Commercial Real Estate News / Investing / Is Owning a Car Wash a Good Investment?

Is Owning a Car Wash a Good Investment?

Published: 09-20-22 Category: Investing

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

Believe it or not, car washes have been around since before the mass production of cars, and there’s no reason to think that they’ll go away anytime soon.

As more people buy more cars and the need for affordable cleaning continues to grow, the demand for car washes will continue to grow. This makes owning a car wash a potentially excellent investment opportunity.

Of course, not every car wash comes with the same return on investment potential; consider these factors when looking to purchase a car wash.

The Initial Financial Investments of a Car Wash

The initial financial investments of starting and operating your own commercial car wash are hefty. In addition to buying the land, it may cost thousands to:

Lease a building.
Install expensive machinery and amenities.
Hire employees.
Market your new business.
Secure permits and licenses.

While some individuals do this themselves with great success, many choose to purchase their first car wash as an income-producing property rather than starting an actual business venture. (In other words, they make a commercial real estate purchase.)

Commercial real estate for sale often can be purchased at lower prices when viewed as an investment rather than a primary business venture due to lower overhead costs such as wages paid per hour.

The Pros and Cons of Car Wash Ownership

Unfortunately, there’s much more to car wash ownership than just washing cars. You must take into account the seasonality of your business, its management needs, its funding, and return potential.

Seasonality: Car washes are seasonal businesses. You won’t get as many clients during the wetter rainy seasons as you will during the drier summer and cold wintry seasons for obvious reasons.
Management needs: As with any successful business, you need the right team. Finding this team can be as simple or as complicated as your hiring situation permits, and you should take potential employee attrition rates (and potentially hiring a property management company) into account.
Funding: How will you acquire the funding for your purchase? Will you leverage debt or try to raise the capital on your own? Heavy analysis into return-on-investment potential and market research need to be conducted before a single dollar is spent on your purchase.

Should you manage to conquer these setup obstacles, then you’ll likely set yourself up for a profitable business venture: Car washes can clear anywhere from $50,000 to $500,000 a year in profits.

Risks in Establishing a Car Wash Business

The riskiest part of establishing a car wash business, generally speaking, is the debt load. You’re not likely to experience immediate profitability upon your purchase, and this needs to be accounted for in your business plan.

You could have all your other costs figured out and have most of your money set aside, but what happens if the wrong type of customer has too much to drink in the parking lot one night and decides to smash their rental car into your machinery?

The hope with any commercial real estate for sale you buy is that its income is enough for you to not only pay off those debts and build your business without outside assistance but also to cover any unexpected financial costs and repairs that come up along the way.

You also need a sound financial strategy in place to prevent the business from going into even more debt during periods of lower profits. This is where assembling the right team comes into play.

Things to Consider Before Investing in a Car Wash Business

So you’ve balanced the risks, weighed the pros and cons, calculated the funding, and are ready to pull the trigger on owning a car wash.

But before you do that, some final things to consider include:

Your business plan. Have you laid out all the steps you plan to take in writing? Are everyone’s expectations in line with each other?
The location. Have you conducted enough market research and analysis to decide on a profitable location? Car wash demand is always there, but where exactly that "there" is will vary.
The pro forma analysis. Are you familiar with the financials of the piece of commercial real estate you plan to buy?

You’ll also need to ensure you require the right licensing and permits before you begin.

Maintenance Costs Involved With Running a Car Wash Business

A general rule of thumb is that around 1% of the business’s price tag needs to be allocated for maintenance costs.

There are many factors, however, that play into how much maintenance is needed, including the size of the building, natural wear and tear, its geographic location, and more.

Other maintenance costs specific to car washes include:

Broken and damaged equipment. It can cost you as much as $5,000 a day for every day your car wash is down. Are you prepared to absorb this cost?
Routine maintenance and replacement parts. It’s better to stay on top of your equipment and know when parts need to be routinely replaced rather than wait for them to break down.
Acquisition of new machinery. If you’re feeling as though routine maintenance is maintenance too many, you should look into investing in new machinery that isn’t as susceptible to failure.

Make sure to do your research before purchasing a car wash for sale and deciding on your maintenance budget.

Car Wash Business Management Tips for Success

As a property owner and/or business manager, you should always reconcile with yourself the fact that you don’t know everything.

Knowing what you don’t know will not only help keep your property profitable, but it will also help you build the proper team and withstand the rainy days when they inevitably arrive.

Never be afraid to ask for help, either: Sometimes, all it takes is the right consultation with the right professional to swing things back in your favor.

Do your research, stay diligent, and happy investing.

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