*. $343.75. That works out to $1.56/qt.
As for oil filters, first listing I found for Purolator filters was 99 cents each (in a lot of 20,000.)
So right off the bat, the material cost is less than $9 per change. And I’m guessing a chain store can get a better price than I can from 2 minutes of research on the Internet.
Well, there’s a big part of the answer – low cost of goods. PLUS the fact that it’s been my experience with such places that charges go rapidly way up when you upgrade from whatever they have in bulk to a premium or synthetic oil. There’s a local millionaire known for making astute and profitable investments who owns a chain of those things, so I imagine he looked at the numbers and really liked what he saw.
Nitpick: that’s for a synthetic blend which is pretty much just a marketing gimmick that gets sold at the same price as conventional oil.
But yeah, you’re definitely right about the costs of raw materials. Back when all my cars took the same kind of oil, I used to buy 5 gallon pails of 5w30 at the local farm and ranch store for about $100 ($2/qt). I’m sure the oil change places get it for even cheaper than that barrel you posted.
I looked at their website, and along with oil upgrades, they offer these other items and services:
Air Filters
Limited Cabin Air Filters
Windshield Wiper Blades
(both Summer and Winter Blades)
Windshield Washer Fluid
Anti-Freeze
Transmission Fluid
Motor Flush
A lot of room for upselling in that list.
I did a Google search on the value of used motor oil and it appears that it sells for about $0.50 per gallon. So that’s a little more money that can be squeezed out of the business.
Needless upselling and failing to perform services charged for, in some cases.