Last Updated on May 14, 2020
If you enjoy repairing your vehicle and have some training or experience in working on cars, opening a car repair shop might be the career move for you. With a car repair shop, you’ll get to work on vehicles daily, and you’re sure to see a variety of challenging repair jobs. You’ll also have the satisfaction of helping car owners to get their much-needed vehicles back on the road. With time, you can grow that shop into a profitable business, and with a base of returning customers, you can enjoy stable work that puts your talents to use.
Car repair shops offer a variety of vehicle repair services to the public. Some of these repair shops specialize in particular services, like muffler repair, brake work, or tire service. Others become more generalized and may offer brake work, engine repair, inspections, AC/heating services, and more. Some shops also specialize in working on certain types of vehicles, like sports cars or luxury vehicles. It’s common for a shop to not only work on cars and trucks but also on trailers and small engines like lawn mowers and golf carts.
There’s a great deal of variety in the car repair shops in business today. Small, one-person shops offer a personalized experience, while larger shops provide efficiency and a capacity that allows them to repair dozens of vehicles each day.
According to IBIS World, the auto mechanic industry has undergone steady 1.4 percent annual growth from 2014 to 2019 and is expected to bring in $69 billion in revenue in 2019. During that time, the number of businesses increased to 271,068, and the industry now employs 577,172 people.
That growth is largely due to an increase in disposable income and corporate profit, which allows consumers to choose professional repair services over do-it-yourself repair options. As businesses enjoy increased profits, they also expand their operations, which further contributes to the number of vehicles on the road – and the number of vehicles that need to be repaired.
The car repair industry is benefiting from the fact that people are increasingly keeping their used cars longer, states Christian Brothers Automotive. Given the high cost of purchasing a new vehicle, consumers are increasingly buying used vehicles, instead. Brands known for their reliability, such as Toyota and Honda, have become more popular, and with drivers requiring that their used vehicles last, there’s an increased need for repair shops to keep these vehicles running well.
Electric cars also continue to grow in popularity. Tax credits, electric car improvements, and a reduction in the cost of electric vehicles means there are more of them on the road now. Auto repair shops that can learn and work on this new technology can increase their customer base and potentially increase their profits, too.
Who is the target market for your car repair shop?
Most car repair shops target vehicle owners, though some shops specialize and market toward more niche audiences. A shop might specialize in a particular service, like muffler repair, and market solely toward vehicle owners who are looking for this particular service. Other shops might work on certain types of vehicles, like luxury or foreign vehicles, and would market only toward the owners of those types of vehicles.
Skills, experience, and education useful in running a car repair shop
While starting a car repair shop doesn’t require a business degree, certain skills and experiences are valuable when going into the auto repair business.
Automotive knowledge. A detailed knowledge of cars is a must for any car repair shop owner. The better you know cars, the more trust customers will have in you – and the more they’ll keep coming back.
Vehicle repair experience. No formal vehicle repair education is required to become a mechanic, but when opening a car repair shop, however you should have plenty of vehicle repair experience. Earning a degree in an automotive-related field can leave you well-prepared for the challenges of working as a mechanic, but it isn’t required.
Interpersonal skills. Car repair shop owners will need to work with customers daily, and customers can be stressed or upset when their vehicles are broken. Strong interpersonal skills are valuable when running a repair shop.
Management experience. If a repair shop employs staff, then management experience is a valuable trait to have. From interviewing and hiring staff to maintaining schedules and training staff, management is an ongoing task when owning a repair shop.
Organization skills. With multiple vehicles on the schedule, each needing different repairs and different parts, organization becomes important to keeping a shop running smoothly. Organizing the shop itself, is also vital so that mechanics can quickly find the tools and supplies that they need in order to maximize their productivity.
Marketing skills. Most repair shops have to do at least some marketing. When a shop’s owner can handle part of the marketing, themselves, they can save money over hiring an agency.
Physical stamina. Repairing cars is a physically demanding job, and mechanics spend most of the day on their feet. Physical stamina is important when working in this industry full-time.
Costs to Start an Auto Repair Shop
The cost to open a car repair shop will largely depend on the shop’s size and the amount of money that you invest into specialty supplies and equipment. A one-bay shop with one vehicle lift stocked with basic equipment will cost about $50,000 to start. Larger shops with more extensive equipment and multiple lifts can cost as much as $75,000 or more to open.
Common startup costs include:
- Shop renovations and modifications
- Vehicle lift
- Diagnostic equipment
- Tools and supplies
- Inventory, including vehicle parts
Steps to Starting an Auto Repair Shop
Step 1. Write your Business Plan
After coming up with the idea, the next step in starting your business should be to write a business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Step 2. Form a Business Entity
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from which include the sole proprietorship, partnership, corporation and LLC. Each type of entity has its own pros and cons such as liability exposure, costs and administrative requirements.
Related: Comparison of Business Entities
Step 3. Select your Location
While many auto repair shops don’t necessarily require a prime, high-traffic location, it can provide visibility and potentially more customers. These locations however come with a higher price tag.
Some auto repair businesses operate on a small scale out of owner’s garage. Before going down this path, be sure to check neighborhood covenants and city restrictions from running a business from your home.
Related: Choosing a business location
Step 4. Apply for Business Licenses and Permits
There are no licenses required specifically for auto repair shops, however there are local, state and federal registrations depending on where the business is located such as a sales tax permit, Employer Identification Number, and Occupancy Permit among others.
The Environmental Protection Agency (EPA) does have some oversight over repair businesses with disposing vehicle waste like old motor oil.
While you’re not required to hold an Automotive Service Excellence (ASE) Certification, the Advanced Technology Institute states that it may be difficult to find financing and liability insurance for your shop without that certification. To earn the ASE Certification, you’ll need to have at least two years of work and educational experience before you can take the certification test.
Step 5. Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a auto repair shop is another. Funding to start a auto repair shop can be difficult. In order to get a loan, the borrower(s) will need to have good credit and be able invest 15-25% of their money towards the total start-up costs.
Step 6. Get your Marketing Plan in Place
While many repair shop customers will become recurring customers, shops need to market to establish that initial customer base. Marketing options vary, but some common options for repair shops include print advertising, radio advertising, review sites such as Google, Facebook and Yelp, customer loyalty discounts and even sponsoring local events and networking within the community. Costs of these activities will vary depending on the type and volume of marketing.
Another way to market is to become a trusted source for towing companies and insurance agents as they are often the first people contacted when a vehicle breaks down and needs repair.
Step 7. Get Insurance
A car repair shop will need multiple policies to be fully covered:
- Commercial liability insurance protects the shop if a customer is ever injured while at the shop and can pay for expenses like legal fees.
- Commercial property insurance covers the cost of lost or damaged equipment, or if the building itself, is damaged by a fire or other event. If you choose to operate on your personal property, be sure to check your homeowner’s policy as it may not cover your home if there is damage resulting from the business activities.
- Workers comp insurance covers expenses like lost wages or medical bills if an employee is ever injured while on the job.
- Garage keepers insurance protects a car repair shop in case of accidental damage to a customer’s car during a repair.
The costs of insurance policies vary based on a repair shop’s location, property value, and the value of the equipment within the shop. To get an accurate idea of what insurance will cost, request quotes from multiple providers. Compare those quotes while considering factors like premiums, deductibles, and coverage limits and exclusions.
Step 8. Hiring Employees
Some repair shops operate with just the owner, but it can be difficult to juggle the repairs in addition to the tasks of running the business. According to Glassdoor, auto mechanics make an average salary of $51,410 per year. It’s important to budget not only for employee salaries but also for the additional expenses that come with having employees, such as workers comp insurance, health insurance contributions, unemployment insurance expenses, and paid time off.
Related: Hiring your first employee
Amazon has several books that go into detail on starting and running an auto repair shop:
How to Start and Manage a Successful Auto Repair Business: Professionals Guide (Free on Amazon Kindle Unlimited)
Detour: My Journey from High-Powered Attorney to Auto Mechanic Trade School and the Hard Truths Learned Along the Way
Progressive Marketing and Growth Plan for an Auto Repair Service: A Comprehensive, Targeted Fill-in-the-Blank Template (Free on Amazon Kindle Unlimited)
Digital Marketing & SEO for Auto Repair Shops
Every state has specific requirements and regulations when starting a business. Select your state below to find the guide to starting a business in your state.
How much can you potentially make owning a car repair shop?
Many factors affect the potential earnings of a car repair shop, including the shop’s size, the number of employees, the types of services it offers, and even its location – shops in urban areas will probably bring in more business than shops in more rural areas. A shop’s profit margins also affect its income.
Hard data on the average income of repair shops isn’t available, but we can assume that shop owners make more than the average automotive service technician salary. The Bureau of Labor Statistics reports that the top 10 percent of automotive service technicians make an average of $66,950, which can give us a rough idea of the earning potential for a car repair shop owner.
Things to consider before starting a car repair shop
Opening a car repair shop requires a significant financial investment, especially if you don’t have much of the equipment that you need. Diagnostic equipment alone can cost many thousands of dollars, and if you have to modify the shop that you’re renting, you’ll be looking at even larger expenses.
Be sure to write your business plan to make sure the idea is feasible. Read our article on writing an auto repair shop business plan.
To keep expenses minimal, consider starting out by specializing in a field like brake work or tire alignments, adjustments, and installation. These fields don’t require extensive diagnostic equipment, and the inventory is more minimal when compared with that you’d need to start a more generalized repair business.
You can also make the transition into owning your own shop easier if you have an existing base of customers. Doing some work out of your home’s garage (with the proper insurance) can help to gradually build up some customers while also getting a feel for what running a shop full-time would be like. This experience can leave you better prepared for when you ultimately decide to start up your own car repair shop.