There are four main categories in the automotive price structure: wholesale, jobber, dealer (or garage), and retail. Wholesale is the price at which a manufacturer of a product sells to a distributor, usually about 30% above cost. This distributor may carry hundreds of manufacturer's product lines. This allows the distributor to offer hundreds and even thousands of products to a retail store. That way, a retail auto parts store only has to deal with one or two distributors. The retail stores buy from the distributors at "jobber" pricing (an auto parts store is considered a jobber), which includes about a 25% mark-up over what the distributor paid. They sell at retail price which has an additional 35% mark-up.

Have I missed the dealer category? Not really. This is the price a mechanic's garage (or repair shop) will purchase at, right between jobber and retail pricing. The garage will then in turn charge the consumer full retail price.

If you haven't followed this, go back and read it over until you understand it completely. It is vital that you understand this principle.

The car dealership has basically three price categories: their cost, garage price (approx. 20% markup), and retail (approx. 40% markup over cost).

It is important to understand mark-up. Read the following carefully, since it can be confusing. If I have a product that costs me $120 and I want 30% mark-up, I take 100% and subtract 30% to get an answer of 70%. As you know, 70% is 0.7 in decimal (move the decimal two places to the left). I then divide my cost price of $120 by 0.7 which equals $171.43. The price with 30% mark-up is $171.43. If you don't understand this, get your calculator and follow it through.

Whoa...I must be crazy, right? $120 multiplied by 30% is $156 not $171.43. You are absolutely correct. That is why mark-up is so tricky and you have to understand the concept. The 30% mark-up is the percentage amount that I can subtract from my selling price to get my cost price. It is not just multiplying my cost price by 30%,...