Over the past few years, various niche asset classes have gained popularity among investors, and one of them is car wash investments. This trend is expected to continue as the professional car wash industry is projected to grow at a compound annual growth rate (CAGR) of 3.1% from 2022 to 2030.
As an individual investor, owning a car wash might seem impossible, impractical, and unappealing. However, there are non-ownership routes, such as investing, that let you get a piece of the pie. This is particularly true for accredited commercial real estate investors.
To help you navigate car wash investments, our starter guide outlines the pros, cons, and considerations of this investment option. It also outlines how to get started.
So, is a car wash a wise investment? Car wash investments are a solid option for many investors. From a fundamental real estate investment perspective, car washes have low construction costs and short construction timelines. Investors can capture cash flow faster with a lower investment amount.
Moreover, the car wash industry is growing. In 2021, the global car wash market reached a record high of $29.3 billion, with North America accounting for more than half of global revenue.
Over 72% of U.S. drivers regularly use professional car washing services, driven by an increasing consumer focus on car maintenance and more spending power. The quest for convenience is also a top driver, with more people choosing quick professional car washes over washing at home.
The COVID-19 pandemic has further boosted the car wash industry, with several unique facets encouraging growth. No-touch car washes have earned “essential business” designations in several markets, and rideshare services like Uber and Lyft now require routine professional vehicle cleaning, potentially boosting demand.
Investing in a car wash business can be a smart move for several reasons. Firstly, it is a low-risk investment as the initial investment costs are not as high as other businesses. Depending on the type of car wash, the initial investment can range from $10,000 to $500,000. Additionally, a car wash business has low overhead costs, and maintenance and operating costs are relatively inexpensive compared to other businesses.
Another reason why a car wash investment is a smart move is a steady demand for car washing services. As long as people drive cars, they will need to clean them regularly. According to the International Car Wash Association (ICA), the car wash industry has grown consistently by 3% annually over the last ten years.
In addition to steady demand, car washes offer multiple revenue streams. Most car wash businesses generate revenue from car washing, detailing, and additional services such as oil changes, tire rotations, and windshield repairs. Offering these services can increase the customer base and provide additional revenue streams.
Moreover, technological advancements in the car wash industry have made it easier to operate and maintain a car wash business. Advanced equipment and technology such as touchless car washes and water recycling systems increase efficiency and reduce operating costs.
Another factor to consider when investing in a car wash business is expansion potential.
Once the business is up and running, it can be scaled up by adding more locations or offering additional services. This can help increase business revenue and profitability.
Location plays a crucial role in the car wash business. A facility’s proximity to high-traffic areas or major retail destinations can directly impact its cash flow. Additionally, climate can also play a role in car wash usage, as snowy climates may result in more frequent washes during the winter season. It’s also critical to remember specific zoning requirements and local rideshare vehicle volume.
Operating costs are a significant aspect of car wash profitability. Investors must consider one-time fixed payments for equipment as well as ongoing utility and labor costs. However, overall operating costs for car washes are low, with a 30%-35% average operating expense ratio.
Technology-enabled solutions are becoming increasingly popular in the car wash industry, with facilities modernizing their equipment to cut back on chemical and water waste while maximizing customer experience and retention rates. Evaluating the technology and equipment used at the car wash you’re interested in investing in can provide a better understanding of the expected machinery lifespan. This can also help you understand replacement frequency.
A well-located location can provide potential downside protection, as the property can easily be repositioned into another type of retail unit if the car wash business fails to generate cash flow as projected.
Type of car wash
Car wash systems come in different shapes and sizes, each with unique features and capabilities to cater to different types of vehicles and customer needs. Here are the five main types of car wash systems:
- Self-Service Car Wash: A self-service car wash allows customers to use a coin-operated or card-operated system to access a variety of tools and products to clean their vehicles. These tools typically include pressure sprayers, soap dispensers, and wax applicators. Self-service car washes are great for customers who want to take their time cleaning their vehicles and have control over the process.
- In-Bay Automatic Car Wash: In-bay automatic car washes use a system of machines and nozzles to clean the vehicle as it moves through the wash. The customer pulls their vehicle into the bay and the machines do the rest. Car washes are usually fully automated, with no human intervention required. In-bay automatic car washes are ideal for busy customers who want a quick and convenient car wash.
- Tunnel Car Wash: A tunnel car wash is a fully automated system where the vehicle enters a tunnel and is guided through a series of machines that apply soap, water, and other cleaning agents to the vehicle. The tunnel car wash system is efficient and can handle large volumes of cars, making it popular with commercial customers.
- Touchless Car Wash: Touchless car washes use high-pressure water and chemicals to remove dirt and grime from the vehicle’s surface. The wash is entirely automated, and there is no physical contact between the vehicle and the equipment. Touchless car washes are ideal for customers concerned about vehicle finish damage and want a gentle, thorough clean.
- Mobile Car Wash: A mobile car wash is a service that brings the car wash to the customer’s location. A mobile car wash operator comes to the customer’s home or office and washes the vehicle on-site. This type of car wash is popular among customers who are short on time or prefer the convenience of a car wash convenience.
Learn How To Invest in a Car Wash Business
Investing in a car wash can be a profitable venture for those willing to put in the time and effort to research and analyze the industry. Here are some steps to consider when investing in a car wash:
- Research the market: Before investing in a car wash, it’s important to research the market to understand the industry’s current trends, challenges, and growth potential. This includes analyzing consumer behavior and preferences, location trends, and competition.
- Determine your investment goals: Decide on your investment goals and expectations, including the expected return on investment (ROI) and the desired level of involvement in the business. Will you be a hands-on owner or a passive investor?
- Assess the potential investment: Consider factors such as location, equipment, and current profitability when assessing a potential car wash investment. Evaluate market demand, equipment condition, and the quality of the customer experience.
- Develop a business plan: Create a detailed business plan outlining your investment strategy, marketing plan, and financial projections. The business plan should also include details about the management team, operational procedures, and marketing tactics.
- Secure financing: Determine the amount of capital required to acquire or start a car wash and secure financing. Options include bank loans, crowdfunding, private investors, or personal funds.
- Purchase or start the car wash: Once financing is secured, purchase or start the car wash. This includes finding a suitable location, acquiring equipment, hiring staff, and obtaining the necessary permits and licenses.
- Manage the car’s profitability when assessing a potential car wash investment. Evaluate market demand, equipment condition, and the quality of the customer experience.
- Develop a business plan: Create a detailed business plan outlining your investment strategy, marketing plan, and financial projections. The business plan should also include details about the management team, operational procedures, and marketing tactics.
- Secure financing: Determine the amount of capital required to acquire or start a car wash and secure financing. Options include bank loans, crowdfunding, private investors, or personal funds.
- Purchase or start the car wash: Once financing is secured, purchase or start the car wash. This includes finding a suitable location, acquiring equipment, hiring staff, and obtaining the necessary permits and licenses.
- Manage the car wash: Once the car wash is operational, it’s critical to manage the business effectively. This includes maintaining equipment, monitoring expenses, hiring, training staff, and marketing the business to attract customers.
Investing in a car wash can be profitable with the right research, planning, and execution. By understanding the market, assessing potential investments, and developing a solid business plan, investors can build a successful car wash business.
In conclusion, investing in a car wash business in 2023 can be a smart move. Low-risk investment, steady demand, multiple revenue streams, and technological advancements make it an attractive opportunity. With careful planning and execution, a car wash business can be a profitable investment that provides a steady source of income for years to come.
Ralwealth team is an expert consultant on the most affordable carwash deals in the USA. Please contact us to help you find the most suitable carwash investment that matches your portfolio.