Last Updated on May 21, 2020
Changing a vehicle’s oil is difficult and inconvenient if a driver isn’t really set up to perform the service. Oil change businesses offer a convenient alternative, and many customers seek these businesses out out of necessity. If you often work on cars and are comfortable performing oil changes, then starting an oil change business might be a profitable opportunity. While this type of business usually requires a significant startup investment, with creative branding and great customer service can help to establish it as a successful long-term opportunity.
Oil change businesses provide lubrication services for a variety of vehicles, helping to keep those vehicles running at their best. This standard part of vehicle maintenance is difficult for vehicle owners to perform on their own, and oil change businesses offer a convenient alternative. Most businesses perform oil changes while customers wait, making prompt, efficient service important.
Many businesses don’t just provide oil changes, but also provide complementary services like tire rotations, air filter changes, and other basic automotive maintenance. While some mechanics will offer oil changes, businesses that specialize in oil changes are generally faster and tend to charge less for these services. Because vehicles need regular oil changes, there’s opportunity for a business to provide great service and earn valuable returning customers.
According to IBIS World, the oil change services industry underwent 2.8 percent annual growth from 2014 through 2019. During that time the number of businesses decreased to 33,481, but industry employment grew to 93,198. In 2019, the industry brought in $8 billion in revenue.
The industry’s growth correlates with the number of vehicles on the road and how far they’re driven. During that five-year period, crude oil prices fell, encouraging people to drive more. Per capita disposable income also increased during that time, which may have prompted consumers to travel, take road trips, and otherwise drive their vehicles more.
Several trends are affecting the oil change industry today. According to Lubes’N’Greases, consumers are realizing that vehicles are being built to last, and that’s a positive for the oil change industry. With more vehicle owners keeping their vehicles longer, they’re more willing to perform routine maintenance to keep those vehicles operating well. An increase in the number of vehicles that are 11 years old and older is expected to drive increased demand within the oil change industry.
CarWash.com notes that there’s an increased pressure on oil change businesses to quickly service vehicles and have them on the road again. Consumers are no longer willing to wait an hour for an oil change, and instead expect the service to be completed within 30 minutes.
This preference for convenience opens up other opportunities within the industry, though. Many facilities are combining oil change services with car washes, offering drivers the opportunity to take care of multiple car maintenance factors with one short trip. Offering car wash coupons with an oil change can help to support customer satisfaction and loyalty.
Most oil change businesses market to drivers who are looking for convenience, or who don’t have the skills or facilities to perform their own oil changes. The target market for an oil change business includes drivers and vehicle owners who are aware of the importance of vehicle maintenance. In some cases, businesses may also advertise to commercial drivers or fleets in an effort to secure a large volume of recurring business.
Skills, experience, and education useful in running an oil change business
While starting an oil change business doesn’t require a business degree, certain skills and experiences can contribute to the business’ success.
Oil change experience and knowledge. A business owner needs to have experience in performing oil changes and a general awareness of the industry and the work that goes into an oil change. A familiarity with the different types of oils, like synthetic and conventional oils, is also important.
Automotive knowledge. An oil change business owner should also have general automotive knowledge. Experience working in a garage is ideal, since it can contribute to important safety issue awareness and precautions.
Customer service skills. Providing great customer service will help a business to quickly build up a good reputation. Some experience in the customer service area is helpful, especially since a business owner can train employees on how to provide great customer service.
Management experience. An oil change business will need multiple employees, so experience in hiring, training, and managing staff is helpful.
Marketing experience. Marketing is important to a business’ success. A business owner who is aware of some common marketing techniques can be involved in the business’ marketing and make wise choices about how to best use the marketing budget.
Costs to Start an Oil Change Business
Starting an oil change business will usually involve significant startup costs. Most of that money is related to the construction and outfitting of garage bays that allow technicians to easily access a vehicle’s undercarriage without the need for a vehicle lift. Expect to spend about $250,000 to start a business with a two-car facility that’s built from scratch. Business owners lucky enough to find an already constructed facility available for rent will have significantly lower startup costs.
Common startup costs for an oil change business include:
- Garage construction or renovation
- Equipment purchases
- Inventory (oil, filters, and other goods)
- Furniture for the waiting room
Steps to Starting an Oil Change Business
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
It is advantageous to locate an oil change business in a high-traffic area as it’s both easy for customers to find and they will see it on their daily commute.
Related: Choosing a business location
Step 4. Apply for Business Licenses and Permits
While not overly common, in certain areas, some form of environmental licensing may be required. Additionally, there are common local, state and federal registrations such as a sales tax permit, Employer Identification Number, and Occupancy Permit among others.
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 oil change business is another. Funding to start a oil change business can be difficult as they can be expensive. 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
Marketing is important to both build awareness of a new business, but also as an ongoing activity to bring in new customers and build profits. Many oil change businesses are active on social media such as Facebook and Yelp and occasionally print advertising and direct mail. Coupons, loyalty programs, and other incentives can also help to build up a customer base and establish customer loyalty. Marketing costs will vary depending on the type of the marketing performed and how much is done within the business versus by hiring a professional marketer.
Step 7. Get Insurance
An oil change business needs multiple insurance policies to be fully covered:
- General liability insurance protects the business if customers are ever injured while on the properly, like by a trip or fall. This insurance can cover costs like legal fees and other expenses.
- Commercial property insurance protects the business against a financial loss if inventory, equipment, or the business’ property are ever damaged in an event like a fire.
- Workman’s comp insurance helps to cover expenses like medical bills or lost wages if an employee is ever hurt while on the job.
The cost of these policies can vary based on the business’ location, the value of the building and its equipment, and even the number of employees that the business has. To get the most accurate idea of what insurance expenses will be, request quotes from multiple insurance providers. Then, compare the quotes while paying attention to variables like coverage limits and exclusions, premiums, and deductibles.
Step 8. Hiring Employees
The most basic oil change business will require a manager and a few technicians. Larger businesses may also hire an assistant manager. According to PayScale, the following are the average salaries for these positions:
- General manager: $43,000
- Assistant manager: $36,000
- Lube technician: $24,000
In addition to budgeting for employee salaries, a business’ budget needs to include other expenses that often come with hiring employees. These expenses include paid time off, workmans’ comp insurance, and retirement and health insurance contributions.
Related: Hiring your first employee
How much can you potentially make owning an oil change business?
Oil change business profits will vary depending on how long the business has been in operation, its location, the effectiveness of its marketing, and its expenses. Valvoline Instant Oil Change franchises earn an average of $282,067 per store per year. For a smaller, independent store, profits of $70,000 or more a year are more likely.
Things to consider before starting an oil change business
Employee training is very important to a business’ success. Well-trained employees won’t just be safer in how they work, but they’ll understand how to work well together as a team for efficient, quality service. Because employees are handling expensive vehicles belonging to customers, plan to invest plenty of time in training and to create a detailed training and safety manual.
Many oil change businesses are finding success in offering multiple services, like tire rotations or even car washes. Offering these multiple services can allow for upselling and can even bring in new customers. But just adding on new services for the sake of it won’t necessarily be effective. It’s important to perform market research to try to establish whether there’s a need for the services that you’re thinking of offering.
Automotive Oil Change Association