In this guide, we will reveal the average car wash startup costs, income, and profit margin.
One of the primary considerations entrepreneurs must make when starting a car wash business is to determine the average potential income and profit margin potential. The same applies to any business.
However, we are most concerned about the car wash industry to help interested investors prepare adequately beforehand.
There is no doubt that a car wash business is profitable. Nevertheless, the level of income and profits made is determined by two major costs; that is, fixed and variable.
Before we get into the details of explaining each type, it’s necessary to make it’s meaning clear.
Every car wash business is bound to incur running costs. This can also be termed its cost of operation. But that is as far as we go in making a brief explanation of the concept.
As we proceed further in discussing fixed and variable costs, and how they affect income and profit margin, you should have a much better understanding.
Average Car Wash Cost
To better understand the average income and profit potential a car wash business is likely to make, you’ll need to figure out its cost implications. As stated earlier, there are variable and fixed costs.
To help you better appreciate the income and profit potential of the business, let’s discuss both concepts (variable and fixed costs).
As the name suggests, variable cost is the cost incurred by a car wash business which varies from month to month.
In other words, these aren’t static but change due to several factors. When variable cost is discussed, we would be looking at the cost of electricity, water, repair & maintenance, detergent & chemicals, and natural gas.
Energy is essential to the functioning of a car wash business. Most of the equipment used to rely on electricity and will hardly function without it.
As a result, you are expected to factor-in energy costs. This falls under variable costs because consumption is likely to differ from one month to the next.
Breaking down the amount of electricity used per vehicle to about $0.50, it gives you an idea of what to expect at the end of the day.
Water is an indispensable requirement for all car wash businesses. A standard one-bay automatic car wash will take about 45 to 46 gallons to wash a single car.
When translated to cost, this amounts to about $0.16. Reclaim systems can be fixed to improve water efficiency. This makes previously used water available for washing other cars.
iii. Repair And Maintenance
A car wash is bound to experience system breakdown in addition to the need for maintenance. Repair and maintenance costs aren’t static. They change from time to time.
At other times, such costs may be significantly less depending on the type of repair and maintenance carried out. The cost of maintenance per car starts at about $0.47.
iv. Detergent And Chemicals
These are supplies that are constantly required to keep a car wash operational.
The choice of a car wash will determine its cost. Some car washes give the customer the choice of choosing the detergent/chemicals to be used on their cars. This should cost anywhere from $0.45 to $1.20 per car.
v. Natural Gas
In some cases, natural gas will be required for heating water used in washing cars in addition to hot air used for drying. The average cost starts at about $0.16 per car.
Unlike variable costs, fixed costs are definite or static. These hardly fluctuate and are always the same. These include administrative expenses, site labor, and rent or mortgage & property taxes.
All costs included here represent the national average.
i. Administrative Expenses
Administrative expenses include advertising fees, landscaping, office supplies, management staff, advert and marketing fees among several others. Such costs, when broken down to how much it will cost per car, will start from $1.00.
ii. Site Labor
This refers to your staff’s strength. There should be a definite number of work staff irrespective of the number of cars washed. Site labor would cost about $1.24 per car.
iii. Rent Or Mortgage & Property Taxes
There’s no definite cost relating to this aspect of cost. Different locations are bound to have varying costs.
Average Car Wash Income
The provision of standard car wash services will fetch you varying degrees of income. The main reasons for the differences in income are due to type, size, location and market or demand. There are 3 main types of car washes.
They include in-bay automatic car washes, self-serve car washes, and tunnel car wash businesses. The income for each of these types varies significantly.
In-Bay Automatic Car Wash
This type of car wash sees an annual revenue averaging about $139,000. About 20,000 cars are washed annually with an average sale of $6.34 per car and an average profit of about 4.35 per car.
Self-Serve Car Wash
The average monthly income per each bay amounts to about $1,489. This amounts to an annual income of $17,868. The average annual income for a two-bay operation car wash stands about $41,000.
Tunnel Car Wash
Car wash businesses operating this model see an average annual income of $686,250. The average number of cars handled by this type of car wash stands at 45,750.
To further break down the income generated, a tunnel car wash charges an average price of $15 per car.
Average Car Wash Profit Margin
As we’ve seen, the average profit margin for a car wash business depends on the type you operate. The different types have been mentioned in addition to the average income earned. Now, understanding the profit margin requires an understanding of the concept.
This simply refers to the amount by which revenue from sales exceeds costs incurred by the car wash business. In other words, it is a measure of profitability. Being a ratio of a car wash’s profit divided by revenue, The profit margin helps compare profit to sales.
As stated earlier, getting a car washed in an in-bay car wash will cost about $6.34. This yields a profit of about $4.35 per wash. Being a measure of profitability, the profit made helps reveal the average profit earned from the sale.
The above discussion on the average car wash income and profit margin has focused on the different aspects of sales and profit. It gives you a picture of what to expect when starting your car wash business.
We also included the fact that multiple factors such as location and type of car wash among other factors will influence your income and profit margin.