How to Create a Mechanic Auto Repair Shop Profit and Loss Statement

As a mechanic, you love fixing cars, but the only way to know whether you're charging enough for labor and parts is by putting together an auto repair shop profit and loss statement. A P&L statement, also known as an income statement, adds up all of your sources of income and all of your expenses for a given period of time (often a month, three months, or one year) to see whether you're going forward or backward. You can then use this information to make decisions about pricing, staffing, and inventory.

Sample Profit and Loss Statement

To put together a mechanic auto repair shop profit and loss statement, you will need to choose a period to review and gather all of the relevant financial documents. It helps to have a full service auto repair shop bookkeeper prepare these documents for you.

	Dec 2020	Dec 2021	Dec 2022
Revenue	50,000	75,000	100,000
Cost of Goods Sold	30,000	40,000	50,000
Gross Profit	20,000	35,000	50,000
Gross Margin (revenue divided by COGS)	40%	47%	50%
Operating Expenses
Payroll	2,000	6,000	10,000
Marketing	500	500	500
Leased equipment	1,000	1,000	2,000
Utilities	500	600	800
Insurance	250	400	600
Rent	1,500	2,000	2,000
Business meals	100	200	400
Fuel for mobile mechanic service	200	400	500
Hand tools	100	150	0
Materials (oil, grease, etc.)	50	70	100
Uniforms	100	150	200
Laundry service	50	50	50
Waste disposal	100	200	300
Other operating expenses	0	0	0
Total Operating Expenses	6,450	11,720	17,450
EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization)	13,550	23,280	32,550
Depreciation and Amortization	2,000	4,000	4,000
Interest	3,000	5,000	7,000
Profits before Tax	8,550	14,280	21,550
Business Income Tax	2,052	4,569.6	7,542.5
Payroll Tax	600	1,800	3,000
Self-Employed Tax	1,308.15	2,184.84	3,297.15
Excise Tax	50	100	100
Net Income	4,540	5,625.56	7,610.35
Net Profit Margin (profit/sales)	9.08%	7.5%	7.6%

Auto Repair Shop P&L Statement Explained

The subheadings in the example P&L statement cover a wide range of income sources and kinds of business expenses that auto repair shops deal with on a daily basis, which is why it can be helpful to break these subheadings down.

Revenues

Your revenues are all of your auto shop's sources of income. This includes your total sales (repair costs, parts sales, and materials sales like paint and motor oil) as well as sublet if you rent out parts of the workshop to individual mechanics. 

Cost of Goods Sold

This includes all of the direct costs of providing repair services out of your auto shop. For most auto repair businesses, this includes labor costs, parts, and products (purchased wholesale) that are sold directly to customers.

Operating Expenses

Operating expenses are all of your business expenses that don't directly go into providing repair services. These include overhead expenses or overhead costs, like rent, utilities, and leased equipment, as well as payroll, marketing, and insurance.

EBITDA

EBITDA is an acronym for "earnings before interest, taxes, depreciation, and amortization." This measure allows you to compare your earnings with comparable businesses across time, even as tax and interest rates change. However, because EBITDA doesn’t include taxes or capital costs, this metric should be used with caution when assessing the actual profitability of your auto repair shop.

Depreciation and Amortization

Depreciation and amortization represent the amount you effectively spend on capital assets (buildings, tools, and equipment) each year. Some of the equipment used in an auto repair shop, such as a diagnostic scanner, comes at a significant up-front cost and lasts for several years before it will need to be replaced. 

Rather than counting capital expenses like these against your net earnings in the year that they are purchased (resulting in a very small or negative taxable income), you will claim a percentage of the cost each year on a depreciation schedule.

Interest

Interest in a profit and loss statement describes the interest you pay on business loans and equipment and property that was purchased on credit. Interest rates can vary between states and change over time, which is why interest isn’t counted in the EBITDA metric. However, it can have a real impact on your day-to-day cash flow, which is why paying off high-interest debts is a top priority if you want to improve your bottom line.

Profit before Tax

This is the actual profit you made for the period under review. However, there are several deductions you might be able to claim (such as professional memberships and retirement contributions) that reduce your total taxable income. Because deductions must be substantiated and available tax credits frequently change, it’s a good idea to consult with a small business accountant before you file your business tax return.

Business Tax

Federal taxes for small businesses and corporations include:

• Income tax (paid in several estimated payments)

• Self-employment tax (if relevant)

• Employee income tax withholding

• Social Security and Medicare payments for employees

• Federal unemployment tax (FUTA)

• Excise taxes, including the fuel tax and environmental taxes

Net Income

After adjusting your income for deductions, allowances, interest, and taxes, you are left with the actual amount of money you have left in your pocket. If the net income is negative (a loss), you might not be charging enough for labor and parts, or your overhead costs might be too high. If the net income is positive (a profit), you can be confident that you're managing your workshop well and can think about expanding your team or investing in new equipment.

Net Profit Margin

Net profit divided by sales (and multiplied by 100) gives you the net profit margin for the period under review. Net profit margins tell you what percentage of your sales is left over after all of your expenses (including tax) are accounted for. 

If you have high profit margins of 30-50%, you have more "wiggle room" to offer discounts and special pricing for repeat and bulk customers. In contrast, net profit margins that are too low can lead to a loss if there is a change in tax rates or an economic downturn. 

To know if your net profit margin is reasonable, you can compare it to the average profit margin for your industry. For auto repair shops in the United States in 2022, the average profit margin is around 38%. This is very good, considering that there were almost 239,100 auto repair shops and centers in the U.S. in the fourth quarter of 2021.

Other Useful Financial Documents

Aside from a profit and loss statement, auto repair shops can benefit from other kinds of financial statements, including a cash flow statement and projected balance sheet. Having accurate, up-to-date financial information at your fingertips can help you develop financial projections to show to investors and banks if you're applying for a loan. 

Knowing how your financials are performing is also crucial to creating more accurate estimates. For example, your auto shop might deal with cases more complex than the average car, meaning that charging an average price for services won't be enough to turn a profit.

An Accounting Professional Can Help Your Business Grow

You know cars inside and out, and accounting professionals know finances. If you're a mechanic who's just starting out or a small auto repair shop looking to grow, an experienced accountant can help you choose the most appropriate accounting system and ensure your net income is rising month over month and year over year. 

There's a lot that goes into calculating profit and loss, but once you have accurate information, you can start making decisions that will help your workshop grow.