Average Cost To Open An Auto Repair Shop
For many mechanics, opening their own auto repair shop is a dream and a passion project. After all, the auto repair industry has seen steady growth in the past few years.
The demand for automotive repair services is advancing with the increasing sales of automobiles. But setting up your own auto repair business is no walk-in the park.
In fact, starting your own auto repair shop from scratch requires a cost outlay. But the real elephant in the room is, how much does it cost to build auto repair shop?
So in today’s post, we will explore the average cost of setting up your own auto repair business. Having a baseline figure for the cost you’ll incur will help you in taking appropriate actions to meet your financing needs.
Is Setting Up An Auto Repair Garage Feasible?
Let’s keep things simple. If you manage to successfully run an auto repair shop, the profit potential is massive! A large auto body shop can be expected to make around $100,000 a year or more.
However, the profit potential of auto shops varies with a lot of different factors like scale, location, team qualifications, auto shop fees, and capital budget. You can read this research about the future of automotive sales by Deloitte.
The services of auto repair shops are needed around the year and are not seasonal in nature. This is also why mechanics often transition into owners of auto repair shops.
But for a smooth transition into a business owner of a mechanic shop, it’s also important to understand the different costs that your business will incur.
Use the cost estimates to budget your business, plan financing needs and build a comprehensive business plan.
Understanding The Cost To Build Auto Repair Shop
It can be hard to figure out the right starting point for an auto shop. But after you have decided to take the plunge, it’s time to sit down and break down the cost structure.
Below, you will find some of the basic components of the cost that repair shop owners are expected to go over.
1. Automotive Repair Tools
Having your own mechanic shop means you need to fetch your own tools! So if you have decided to set up your own auto shop, you should start by making a list of the small automotive repair tools that you will need.
The total cost for these tools should vary between 1000-1500$, depending on which tools you’ll choose. For example, specialty tools are going to cost you more than getting the basic ones.
Here’s a list of some of the basic tools that are a requirement for a small auto repair shop:
- Set of Screwdrivers ($50)
- Hammer ($20)
- Torque wrenches ($75)
- Ratchet wrenches ($75)
- Hex wrenches ($30)
- Impact wrench ($300)
- Oil filter wrench ($20)
- Oil drip 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)
Along with the tools you can see a tentative cost for each one. The total for this amounts to $1335.
However, it’s important that you first understand the scale of your auto repair shop and then decide on the necessary tools. A bigger auto repair shop with a higher number of specialty services will require more tools and equipment.
For example, if you plan on offering air conditioning services, you will also need to purchase an air conditioning machine.
For a medium-scaled auto repair shop, you will need to get:
- Jack ($200)
- Air compressor ($200)
- Workbench ($300)
- Tool chest ($500)
- Diagnostics and OBD machine ($4,000)
These will be add-ons to our previous list. So this means for a medium scaled business, your budget should go up to $6000-7000.
And if you plan on setting up a large-scale auto shop, you will also need to purchase the following equipment:
- Hydraulic lift ($3,000)
- Engine crane ($500)
This means that for setting up a large-scale auto shop, cost will be hitting around $10,000.
In addition to the equipment, you will also need to purchase garage supplies for your auto shop which include:
First Aid Kit ($30)
- Gloves ($30)
- Boots ($150)
- LED Headlamp ($30)
This is another cost of around $200-300.
While purchasing your equipment, remember to opt for quality suppliers. Customers also judge the credibility and reliability of a shop on their tools and equipment.
Getting all the right equipment is one of the first few steps to setting up a successful auto shop.
2. Business and Administrative Expenses
When you set up your own shop, you will need to get the necessary licenses and permits too. This is especially for an auto shop since the nature of work is risky.
Before you can start your auto business, make sure to check the laws and regulations of setting up a business in your state. You will have to figure out which business permits are needed to operate in your area.
However, a ballpark figure for business and administrative expenses is around $6000.
This cost includes the following:
- Business license, certifications, and permits ($200)
- Insurance ($5k / year)
- Accounting fees ($500 / year)
The insurance cost can also go up depending on the types and extent of coverage that you purchase. That said, insurance makes up an important part of startup costs.
3. The 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. The prices for garage space for an independent shop vary greatly depending upon the location.
But to have a thriving auto shop, you will have to pick a location that has enough traction from local residential areas. Having a location with enough footfall will allow you to tap into potential customers, easily.
But at what cost?
The range for commercial garage space in the United States varies between $0.50 per square ft/month for small towns to $5.00 per square ft/month for larger cities.
This means that for a 3000 square feet garage, your rental building costs will be $1500 to $15,000 per month. In addition to this, you will have to consider potential space remodel fees. This means that you will need even more business capital to get your auto garage off the ground.
4. Supplies for Auto Repair Shop
You will also need to purchase spare parts and supplies for your auto shop. You will need to stock an inventory of car repair parts to perform your repair services effectively.
The approximate cost that will be needed to purchase your supplies and spare parts is around $5500. Supplies and inventory are other important items in your startup costs, as they are needed to execute the repair services.
Here is a list of some of the supplies that you will need to get your hands on for your shop:
- Oil for oil changes
- Washer Fluid
- Air Conditioning Coolant
- Radiator Fluid
- Transmission Fluid
- Power Steering Fluid
- Brake Fluid
- All-Purpose Cleaner
- Brake Cleaner
5. Marketing and Advertising Costs
Picture this; you have paid for your business permits, and rental fees and got yourself reliable equipment. You also have a team in place to execute your business.
But how will you get the word out about your shop 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 shops advertise their services but it takes a hefty budget to make a shop a brand or a household name.
That said, there are various options that you can use to market your shop. Some are more cost-effective than others. For example, you can also use social media marketing, blogging, and set up 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 like giving out discounts, coupons, and flyers for your store launch. This will help you in getting the word out about your auto shop.
Remember, effective marketing is going to drive sales and help you stand out from the many shops in your area offering the same services as you.
6. Human Resource Cost
It’s easy to offer mechanic services as a one-man show. But once you set up your own shop or business, you will need to put a team in place.
There are many key services that have to be performed to successfully run a business. And if you plan on setting up a profitable business, you will need more than a location respectable tool set.
You will need a capable team in place that can perform the necessary functions like HR, marketing, accounting, IT, sales, etc. For example, for billing and customer accounts you will need qualified accountants.
If you don’t invest in human resources, you will risk failure. Now depending upon the scale of your business, you will need to gauge how many people you’re going to hire and at which pay range.
You might also need to look into the labor laws in your area so you are in full compliance.
Wrapping it Up
In conclusion, you will need to invest around $50,000 in your auto shop. This includes the cost of equipment, supplies, business expense, marketing, and human resource cost.