People love their cars. Not only do their cars get them around, but they can also be a source of pride.
Part of maintaining your car is keeping it clean and free of dirt, bugs, bird droppings, salt, and grime.
A car wash is the easiest and most convenient way to keep it clean. If you own a car wash you can directly profit from the 286 million cars in the US.
It gets better.
Owning an automatic car wash allows you to earn passive income by having your fully automated car wash bays clean the vast number of cars that are on the road each day.
The car wash business can be a lucrative one. This is supported by the fact that the US is home to about 80,000 car washes according to the Internal Carwash Association. Source: New Horizons Car Wash
So how can you get into this profitable and passive business?
This guide will cover what you need to get started. It consists of four sections. If you want to skip ahead to any particular Section, just click on the link associated with that Section below. For the discussion on how to make your automatic car wash as passive as possible, go to Section II and read the passage on choosing the right equipment.
Section I: Introductory Information About Automatic Car Washes (what is it, how profitable is it, how much does it cost to start one, etc.)
Section II: Keys to Owning a Successful Car Wash
- Find a great location (this is critical!)
- Keep tabs on competition
- Use the right equipment
- Manage seasonality and weather
- Maintain equipment to prevent costly breakdowns
Section III: How to Buy a Car Wash (if you want a ready-made business)
Section IV: Pros and Cons of Owning a Car Wash (so you get a complete picture of what’s involved)
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The information contained in this post is for informational purposes only. It is not a recommendation to buy or invest, and it is not financial, investment, legal, or tax advice. You should seek the advice of a qualified professional before making any investment or other decisions relating to the topics covered by this article.
What Is An Automatic Car Wash?
An automatic car wash is a car wash system where you park your car into the wash bay and place it in neutral. At that point, the automated system begins the car wash process by moving your car through the wash tunnel, where it is sprayed with water and cleaning agents, scrubbed, rinsed, and dried. In some cases, wax is applied as well.
In Bay Automatic Car Wash
There is a variant of the automatic car wash, known as an in-bay automatic car wash, where the car does not move through a tunnel but is washed “in bay.” These types of car washes can offer passive income because they can operate without staff.
Touchless Car Wash
A further variant of the automatic car wash is the touchless car wash, where no brushes or strips touch your car during the cleaning process.
Instead, during the wash process, your car is sprayed with water and a number of special cleaning agents are applied. These cleaning agents are allowed time to break the bond that the dirt and grime have with the surface of your car. Then your car is thoroughly sprayed with water that washes everything away.
The main advantage of this process is that it does not scratch the clear coat of your car because it is “touch-free.”
What Is the Car Wash Profit Margin?
The average profit margin for an in-bay automatic car wash is $4.35 per car. This represents 68.6% of the average ticket price per car, which is $6.34.
Source: Brandongaille
That is an extremely high-profit margin per car. Of course, it is important to recognize that these are averages and your results may vary.
How Profitable Is a Car Wash?
The average annual profit for an in-bay automatic car wash is $86,531.
The average annual revenue is $139,000 based on approximately 20,000 cars washed each year.
Source: Brandongaille
So we see that, on average, in-bay automatic car washes have the potential to generate healthy profits per year. That’s the good news. What about the bad news…
How Much Money Does It Cost To Start A Car Wash?
On average, total equipment and building costs for an in-bay automatic car wash are $260,000. The following is a breakdown of these costs:
- Typical equipment for an in-bay automatic car wash is $135,000.
- Ancillary equipment costs add another $25,000
- Building costs will be approximately $100,000.
Source: Inside Self-Storage
Of course, the actual costs of building your car wash and buying all of the equipment necessary to start it will vary significantly, depending on your location, type of equipment, building specs, as well as a host of other factors.
Ultimately, this means that starting an automatic car wash is not going to be cheap. Even if you finance the business, you will need a healthy down payment. It is definitely something to keep in mind when you are evaluating whether this business is right for you.
If you are looking for financing options, one you may want to consider is Fundera. They are affiliated with Nerdwallet and offer small business financing options from a variety of potential lenders. You fill out one application and they provide you with a list of lenders suited for your situation.
Related reading: Interested in a passive income business that is more affordable to start? You may want to check out my articles on these other passive income businesses that have a much lower cost of entry:
Or if you don’t want to spend any money to start earning passive income, here are 15 truly passive income ideas that require no money to start.
What Are the Keys To Owning a Successful Car Wash?
Find A Great Location For Your Car Wash
As with real estate, the key to a successful car wash is location, location, location. The location of your car wash will likely be the biggest driver of your profitability.
Of course, there are other factors, such as keeping close tabs on your competition, owning the right equipment, managing seasonality, and maintaining the car wash in an efficient and cost-effective way.
We will go into these other factors as well, but for now, let’s focus on how to find a great location for your car wash.
How Do I Find a Good Location For My Car Wash?
The key to finding a good location for your car wash is identifying a site that (i) is on a busy road with great traffic, (ii) has great visibility to your site from that road, and (iii) allows cars easy access to your site. You can improve your chances of finding a profitable location for your car wash if you find a site that is near an anchor location, such as a big-box retailer (e.g., Walmart, Target, Costco, Ikea) or a shopping center.
In addition to the factors outlined above, make sure you have enough space to accommodate lines and larger cars that may want a wash.
As I mentioned, being near an anchor destination is ideal. If people are driving to their local Costco or Target, they may want to take care of washing their car on the way if your car wash is nearby.
My friend owns a large and very successful car wash near a major university that has mostly commuter students. It’s perfect because thousands of students drive to class each day and they all need to get their cars washed from time to time.
One final note regarding location: You need to make sure that your chosen location allows a car wash from a legal perspective.
You need to confirm that state and local requirements permit the use of the land for a car wash and go through all of the paperwork involved in getting the right licenses for your business.
Consult with a qualified lawyer to help guide you through this process.
Keep Tabs On Your Competition
To operate a successful car wash, you want to make sure you know what your competition is up to. That includes knowing their pricing, equipment, and cleaning products, and generally making sure your car wash is up to par.
As with any business, if you fail to at least keep pace with your competition, you will find your business in steady decline.
Use the Right Equipment For Your Car Wash
Seems obvious, right? But what is the right equipment for your car wash?
For automatic car washes, you want to purchase equipment that is reliable, cost-efficient, and meets the needs of your business and your customers. You have two viable options: Tunnel car wash equipment and in-bay automatic car wash equipment.
Tunnel equipment typically allows for more volume and can be more profitable, but requires more real estate (average one requires 5000 square feet) and staff.
Source: Inside Self-Storage
As I mentioned before, a tunnel car wash is not ideal for passive income because they are usually operated with employees (this is not mandatory, but is often the case). But if you don’t mind the extra cost and effort, tunnel washes can be a more lucrative business.
In-bay automatic equipment requires less real estate and can be used 24 hours a day because it does not require staff to operate it. In fact, many 24-hour convenience stores and gas stations use in-bay automatic car wash equipment for its low-hassle features.
A further benefit of in-bay automatic equipment is that it can offer touchless washes as well.
If you want to look at some major suppliers for these two types of equipment, here are a couple of resources for you:
MacNeil Wash (for tunnel equipment)
Ryko Systems (for in-bay automatic equipment)
If you want to learn more about specific models that might be right for your particular business plan, you may want to look into joining a car wash trade association near you.
Ask questions about this and other topics. You can gain really valuable insights from experienced people in the know.
Manage Seasonality and Weather
Everyone in the car wash business knows about the risk of seasonality. Or more precisely, the role that weather plays in determining how profitable your car wash will be.
The connection between weather and a car wash’s profits should be evident. People are more likely to get their car washed after it snows because of the snow residue, salt, and grime covering their car after a snowfall. So for car wash owners who experience snowy winters, it can be a fine season to make profits.
On the other hand, on the West Coast, winter is often the rainy season and, as you can imagine, folks are less likely to wash their cars when there is a lot of rain.
As a car wash owner, you will need to understand the role of weather on your business and take steps to make sure a bout of unfavorable weather does not sink you.
The best way to do this is to maintain an adequate cash reserve at all times so that you can ride out slow periods caused by adverse weather. In other words, follow the old proverb and save money for a rainy day.
Maintain Equipment to Prevent Costly Breakdowns
Your car wash is going to have very expensive equipment that will need regular maintenance. If you fail to perform regular maintenance on your equipment, it can break down at the worst possible moment, leaving your customers in a lurch.
If this happens frequently, your reputation will suffer, as will your bottom line.
So make sure you understand all of the maintenance tasks that you need to perform and ensure that they get done. Don’t get lazy or skimp to cut costs. You don’t want to pay for a huge repair that could have been avoided with proper preventative maintenance.
This article from carwash.com provides some maintenance tips and checklists that you may find helpful.
How Do I Buy a Car Wash?
If you want a ready-made business that is already profitable and has an established customer base, you can buy an existing car wash.
There are some great benefits to this approach, including taking a lot of risk off the table around whether a location will be profitable.
For a new car wash, you just won’t know the answer to that all-important question until you open the doors for business. But an existing one has already proven itself on that critical element.
That being said, buying a car wash comes with drawbacks and risks too. First is the cost. You are going to pay a premium for a proven and profitable car wash. Large and successful car washes can cost millions of dollars.
An existing car wash can also have risks that a new car wash won’t. Specifically, the equipment may be outdated or be in poor condition. This can be a huge cost and you need to carefully examine the age and condition of the equipment.
You also need to be aware of any developments that may be happening in that area. Find out why the owner is selling. You may not get a straight answer, but you should probe as much as you can.
Is there a new competitor that is building a car wash nearby? Is there some other local development that can cause the car wash to lose sales (such as an anchor location closing or relocating)?
You should investigate these types of issues before buying.
In short, you should conduct thorough due diligence across all key dimensions (business, financial, legal, tax, environmental (ground contamination), etc.) before buying a car wash.
If you are interested in finding car washes for sale, check out the following sites:
What Are the Pros and Cons of Owning a Car Wash?
Now that we’ve covered how to start or buy an automatic car wash, we will dive into the pros and cons of owning a car wash so that you get a more complete picture of what’s really involved in this business.
Here are the pros and cons of owning a car wash:
|
Pros of Automatic Car Wash |
Cons of Automatic Car Wash |
|
Car washes can be profitable |
Car washes are expensive |
|
Car washes can be passive |
Seasons and weather affect profits |
|
Strong demand for services |
Car wash repair costs can be high |
|
Independence |
Competition is high |
|
Scalability |
|
Pros of Owning a Car Wash
Car Washes Can Be Profitable
We have already discussed the profit potential for an automatic car wash, so I won’t cover that again.
The bottom line is that if you own a well-run and well-maintained car wash in a great location, you can make serious profits each year.
Car Washes Can Be Passive
Owning an in-bay automatic car wash can be a fairly passive way to make money. Like any business, it will not be completely passive (you will need to maintain the equipment and make sure things are running smoothly in your business).
But you will not really need to actively interact with employees or customers (for the most part).
People just pay for their ticket, pull into the bay and the machines do the rest.
That type of automation is a huge difference between this and other types of businesses.
Strong Demand For Services
As I mentioned at the top of this article, people love their cars and there are a lot of cars on the road.
All of them will need their cars washed at some point and most will be happy to pay for the convenience of having someone else do the dirty work.
Independence
If you have your own business, you do not answer to anyone. Hard to put a price on that.
Scalability
Scaling or growing an in-bay automatic car wash is fairly easy. You can start off with a couple and add more as your business grows (subject to there being enough room on your lot to do so).
If you run out of space, you can expand to another location and replicate your success there.
Cons of Owning a Car Wash
Car Washes Are Expensive
Whether you want to start a car wash from scratch or buy an existing one, the cost is going to be high. As we discussed already, the average start-up costs for an in-bay automatic car wash are $260,000.
Buying an existing car wash is not going to be cheap either. When I looked on bizbuysell for car washes across the country, the cheapest ones that seemed somewhat decent were over $300,000. But most were much more expensive, some hitting close to $10 million!
Whether you choose to start one or buy one, it’s going to be a big investment, either way, so you will need some serious financial resources to enter into this business.
Seasons and Weather Affect Profits
I discussed this topic at some length already, so I won’t go through it again. In short, you should save and be prepared for seasonality and the occasional bouts of unfavorable weather.
Cash Wash Repair Costs Can Be High
Your car wash equipment is expensive and constantly in use. There are strong cleaning agents involved. So repairs are going to be inevitable as the machinery malfunctions or breaks from time to time. While some repairs may be simple and cheap, others will be quite expensive.
You should be prepared to cover those expenses as they arise by putting aside money for that purpose.
Competition Is High
In any business where there is significant profit to be made, you are going to find serious competition. Car washes are no exception.
The competition can take the form of a nearby car wash upgrading its equipment to draw away your customers, mobile car wash services popping up to service customers in your area, or a new mega car wash opening up in your neighborhood.
Whatever form it takes, the risk of competition can’t be ignored. It’s part of the business and you need to effectively manage it.
What do you do? Stay vigilant, assess what your competitors are doing, and try to stay a step ahead (or at least keep pace). Don’t get complacent – it is tough to replace or win back lost customers.
Keep your customers happy with up-to-date and working equipment, fair prices, and a great experience, and they will keep coming back.
Conclusion
Owning a car wash, especially an in-bay automatic car wash, can be a terrific way to earn passive income and get out of the rat race.
But as you can see by now, it’s not as simple as buying a car wash bay and waiting for the money to roll in.
If you want to succeed in this business, you need to have a great location, buy the right equipment, stay abreast of your local competition, and generally make sure your car wash is running like a well-oiled money-making machine.
If you want more great passive income ideas, check out my ultimate beginner’s guide to passive income [25+ strategies that work], where I cover tons of effective strategies that generate passive income.
One of my favorite articles on passive income is my piece on businesses that run themselves. In that article, I cover some great businesses that can generate attractive levels of return without a lot of day to day involvement by the owner (obviously, automatic car washed are included in the list, but there are many more). Check it out here.
