Auto Repair Shop Business Overview
Auto repair shops provide mechanical and electrical repair services for cars, trucks, vans, and trailers. These businesses handle a range of services, from routine maintenance to major repairs, helping vehicle owners maintain their automobiles and extend their lifespan.
Related: Checklist To Start A Business
How Do Auto Repair Shops Make Money?
Auto repair shops generate income by providing vehicle repair and maintenance services to car owners. These services range from routine maintenance to complex mechanical repairs.
The following list outlines the primary ways auto repair shops earn revenue:
- Mechanical Repairs: Fixing engines, transmissions, and other mechanical components makes up the largest portion of revenue. This typically generates the most income because these repairs require extensive labor hours and expensive parts.
- Scheduled Maintenance: Performing manufacturer-recommended service work like oil changes, filter replacements, and systems checks. This creates steady income through repeat customer visits.
- Brake Services: Installing new brake pads, rotors, and other components while conducting brake system maintenance and repairs.
- Electrical System Repairs: Diagnosing and fixing vehicle electrical problems, including battery issues, starter motors, and computer systems.
- Wheel Services: Providing tire rotations, wheel balancing, and alignment services to maintain proper vehicle handling.
- Diagnostic Services: Running computer diagnostics and performing inspections to identify vehicle problems.
- Parts Sales: Selling replacement parts and components needed for repairs, often with a markup on wholesale prices.
Industry Statistics
Auto repair shops operate under NAICS code 81111 – Automotive Mechanical and Electrical Repair and Maintenance.
Here are some statistics that show how the auto repair industry has performed:
Auto Repair Industry Size & Growth: The auto repair industry generated $81.7 billion in revenue last year. The industry saw an average annual growth rate of 0.5% over the past five years. Growth projections remain positive for the next five years as the average age of vehicles continues to increase and more vehicles require maintenance. Rising consumer confidence will encourage vehicle owners to proceed with previously delayed repairs and maintenance services. (IBISWorld)
Number of Auto Repair Shops: There are approximately 286,000 auto repair businesses operating across the country. The industry remains highly fragmented, with independent operators making up about 67.6% of all businesses. The largest companies include TravelCenters of America, Monro Muffler Brake Inc, and TBC Corp, though none control more than 8% of the market. (IBISWorld)
Auto Repair Shop Profit Margin: Auto repair shops typically see profit margins between 5% and 15%%. These margins account for labor costs, parts markup, and overhead expenses.
Startup Stories
Also See: Ideas for Naming an Auto Repair Business
Costs To Start an Auto Repair Shop
Opening an auto repair shop can range from $50,000 to $300,000, depending on the size and location of the facility. This cost includes the initial investment in equipment, tools, facility setup, and inventory.
Here are some of the main costs to consider when starting an auto repair shop:
Location and Facility Setup: A suitable commercial space for an auto repair shop will need multiple service bays, proper ventilation, and equipment installation capabilities. Initial costs include the first and last month’s rent plus a security deposit. Building modifications like installing lifts, air compressor lines, and proper drainage systems must also be factored in. Total facility costs could range from $25,000 to $150,000.
Equipment and Tools: Auto repair shops require hydraulic lifts, diagnostic equipment, air compressors, and specialty tools for various repair jobs. Basic equipment and tool packages range from $15,000 to $75,000.
Parts Inventory: An initial stock of commonly needed parts and supplies allows for quick repairs and routine maintenance jobs. Starting inventory costs range from $5,000 to $25,000.
Insurance and Certifications: Business insurance, garage liability coverage, and necessary technician certifications are required before opening. Initial insurance and certification costs range from $3,000 to $10,000.
These figures represent rough estimates and will vary based on location and business size.
Resources:
Auto Care Association
Automotive Maintenance & Repair Association
Automotive Service Association