How to Buy a Carwash: When considering entering a new industry, you want to ensure that your investment will yield a positive return. You want a solid industry with an upward trajectory. And perhaps you want to have some fun while you’re doing it! Many investors have discovered that investing their money into a carwash meets those criteria.
Owning a car wash can be successful if you do your research and price each wash properly. This article will tell you everything you need to know and how to buy a carwash.
How Much Does it Cost to Buy a Car Wash?
Various factors determine the cost of buying a car wash business. These considerations include the land location, equipment used to operate the business and the past financials of the business. In any case, the cost varies significantly. You can spend as little as $100,000-200,000 on a self-serve car wash, $150,000-$500,000 for an in-bay automatic system and $1 to 5 million on larger conveyor car wash systems. Additionally, the mobile car wash business may cost between $30,000 and $100,000.
How Much Money Can You Make from a Car Wash?
In-Bay Automatic Car Wash Revenue
The most common type of car wash in the U.S. is an in-bay automatic car wash, which may be readily integrated into an existing business like a gas station or repair shop. It also saves time because it is fully automated. Customers pay for the wash they desire, drive into the bay or park at a designated starting location, and wait for the car to be cleaned. Across-bay automatic vehicle washes are the most common type of car wash, with around 58,000 in the US. It’s not the most profitable business model, despite the higher margin.
The average in-bay automatic car wash produces revenue of $139,000 a year, with profits around $80,000-90,000. Typically, this car wash charges $6.34 each wash and profits $4.35. Automatic car washes are indeed more expensive to build than other vehicle washes, so the more bays, the better.
Exterior Conveyor Car Wash Revenue
These exterior conveyor car washes are the auto equivalent of fast food restaurant drive-thrus. Customers sit in their cars while automatic soap, brushes, and water wash the outside of their vehicles. As a result, firms charge a premium for this service. It costs about twice as much as a regular in-bay car wash at $15 each wash. Conveyor car washes have an average annual revenue of $686,250.
Self-Serve Car Wash Revenue
Like in-bay automatic vehicle washes, self-serve car washes require no labor from the business owner. Aside from washing water, detergent, and little upkeep, it’s all profit. Self-serve car washes are common outside gas stations and rest stops. Customers simply insert coins into a machine (or swipe a credit card). This activates a wand to wash the car’s exterior. Customers can sometimes use a coin-operated vacuum to clean the interior.
The US has approximately 36,000 self-serve vehicle washes, but the average bay is only occupied 10% of the time. It’s not a high-traffic or high-profit business, but it’s a wonderful second source of income for entrepreneurs looking to expand their gas station or rest stop services. This low-cost enterprise typically generates $1,489 monthly per bay. A typical two-bay operation generates around $41,000 annually.
Costs of Operating a Car Wash
While it’s fantastic that you have the potential to earn money as a car wash operator, you may be wondering, “How much money can I earn owning a car wash?” Unfortunately, the question is impossible to answer because the answer is contingent on various factors, including the type of car wash you operate, the number of bays at your facility, your prices, and your expenses.
Although numerous factors affect a car wash’s profitability, one is consistent across the board. This element is your business’s running costs. After you have paid the costs associated with opening your wash, you’ll face continuous charges that are variable and fixed.
The following are some frequent variable expenses and their average cost per car:
- $0.50 for electricity
- $0.12 for natural gas
- $0.16 for water
- $0.64 for chemicals
- $0.47 for repairs and maintenance
You’ll almost certainly need to budget for two fixed expenses: labor and administrative charges. These expenses average $1.24 and $1.00 per automobile, respectively. Rent or mortgage payments are other constant items that must be factored in.
The average business cost of washing a car at a professional facility is $4.13 per car, not including rent or a mortgage. If a given bay washes 20,000 autos each year, your annual operating costs will be $82,600. If you charge $10 for each car wash, you will earn $117,400 in net profit.
While a six-figure profit margin is remarkable, it’s critical to remember that figure represents the possible earnings from just one bay at an ordinary car wash. You have the opportunity to earn substantially more money with that bay if you can attract a greater number of cars than the norm. Additionally, smart entrepreneurs might increase their profit margins by adding extra bays or locations.
Staff That You Will Need To Hire
With car washes becoming more technical and utilizing car wash technologies, you must employ some people with experience in the car wash field and have the willingness and ability to continue developing those talents. Employees who have prior experience with certain equipment and machinery will be better equipped to identify and manage technical issues when they emerge. Additionally, they will be able to mentor other less experienced hires to your business.
Financing Your Purchase
Your Own Funds
The most straightforward method of purchasing a car wash, or any business, is to pay cash. This method circumvents all lender restrictions and stipulations. You are free to do whatever you choose. However, there is a significant flaw with this method. Few entrepreneurs possess the capital necessary to acquire a business outright.
SBA Backed Loan
The most common method of financing a car wash transaction is an SBA-backed loan. SBA provides assurances to lenders. This assistance helps lenders provide entrepreneurs with larger acquisition loans. The majority of small business purchases financed externally have an SBA-backed loan component. These loans give funding up to $5,000,000 at very competitive rates and with very flexible restrictions.
Conventional Bank Loan
Furthermore, buyers can acquire a car wash through standard bank loans. These loans are used when the transaction (or the buyer) does not meet the SBA’s eligibility criteria. Conventional bank loans do not benefit from the SBA guarantee. As a result, banks only provide them to clients who have excellent collateral. Some of these loans include a balloon payment. After some time, the entire loan balance becomes due. Loans that have accrued balloon payments must be refinanced.
Seller Financing
Another option is to finance the transaction through seller financing. As the name implies, seller financing is a loan from the seller that is amortized over a period of time. Seller financing might be an option if you are unable to secure a traditional loan from a financial institution. Some sellers may have less strict requirements and may even offer better pricing. There is a benefit to attaching the seller to the business for a few years. Your ability to pay them is contingent upon the success of your firm.
Hopefully after reading this you are better equipped on how to buy a car wash. If this is a business venture you are interested in pursuing, we highly recommend you speak with some car wash owners first to make sure thoroughly understand the business. Needless to say, there is good money to be made in the car wash industry!
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