The price is right
In this article: IMI member and MOT guru Paul Charlwood takes a look into the cost of testing
You have probably seen that the Department for Transport (DfT) has ruled out an increase in MOT test fees, citing that many MOT stations discount from the maximum fee of £54.85 for the most common class of vehicle – class 4. But I’m often asked why the DVSA allow discounting at all.
I believe that Government regard free market competition to be in the public interest, and that anti-competitive activity is against competition law. I do not condone price fixing or anti-competitive activity and am not suggesting you should act illegally.
One of the garages I look after as a consultant is in a small town. They charge the full fee, and have five testers and the MOT ramp provides an average of ten tests a day Monday to Friday and five on a Saturday morning. Allowing for bank holidays the test bay generates around £153,855 per year.
Another garage in a nearby town charges just £25.00 per test. Assuming they do the same number of tests they will generate £70,125 per year. That’s £83,730 less than – a significant sum.
The DVSA are now using artificial intelligence (AI) to identify MOT stations that aren’t necessarily following the rules. The garage that charges the full fee really do act in a professional manner, no short tests, proper training and good equipment, do you think the 25 quid garage may be cutting the odd corner?
Keeping it fair
Cutting corners show up in the DVSA’s AI system; test times, times between tests, failure rates all add into the mix and the DVSA don’t need to go and visit the good garages that much, as they can focus on the unprofessional ones. So we should welcome the technology as it will weed out the unfair competition.
So, what’s a fair price for an MOT? There’s no denying some people do buy on price alone, but a quick look at various products – cars, clothing, carpets, shampoo all have quality products that perhaps cost slightly more but still sell well. Use the same approach in your business, even in simple areas, you may charge more than the competition, but you could offer a better service and experience for you customers to bring them in.
Take a look at your customer toilets for example, maybe you think they are OK, but would a young mother with two toddlers like to use them? It can sometimes be the simple things that bring customers to you.
But as well as looking after your customers, look after your staff too, paying good wages. Your competitors who discount can’t keep discounting for ever if they cant get staff to do the work.
If you are fixed on discounts and your business model relies on it, consider giving away freebies instead of taking money off the cost of the MOT, for example free wiper blades worth £19.50 with every MOT. It will equate to a small trade cost to you but will be increasingly enticing to your customers. But don’t act dishonestly, in this example, don’t claim they are worth £30.00 if they are the cheapest on sale. Also, expect to sell them without an MOT for £19.50.
Finally, it may never have crossed your mind, but don’t start asking local garages to put up their prices as well, you’ll be breaking the law, (the Government have published information on this very topic).
The market means that there will always be competition based on price but the DVSA’s AI system will help to create a level playing field, where the MOT trade set the price of what a quality test is within the limit of the full fee.