Exactly. I mean no offense, but a $40 diagnostic is considered cheap I think. If you are only working for 20 bucks, you are losing money. Also, the way you can work it, tell them you will roll 10-20 back into the repair. That way if they don't get the repair done, you make 40. If they do, you've still made an extra 20-30. But if you only make 20 and they leave, you've bought lunch for a day or two I guess, don't know how you intend to survive like that.
The town I'm in is 10,000 people give or take. But one thing I've learned, if you charge cheap prices, those are the people you get. If you charge what you think you are worth and do a good job, people many times have no issues paying that. I would say you could start by raising prices by like 5-10 bucks, then inch them up over time. But then you could get your feet wet there, and see if people gripe. Less probably would than you think.