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Effective Labor Rate

Effective Labor Rate (sometimes called Recovery Rate) is the KPI that identifies the actual labor rate achieved by the service department, either as a Total or by Customer, Internal and Warranty work.  Your Dealership might have a posted labor rate, but this is never the actual labor rate you are achieving due to discounts, promotions or warranty paperwork hold-ups, for example.  In order to maximize Service Department profitability you must know what your ELR is (for Total, Customer, Internal and Warranty) so you can identify where you are performing poorly and make appropriate changes.

Effective Labor Rate = Sales / Sold Hours

Benchmark: 90% of your posted labor rate.

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