Understanding the True Construction Costs of Car Washes
Understanding the True Construction Costs of Car Washes
The first half of 2024 has brought a major and significant slowdown in carwash M&A, along with a stark decrease in the dispersion of acquiring parties. Transaction count is down ~46% and the number of sites sold and acquired is down nearly 40%, both compared to the first half of 2023. By way of most active acquirers, 2024 posted a large increase in deal concentration. Most notably, during the first half of 2023, the most active acquiror by transaction count was El Car Wash, having been the acquiring group in just 11% of the announced transactions. The first half of 2024 had Whistle Express representing a commanding 43% of deals as the acquiring group. In this industry report, we cover all announced M&A transactions in Q2 and provide a candid overview of market trends.
Car wash tunnels and supporting equipment are the backbones of any car wash business. They also have some of the highest base costs when it comes to the cost of a car wash. The cost of a car wash tunnel and support equipment can vary on a number of factors.
Water treatment systems can help car wash owners save money on their water bills by recycling the water used for washes. In some municipalities, water treatment systems may even be required. The cost of a water treatment system for your business varies based on whether you install one at all, and the level of equipment that is purchased.
Electronic components are another necessary component of a car wash business, but the price of these components can range considerably. Not all electronic components, like pay stations, are required for car wash businesses. Still, the convenience and long-term savings they can offer may make them worth it for some businesses.
Yearly site maintenance and landscaping costs for a car wash system can get expensive depending on the complexity of the service requested. Some site maintenance tasks are not necessary each year, like paving or asphalt. On the other hand, grass mowing and mulch laying may have to be done several times per year.
Vacuum systems are necessary for a full-service car wash business. The price of vacuum systems can vary highly, depending on the complexity of the vacuum system in question. Luckily, vacuum systems tend to be a one-time investment for car wash owners, with repairs and maintenance being a small fraction of the cost of the overall system.
It may be surprising to some car wash owners to learn that HVAC & plumbing is one of the cheaper investments required for a car wash business. Based on the average temperature of where your car wash business is located, the price you’ll pay for HVAC & plumbing can vary. In general, HVAC & plumbing for a car wash business is less than $100,000, with repairs and maintenance again being minuscule in cost compared to the overall system.
As with any other business, if you do not market your car wash, customers will not know it exists. Signage has a fairly set cost, while marketing can widely vary depending on the kind of marketing you’re performing. Things like websites, digital marketing campaigns, billboards, and print advertisements can easily cost over $100,000. But, the costs range based on the level of marketing being performed for the car wash business.
Most municipalities will require special permitting and in-depth planning before approving the construction of a new car wash. On the other hand, engineering and architecture is required to ensure that your car wash business is up to code with local rules and regulations. You can expect to spend at least $175,000 on the planning and permitting of a new car wash.
With the more predictable of the car wash construction and build costs now established, along with a reasonable range of variance conveyed depending upon the specifics of the wash you are looking to build, the time has come to focus on the hardest of the costs to predict and which vary the most from one car wash build to another.
Real estate is one of the highest variable costs when it comes to building a car wash. Things like the geographical location, quality of the land, and size of the land are all factors that can change the cost of real estate for a car wash business. Doing your research on the land being purchased for the car wash is critical to building a successful business, regardless of city or state.
These add a meaningful cost line item to your total build cost. Whether correct for you will depend on your situation, desired level of time involvement, your goals – and most importantly – the quality and tangible value the consultant brings and provides during the build process.
Financing has a highly variable cost based on how much money is needed to be borrowed to construct a car wash. When it comes to car wash financing, it’s important to understand the different types of loans and how they can impact a business for years to come. Car Wash Advisory is happy to walk customers through the different types of car wash financing at their convenience.
The cost to a car wash varies. However, hopefully the above analysis does provide a meaningful starting point and bounds for estimating how much you should anticipate spending to construct and build the car wash you considering making a reality.
Although we’ll certainly have some pieces and materials coming out more specifically on this topic, the CWA team would like to leave you with one final thought and suggestion for those considering building a new car wash (regardless of whether or not deciding between building vs. an alternative route of acquiring or not).
We highly recommend being heavily focused on a single measure and metric of potential operating and financial performance when considering the potential payout and financial prudence (not to mention the site, path to build, etc..) when building a wash – your breakeven annual car count. As with anything, or at least we’re believers in this, it’s always safest to hope for the best, but plan for the worst. So when considering building a car wash, go to your downside case that you have built pro-forma projections for, extract the effective ticket price (make sure to keep anticipated unlimited membership pricing and expected volume attribution and not just use a simple and dangerous weighted average single wash ticket, along with your anticipated downside annual car count volumes, and figure out what level of safety and margin and error from this scenario you have in comparison to that of the ongoing maintenance costs and debt service costs given the total build cost you are expecting now after using this guide. If your downside / conservative pro-forma does not realistically have a considerable margin of error in comparison to your ongoing simple total maintenance and “keep-the-lights-on” costs – please don’t take this lightly. It may be the case that you have an error in your math, or you need to revisit and further sensitize your underlying projection assumptions. But this number, the minimum cars you have to wash to service the ongoing debt service based on your new build as well as the standard operating, maintenance and payroll costs to run the car wash – please make sure the math works before committing yourself to building a new wash.
Car Wash Advisory is an M&A firm dedicated to serving the car wash industry. Contact us to learn more or to speak to our car wash brokers.
For a conveyor car wash system, you can expect to spend anywhere from $1,400,000 to $2,100,000. The costs of car wash equipment can vary based on features, and size. Costs can change based on decisions by the owner, as well as the car wash tunnel designer.
Operational costs of car wash businesses vary greatly based on several factors, including employed staff, the type of car wash system or systems your business uses, real estate costs, and more. Therefore, it’s difficult to estimate exactly how much it costs to own a car wash.
The cost of a car wash business widely ranges based on several factors, including the type of car wash, the location of the car wash, and its overall revenue. Reference the chart above to see how much it costs roughly to construct a new car wash business, or contact us today to learn more about buying an existing car wash business.
Building a car wash business is an expensive undertaking, and tends to cost millions of dollars in equipment and construction costs. On the low end, Car Wash Advisory estimates that a car wash costs approximately $5,560,000 to build. Higher-end car washes can cost closer to $7,660,000 to build. These high entry costs make the idea of buying a car wash business a much more attractive idea to those looking to break into the industry.
The income provided by a car wash business is also highly variable. For a standard, self-serve car wash in a fairly populated area, you can expect to bring in roughly $40,000 to $100,000 a year from your business. On the other hand, large, multi-bay car washes in a highly populated area can easily net you $500,000+ annually. It’s all about the kind of car wash that you own.
Private equity doesn’t always “work.” Hopefully, this comes as no surprise. Private equity’s involvement in the car wash sector is no exception. The formula that combines outside money, tenured industry experts, and a fitting and applicable industry is far from infallible.
What They Mean for Valuations: Featured in AutoLaundry News
