The carwash industry represents a multi-billion dollar market, with demand expected to rise. Entrepreneurs of all sizes, from beginners to seasoned carwash industry professionals, stand to gain from the industry’s forecasted growth.
In this article, you will learn how to determine the cost of building or opening a carwash and what you’ll need to invest or borrow to take your next steps into this exciting industry.
IS OWNING A CARWASH A GOOD INVESTMENT?
Total annual carwash sales in North America are approximately $15B per year. In 2019, 77% of automobile owners said they frequently used a professional car wash.
Unlimited wash plans and exterior tunnels that provide a fast carwash experience are the main driving forces behind carwash industry growth, which is expected to produce a compounded annual growth rate (CAGR) of 3.2% between now and 2025.
A low labor model in the express carwash industry combined with a recession-resistant business model increases your chances of success with a carwash business.
Plus, there are a number of tax laws that help keep your carwash profitable, even as you continue to invest in the newest equipment and technology. As part of the 2017 Tax Cuts & Jobs Act, carwashes gained access to 100% bonus depreciation, allowing a carwash business to write off 100% of the equipment cost during its first year in service instead of depreciating the costs over many years.
WHAT ARE THE STARTUP COSTS FOR A NEW CARWASH BUSINESS?
There are several startup costs to consider when building or opening a carwash. Planning and permitting costs will vary by region, as do costs associated with site acquisition, construction, and the working capital you’ll need to get the business up and running.
PLANNING & PERMITTING | $100,000 - $400,000
Planning and permitting costs vary based on the jurisdiction where your carwash is located.
You’ll need to hire architects and engineers, go through a design review, entitlement and permitting process, and you might even need to apply for zoning variances.
SITE ACQUISITION | $0 - $6,000,000
The primary site acquisition cost is the purchase price if you want to own the land.
If you lease the property, you won’t pay anything to acquire it but will have recurring payments, and you may have to pay a security deposit or other fees to get started.
If you acquire land or a run-down carwash with the intent of tearing down and building anew, you could pay up to $6 million for the property, depending on the location.
Finally, if you’re constructing a new carwash on your site, you will need to consider the combined cost of acquiring the property and facility construction.
FACILITY CONSTRUCTION | $2,500,000 - $5,500,000
The cost of constructing an automated car wash facility depends on several factors. The most important of these are the size and location of your facility. Materials, off-site expenses, and labor rates will also impact costs and can vary.
CARWASH EQUIPMENT | $1,000,000 - $2,000,000
Wash equipment costs include the tunnel and backroom equipment, vacuums, POS systems, and other equipment. The length of the tunnel and the number of vacuums affect the wash equipment costs. You'll also need HVAC, security cameras, and other equipment typical of a commercial development.
WORKING CAPITAL | $200,000 - $500,000
You should plan to earmark $200,000 - $500,000 in working capital for use in your carwash's day-to-day operations. You'll need this money for pre-opening expenses including hiring, uniforms, marketing, and payroll expenses while also providing cushion for the first 90-120 days of operational expenses while the business begins to ramp up.
There is a wide range of pricing available from equipment to real estate and the total may range from $3.85 million to well over $10 million. Fortunately, a few viable financing methods are available that make starting a carwash accessible for many people.
WHAT LOANS ARE AVAILABLE FOR A NEW CARWASH?
You have several options when it’s time to get carwash financing. Getting a carwash loan can take time, and it’s wise to get ready by gathering the documentation you’ll need to provide to potential lenders. You can choose between conventional commercial financing and Small Business Administration (SBA) guaranteed loans like an SBA 7(a) loan or an SBA 504 loan.
As with any loan, your credit status, the quality of the property, and owner profile are some key factors that will impact the terms of your loan.
An SBA 7(a) loan may be available if you need working capital as part of your loan or are buying an operating business.
While you can’t use funds from an SBA 504 loan for working capital or to purchase goodwill, you can use the funds to develop real estate and purchase large equipment vital to your operation.
The paperwork involved with getting the financing you need to start your carwash can be daunting, but when you have a partner like PetroCal on your side, the process is much easier. Ready to get started? Download our helpful loan document checklist now.