As the auto industry continues to grow, many services related to it have been thriving. Car washes have always been a classic service used by many car owners, and their popularity has been on the rise over the last decade.
A lot has changed on the market though. People’s expectations have been growing steadily, and at the same time, automation has changed the landscape significantly. Are car washes profitable today, or are they not a good business model anymore? This has been a debated topic in some parts of the country, but as far as I can tell, car washes aren’t going anywhere. Their profitability has been impacted positively by some of these recent developments, making it easier than ever to open up your own car wash.
Are Car Washes Really Profitable?
A car wash can be a good source of income if you set it up properly and know a thing or two about running one. Ideally, you should have some hands-on experience with the business, because there are lots of intricate details to learn before you can be successful. If you’re planning to hire staff, that might not be strictly necessary – but you’ll still need to know how to filter good candidates from the rest.
On average, car washes can bring you about $1,000 – $2,000 per month for every bay you have. Starting out small and expanding with additional bays is usually the way to go for smaller operations without a lot of starting capital. You can expect a profit margin of around 10% – 20%, though this will vary a lot depending on how you’re running the business and your location. If you’re more diligent about automating as much as possible, you can easily increase your profits.
What Are the Main Costs of Running a Car Wash?
One of the great things about running a car wash is that the costs are relatively static and predictable. You also don’t need a lot of funding to get started – although it will definitely help to have more capital available for scaling up as quickly as possible. Your costs will mostly be tied to rent, utilities, cleaning supplies, and wages (if you decide to hire workers).
You can buy an existing car wash or build one from scratch. In both cases, you’ll need to either rent the land or lease an existing building. This can cost anywhere between $1,000 to $10,000 per month, depending on the layout of the place, its location, and whether there are any existing facilities.
If you’re planning to build your own, you should set aside around $10,000 for each bay you plan to open. As I mentioned above, a good strategy for working with a limited capital is to start out small and keep expanding with new bays once you can afford it. Keep in mind that scaling up in this manner will cost you more than what it takes to build the new bays. You’ll also have to expand your equipment and possibly hire more people to handle the increased workload.
Utilities will also play a major role in your costs, especially water. Expect to pay as much as $1.00 per car for electricity and water, and even more if you don’t rely on efficient automatization and have an overall inefficient workflow. That’s why car washes prioritize streamlining their operations as early as possible, and you should aim to do the same.
If you’re going with an existing building and you want to convert it to a car wash, you’ll have to spend some money on equipment too. There’s a huge price range to work with here, so make sure you spend a lot of time researching the market.
The cheapest car wash machines go for about $15,000 – $20,000. But if you want some modern features and a reduced maintenance workload, I’d go with some more expensive models. Some of the top machines on the market cost more than $1 million, but you don’t have to go that high to get a good deal. Typically, if you can afford a purchase in the $100,000 – $200,000 range, you should be able to secure a good car wash setup that will last a long time.
Cleaning chemicals will represent another major portion of your expenses. These are usually calculated on a per-car basis, with standard prices ranging from around $0.02 to $0.80 per car. More expensive cleaning agents have various benefits and will allow you to offer a wider range of cleaning services and programs.
You can also look into long-term deals with suppliers. There are plenty of those on the modern market, and they can allow you to save a lot of money if you can afford to sign up for a 1-3 year plan. This can allow you to save thousands over the years, but you have to make a commitment to your supplier, which not everyone might be comfortable with financially.
Running a car wash yourself is not impossible, but you’ll want to look into hiring help as early as possible. Ideally, you should be focusing on the management aspect of your operations and leave the actual washing to your employees.
Be careful with scaling up your hiring, because it’s easy to find yourself in a situation with a lot of extra workers that you don’t actually need. This can get messy if you decide to let them go prematurely, so plan ahead carefully and consult someone more experienced before deciding to hire.
There’s a lot of potential for things to go wrong with a customer’s car, so getting a comprehensive insurance plan is always recommended. General liability insurance isn’t even that expensive in the grand scheme of things, and a policy that costs just $500 – $1,000 per year is often enough to cover you against most types of problems. Pay attention to what exactly is covered by the policy though. There might be specific exceptions that could be problematic for a car wash.
Many car washes offer additional services like a coffee bar, snacks, or entertainment. It’s hard to estimate the costs of those services, but you should not forget to account for them in your budget planning. The reason for offering these services in the first place is to increase your profitability (more on that below), so you should be careful not to fall into a trap that turns into a money sink.
Advantages of Running a Car Wash
Running a car wash is a great business model in many ways. It comes with multiple advantages, especially on the financial front. If you’re not convinced that this is the right type of business for you, here are some benefits to consider.
Good Profit Margins
As I described earlier, the profit margins of a car wash are quite nice compared to many other types of businesses. You can even go above 20% if you get lucky, though this depends a lot on your location and certain factors that are mostly beyond your control. Even with a margin in the 10% – 20% range though, you’re still better off than many other types of businesses that require a similar investment.
Growing Number of Cars Per Household
The auto industry is doing better than ever, and many people are buying their own cars. The number of cars per household has been on the rise, which means more business opportunities for car wash owners.
Laws Limiting At-home Washing
At the same time, certain regulations have made it more difficult for people to wash their own cars at home. This has further driven up the popularity of car washes. Not just in areas with stricter legislation, but all across the country. In some cases, people might even choose to drive out for a while to get a better service.
Suitable for Automation
Car washes are among the most suitable types of businesses for integrating automation. Some car washes even run on a self-serve mode with zero interaction with actual employees. This might be a bit too much for you, especially financially. And that’s okay – there is a huge middle ground to explore. It’s all a matter of finding a good balance between ongoing costs and profits, something which automation can improve significantly.
Easy to Scale Up
As long as you have the real estate for it, scaling up your car wash business is as easy as opening new bays. This can be done on the same lot, or you can even expand into new locations. The only difficult part here is finding a good location in the first place – I’ve covered that in a bit more detail below.
How to Increase the Profitability of a Car Wash
Even though car washes are generally highly profitable by default, there’s still a lot you can do to increase your profits and drive even more customers to your business. Here are some ideas.
Offer Extensive Cleaning Services
Extensive cleaning packages are very popular in the car wash business right now, with many places offering a scale of services, sometimes having as many as 10+ different packages to pick from. If you learn a little about marketing tactics, you can easily set up your prices in a way that entices customers to go with the more expensive offers.
Give Your Customers Something to Do While They’re Waiting
Set up a few tables and a coffee machine, or even a bar (non-alcoholic, of course), or a food truck. My local car wash has a breakfast cafe and the place is packed on Saturday and Sunday morning. A couple of pinball or arcade machines can also go a long way. In general, try to do as much as possible to give your customers something to keep themselves busy while they’re waiting.
You can also offer membership plans. A monthly or even an annual subscription can allow customers to save money while it locks them into using your services. This is a popular approach among owners of large car washes.
What Are the Main Challenges of Running a Car Wash?
No business is without its challenges, and car washes are no exception. There are several things you need to mainly watch out for. As long as you are aware of these issues and plan ahead for them, you should be able to establish your place on the market relatively easy.
Difficult to Secure a Good Location
Location plays a major role in the success of a car wash. And you’ll likely find that all the best spots are already taken. This means that you’ll have to either start your search early, or get lucky enough to have a spot free up in an attractive location. Talk to current car wash owners as well, if you can get in touch with any of them. Someone might be looking to sell their business soon.
High Staff Turnover Rate
Car washes don’t tend to do well in terms of employee retention, as many people only take up these jobs as a temporary source of income. If you rely on a large number of employees, you should prepare to always be searching for new candidates. You might get a couple of long-term workers, and you should cherish them because they will be a rarity. On a side note, if you’re looking for similar jobs that are always hiring, I’ve covered some of those in the past too!
Even if you go with more expensive machines, maintaining them will still be a costly ordeal and you should set aside a lot of money for upkeep. It’s hard to anticipate exactly how much this would cost you, as the cost of maintenance is also offset by factors like how good you are at mechanical work. Try to get on a service plan if there are any options for that.
Frequently Asked Questions
Q: What type of car wash business brings in the biggest profits?
A: Fully automated car washes tend to be the most profitable for obvious reasons. Some of them don’t even focus on offering additional services and just try to make the experience as streamlined as possible – cars go in, get washed, and then leave the premises.
Q: What other types of businesses are easy to run in the long term?
A: If you’re looking to minimize the amount of hands-on work you have to do as a business owner, a car wash is generally a good plan. It’s far from the only viable option though. Running a few vending machines can also bring in a nice chunk of change, for example.