For many mechanics, opening their own auto repair shop is a dream and a passion project. After all, the auto repair industry has grown steadily over the past few years.
The demand for automobile repair services is growing with the increase in automobile sales. But starting your own auto repair business is no small feat.
In fact, starting your own auto repair shop from scratch requires some expense. But the real elephant in the room is, how much is that cost of building an auto repair shop?
So, in today’s article, we’ll explore the average cost of starting your own auto repair business. Having a baseline figure for the cost you will incur will help you take the appropriate steps to meet your financing needs.
Is the creation of a car repair garage possible?
Let’s keep it simple. If you manage to successfully run an auto repair shop, the profit potential is huge! A large body shop can be expected to earn around $100,000 per year or more.
However, the profit potential of auto shops varies depending on many different factors such as scale, location, team qualifications, auto shop costs, and capital budget. You can read this to research on the future of automotive sales by Deloitte.
Auto repair shop services are needed year-round and are not seasonal in nature. This is also why mechanics often become owners of auto repair shops.
But for a smooth transition as a mechanic shop owner, it’s also important to understand the various costs your business will incur.
Use cost estimates to budget your business, plan your financing needs, and build a complete business plan.
Understanding the Cost of Building an Auto Repair Shop
Finding the right starting point for an auto shop can be tricky. But having decided to take the plunge, it’s time to sit down and break down the cost structure.
Below are some of the cost basics that repair shop owners are expected to go over.
1. Auto repair tools
Having your own mechanic shop means you have to go get your own tools! So, if you have decided to start your own auto shop, you should start by making a list of small auto repair tools that you will need.
The total cost of these tools should range between $1,000 and $1,500, depending on the tools you choose. For example, specialized tools are going to cost you more than basic tools.
Here is a list of some of the basic tools needed for a small auto repair shop:
- Screwdriver set ($50)
- Hammer ($20)
- Torque wrenches ($75)
- Ratchets ($75)
- Hex Keys ($30)
- Impact wrench ($300)
- Oil filter wrench ($20)
- Oil catch pan ($20)
- Bolt extractors ($20)
- Pry bar ($20)
- Cordless Drill ($100)
- Fuses ($20)
- Electrical tape ($5)
- Vice grips ($30)
- Pliers ($20)
- Small butane torch ($20)
- Allen and Torx bits ($20)
- Funnel ($10)
- Bench vise ($60)
- Jack stands ($100)
- Ramps ($100)
- Battery charger and jumper ($200)
With the tools, you can see a tentative cost for each. The total for this comes to $1335.
However, it is important that you first understand the scale of your auto repair shop and then decide on the tools needed. A larger auto repair shop with more specialized services will require more tools and equipment.
For example, if you plan to offer air conditioning services, you will also need to purchase an air conditioning machine.
For a medium-sized auto repair shop, you will need to obtain:
- Jack ($200)
- Air compressor ($200)
- Workbench ($300)
- Tool Chest ($500)
- Diagnostic device and OBD ($4,000)
These will be additions to our previous list. So that means for a medium-sized business, your budget should go up to $6,000-7,000.
And if you plan to set up a large-scale car workshop, you will also need to purchase the following equipment:
- Hydraulic lift ($3,000)
- Motor Crane ($500)
This means that for setting up a full-scale auto shop, the cost will reach around $10,000.
In addition to equipment, you will also need to purchase garage supplies for your auto shop, including:
First aid kit ($30)
- Gloves ($30)
- Boots ($150)
- LED headlamp ($30)
This is another cost of around $200-300.
When purchasing your equipment, remember to opt for quality suppliers. Customers also judge a store’s credibility and reliability on their tools and equipment.
Getting all the right equipment is one of the first steps in setting up a successful auto shop.
2. Commercial and administrative expenses
When setting up your own store, you will also need to obtain the necessary licenses and permits. This is especially for an auto shop since the nature of the job is risky.
Before being able to start your car business, be sure to check the business formation laws and regulations in your state. You will need to determine what business licenses are required to operate in your area.
However, a ballpark figure for commercial and administrative expenses is around $6,000.
This cost includes the following:
- Business license, certifications and permits ($200)
- Insurance ($5k / year)
- Accounting fees ($500/year)
The cost of insurance can also increase depending on the types and extent of coverage you purchase. That said, insurance is a big part of start-up costs.
3. Garage space for auto repair shops
Your location and garage space play a very important role in determining whether it will be a successful business or not. Prices for garage space for a freestanding store vary widely depending on location.
But to have a successful auto shop, you will need to choose a location that has enough traction from local residential areas. Having a location with enough traffic will give you easy access to potential customers.
But at what cost ?
The commercial garage space range in the United States varies between $0.50 per square foot/month for small towns and $5.00 per square foot/month for large towns.
This means that for a 3000 square foot garage, your rental construction costs will be $1,500 to $15,000 per month. On top of that, you’ll need to factor in the potential costs of renovating the space. This means that you will need even more trade capital to get your car garage off the ground.
4. Auto Repair Shop Supplies
You will also need to purchase spare parts and supplies for your auto shop. You will need to stock an inventory of spare parts to perform your repair services efficiently.
The approximate cost that will be required to purchase your supplies and spare parts is approximately $5,500. Supplies and inventory are other important components of your start-up costs, as they are needed to perform repair services.
Here’s a list of some of the supplies you’ll need to get your hands on your shop:
- Oil for oil changes
- Windshield washer fluid
- Air conditioning coolant
- Radiator fluid
- Smooth transmission
- Power steering fluid
- Brake fluid
- All purpose cleaner
- Brake cleaner
5. Marketing and advertising costs
Imagine this; you’ve paid your operating permits, your rental fees and procured reliable equipment. You also have a team in place to run your business.
But how are you going to market your store to acquire customers? You will need a marketing budget! The automotive industry is a competitive space and you will need to actively invest in marketing and advertising to stand out.
Many stores advertise their services, but it takes a hefty budget to make a store a household brand or name.
That said, there are different options you can use to market your store. Some are more profitable than others. For example, you can also use social media marketing, blogging, and creating your own website.
Or if you have a higher budget, you can invest in search engine optimization or pay-per-click advertising. These will increase your cost estimate but also have a higher return on investment.
You can also invest in physical or traditional marketing, such as offering discounts, coupons, and flyers for your store launch. This will help you publicize your auto store.
Remember, effective marketing will boost sales and help you stand out from the many stores in your area offering the same services as you.
6. Cost of human resources
It is easy to offer mechanical services on your own. But once you’ve established your own store or business, you’ll need to put together a team.
There are many key services that must be performed to successfully run a business. And if you plan to build a profitable business, you’ll need more than a respectable set of tools.
You will need a competent team in place that can perform the necessary functions such as human resources, marketing, accounting, IT, sales, etc. For example, for invoicing and accounts receivable, you will need qualified accountants.
If you don’t invest in human resources, you risk failure. Now, depending on the scale of your business, you will need to assess how many people you are going to hire and at what pay scale.
You may also need to consult the labor laws in your area in order to be in full compliance.
In conclusion, you will need to invest around $50,000 in your auto shop. This includes the cost of equipment, supplies, business expenses, marketing and human resources.