If you are considering starting a car wash business or if you own a gas station and are considering adding a car wash service then you are probably asking yourself – Are car washes profitable?
After all car washes require large upfront investments in the form of equipment, buildings, and land, not to mention the ongoing operational costs such as water, electricity, labor, chemicals, and so on.
So needless to say, making the decision to open a car wash is not one to be taken lightly. It’s important to do your research and ask yourself some tough questions before you decide if this is the right business for you.
In this article, we will explore 10 factors that you may want to consider before deciding if starting a car wash is the right business move for you.
When Are Car Washes Profitable? – Top Factors for Success
For your business to be successful the most important requirement is that you understand the market for car washes that you plan to target. Who are these people who care about their cars enough to spend money every week or every month to get them cleaned?
Once you know your market, you are ready to focus on these top factors that affect the profitability and, therefore, the viability of a car wash:
- Location
- Type of Car Wash
- Services Offered
- Investments in Equipment – Costs Vs Benefits
- Cost of Utilities
- Cost Labor
- Overhead Costs – Insurance, Maintenance, etc.
- Pricing
- Competition
- Marketing – Promotion, discounts, incentives, etc.
1. Location
Car washes tend to be most profitable in areas with a high density of cars and a lack of competition. If there are already several car washes in the area then it’s going to be tough to make your business stand out and attract customers because most people will see a car wash as a commodity and not distinguish one from the other.
You will also need to have a good location that is easily accessible for customers and has enough space to accommodate your car wash equipment and customers’ cars.
One of the best locations is to put a car wash within a gas station. Many people will go to the same gas station near their homes or near their offices and this can be a great time to lure them into the car wash.
Some gas stations will offer discounts or even free car washes to customers who have their oil changed or buy a certain amount of gasoline.
Another great location is near a shopping mall or other high traffic areas where people are already used to spending money. This is one of the reasons we often find car detailing centers located in garages of shopping malls. Customer can leave their car to be detailed while they go shopping.
So pick your car wash location carefully. This is one aspect of your business you cannot change later on.
2. Type of Car Wash
Another important factor to consider is the type of car wash you want to offer. There are several different types of car washes, from full-service car washes that offer things like oil changes and detailing, to express exterior-only washes.
Full-service car washes tend to be more profitable than express washes, but they also require a higher initial investment and more staff.
Another type of car wash is a manual car wash where customers drive their cars into a bay and workers wash the cars by hand. This is the most labor-intensive type of car wash but can be quite profitable if done right.
However, it is important to note that manual car washes require a high level of customer service as customers will often be waiting for their cars to be washed. If you’re considering offering a manual car wash, you may want to consider a booking system where customers book a timeslot in which to bring their cars.
3. Services Offered
The services you offer will also play a role in how profitable your car wash is. If you only offer basic washing and drying, then you’re not going to be able to charge as much as a car wash that offers additional services like waxing, polishing, and detailing.
Many car washes will also offer extras like vacuum cleaners and air fresheners for an additional cost. It’s important to find the right balance of services that you can offer at a competitive price.
You don’t want to be too basic and only offer washing and drying, but you also don’t want to be too expensive and offer services that customers can get cheaper elsewhere or may not find interesting at all.
4. Investments in Equipment – Costs Vs Benefits
You will also need to consider the type of equipment you will need for your car wash. There are several different options available, from high-end touchless automatic car washes to more basic brush and hose setups.
Touchless automatic car washes tend to be more expensive to purchase and maintain, but they also have a higher throughput which means you can wash more cars in a day and generate more revenue.
You will need to find the balance between the cost of the equipment and the benefits it provides. If you’re only washing a few cars a day, then you might not need to invest in an expensive touchless car wash.
But if you’re washing dozens or even hundreds of cars a day then the investment may be worth it.
5. Cost of Utilities – Power, Water, etc
The cost of utilities like power, water, and chemicals needed for the car wash should not be underestimated.
Water is one of the biggest operational costs for car washes so it’s important to choose equipment that is efficient and has low water consumption. You should also try to find a location that has access to cheap or even free water.
Car washes will use a lot of electricity to run the washing equipment. So don’t neglect to factor in the cost of power when considering the profitability of your car wash.
Similarly, some chemicals used in the car wash process like soaps and waxes can also be quite expensive.
6. Cost of Labor
Labor is another significant cost for car washes, especially full-service ones. You will need to hire staff to man the cash register, wash the cars, and do any other tasks that need to be done.
While automated car washes can reduce labor costs, they will still need someone to man the register and handle overhead tasks. And even automated car washes often need at least one person who gently hand washes the car before it enters the bay for an automated wash.
Remember, that labor costs include not just salary-based compensation but also the cost of employee benefits like health insurance and paid time off.
And don’t forget to factor in the cost of training your staff on how to use the equipment and properly wash a car.
7. Overhead Costs
Next, you will need to factor in overhead costs like the cost of insurance and the cost of maintenance. Car washes are considered high-risk businesses so you will need to make sure you have adequate coverage for your business.
Car washes also have a lot of mechanical and electrical equipment that needs to be regularly maintained. You will need to add in the cost of parts and labor for repairs as well as scheduled maintenance.
8. Pricing
No discussion about profitability is complete without talking about pricing. You will need to find the right price for your services that covers all of your costs and leaves you with a profit.
You should also consider what the competition is charging for their services. Are you offering similar services at a lower price? Are you offering more services for a higher price?
You need to find the right balance that allows you to be profitable while also attracting customers.
9. Competition
Bear in mind that your customers will likely have access to other car wash options. This could be across the street from you or along the customer’s daily commute route.
You will need to find a way to stand out from this competition. Are you offering a unique service? If not, is it at least special in some way? Are you located in a convenient location? Are you offering loyalty programs or discounts?
You need to find a way to make your car wash attractive to customers so they choose your business over the competition.
A loyalty program can be a great way to get repeat business. You could offer customers a card on which they earn points for every car wash. Once they reach a certain number of points, they could get a discount or even a free car wash.
You could also offer discounts for customers who bundle services or buy multiple car washes at once.
10. Marketing – Promotion, discounts, etc.
Finally, you will need to consider the cost of marketing and advertising. You will need to find a way to let people know about your car wash and what makes it special.
Of course, a car wash business is lucky in the sense that it is quite visible. People will often see it as they drive by. But you still need to find a way to catch their attention and get them to choose your business over the competition.
One way to do this is with eye-catching signage. You could also offer discounts or promotions. For example, you could offer a discount for first-time customers or for customers who refer a friend.
If your car wash is located in a gas station, you could offer a discount for customers who buy a certain amount of gas or who buy gas a certain number of times.
You could also offer discounts for customers who use a certain type of car wash. For example, you could offer a discount for customers who use the self-serve car wash rather than the full-service car wash.
If your car wash is located in a commercial or business area you could make deals with the businesses in your neighborhood. You could offer discounted car washes to their employees or you could get a contract for the washing of all company cars at a fixed rate. This can guarantee a steady flow of business on a regular basis.
As you can see there are many ways to package and price your services. You will need to find the right combination that meets the needs of your customers and allows you to be profitable.
Conclusion
So, what do you think? Are car washes profitable?
As you saw in this article, there are a lot of factors to consider when figuring out whether your car wash business can become profitable.
These include the cost of equipment, the cost of labor, the cost of water and electricity, the cost of insurance, the cost of marketing and advertising, the price you charge for your services, how you market your business and how you incentivize customers to choose your car wash over a competitor’s.
You need to carefully consider all of these factors and run P&L simulations in a spreadsheet before you can truly decide whether your car was can be profitable.