10 Ways to Start Investing in Car Washes

Investing in car washes is an excellent revenue opportunity for those who want a hands-off type of investment strategy that’s growing in demand. The simplest of methods could be to simply buy an existing car wash and run it, but that’s just one opportunity, and, in many cases, it may leave out some key opportunities for growing your portfolio. If you are looking for your next business venture, consider the different car wash types and how to buy a car wash – or invest in one in another way.

Are Car Washes a Good Investment?

Consider the industry to determine how profitable owning a car wash in your area is. According to data from Grand View Research, the market is solid and growing, with a compound annual growth rate from 2013 to 2018 at 3.6%. However, by 2025, this is expected to be around 3.2%, meaning there is a rise in the demand for car washes in many states.

Do people use car washes? When was the last time you went through a car wash? If it’s been some time, you may not realize just how advanced and streamlined these operations have become, nor the profit potential behind them. In 2994, just 48% of people used a professional car wash, but in 2019, that number had grown to 77%. The increase in the number of people operating rideshare companies with their vehicles makes this demand even more so, according to the International Carwash Association.

With potential, it makes sense to consider the benefit of investing in car washes yourself. However, many ways exist to own and profit from a successful car wash business.

Ways to Own and Profit from Car Wash Businesses

As you think about this business venture, you have to consider a few things:

• Do you want to provide a full-service car wash in which you are actively involved during the day-to-day business operations?
• Are you considering something like a self-service car wash you own and people use alone?
• Perhaps you just want to help support the car wash industry by being an angel investor in this industry.

These are just a few car wash model options to think about. Let’s dive into a few ways to see annual revenue from investing in the car wash industry.

1. Buying a Car Wash That’s Already Operational

Buying a car wash to own and operate is the most obvious option for many people. There may be one for sale in your area right now that you wish to own. These are seasonal businesses in some areas, especially in areas with a significant amount of snow.

However, even in these cases, once temperatures warm up, car washing becomes critical to remove salt and debris from the cold and rainy weather. The bottom line is that cars need a car wash, and if there’s one in your area that needs an owner, it may be a good option for you to build some cash flow.

Owning a car wash will mean several things:

• You will need to purchase the building and business itself. You can use a lender like RealtyMogul to help raise funds for this purchase.
• You are responsible for installing and maintaining all working components of the system. You also need to consider updates to car wash technology over time.
• You’ll need to choose a prime location with ample traffic to ensure enough people will stop in.
• You’ll need to cover all the costs of owning the business, including property taxes, utilities, and repairs.

How much revenue you earn in this business model depends on the area, the type of car wash, the number of service bays available, and the overall nearby competition.

This model has two sub-options:

• Self-service car wash: In this method, you own a car wash in which people pull up, drive into the bay, and then get out to scrub down their car. Car wash prices tend to be lower for this method of car washing, but there’s less technology involved.
• Automatic car wash: In this method, the person remains in their car, pulls into the tunnel car wash, the car wash equipment moves over their car to clean it, and they drive away.

Older-style car washes involved people actually scrubbing and drying off vehicles, but these are no longer used because of the effort and risk involved.

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2. Building a Car Wash

On the other hand, you may see a need for a car wash in your area. You can then invest in building one from the ground up. If there is no car wash in an area you want to operate in, you can build one and own the entire business from the ground up.

Where you operate is important. For example, the U.S. Census Bureau reports that people in California love their car washes, and that’s why the state has over 2,000 car washes established. By contrast, in Wyoming, there’s just one car wash in the state for every 10,335 people (and that could mean lots of opportunity!)

If you plan to build a car wash, you’ll need to consider the following:

• Self-service car washes are easier to set up and manage with few employee needs. A bay automatic car wash and more expensive equipment will need employees to monitor it.
• Determining the operating costs can be challenging. Consider talking to nearby businesses or those in neighboring cities about these options.
• If you start a car wash like this, you’ll need to fund the entire process, including buying property, obtaining city permits, and constructing the building itself.

You must also establish the business, obtain the necessary licensing, and invest in marketing your company.

3. Owning a Franchise Car Wash

Another route to reduce some of the marketing difficulties involved is owning a car wash franchise. There are several car wash companies available that provide you with not only their name to help establish the business but also the how-to and education you need to do it well.

Some of the most well-known car wash franchises include:

• Mr. Clean Car Wash
• Superior Wash
• Green Shine Waterless
• Ziebart
• Fleet Clean USA

You may be able to find others in your area. If you plan to have a car wash business that is a franchise, there are some interesting factors to consider.

• You will need to meet the franchise’s expectations, which may include factors related to the services provided, the specialized car wash equipment you must use, and the overall branding messaging used.
• Starting a car wash like this may help you to learn the industry, equipment, and overall business model if the franchise offers any type of hands-on training.
• The profit margin could be a factor since you will likely pay an ongoing franchise fee for using the company’s name.

If you decide to go this route, it’s important to learn as much as possible about the car wash business and compare several franchises to determine what distinguishes one from the next.

4. Investing in a Car Wash with a Partner

You could be a single car wash owner, which means you are putting all the financial risk on yourself. If you want to operate in this business with less risk (and perhaps just have a bit of help), you may wish to find a partner to help you. This way, you can put in as much effort as you want and split the workload with your partner.

One of the key benefits of this method is that you can continue working your job or managing other investments while you work to build your car wash business. Splitting the work may also provide a better financial strategy because you alleviate some risk and financial investment.

If you don’t have a partner who wants to get into business with you, you may want to consider real estate crowdfunding platforms like Crowdstreet, which can help connect you with investors. Many investors see the potential of putting money into companies even if they cannot work within it routinely.

5. Investing in a REIT for Car Washes

If the thought of actually running a day-to-day business just does not work for you, and you want to take advantage of the car wash industry, you may want to consider a commercial real estate investment trust (REIT).

As an investment fund, you put money into a trust managed by a professional financial advisor. They handle the investing in actual companies. There are some key advantages to this method of taking advantage of the car wash industry:

• You earn passive income. That means you put money into it, and your fund grows over time, though some risk is involved. There’s not a lot of day-to-day work for you to do.
• You can trust your financial advisor (if you’ve selected wisely) to manage the investment strategy according to your desired risk tolerance level.
• You benefit from a long-term investment strategy, and while your profit margin is lower than owning the business outright, there’s often less risk involved.

Investing in a car wash or REIT could help you to lower your risk, diversify your portfolio of investments, and still take advantage of this industry.

6. Investing in a Private Equity Fund

A private equity fund is an investment strategy in which you pool money with other investors, and an advisor manages the investment. It is a collective investment method that allows for investing in several types of equity securities. Most often, that means you can invest in more than just car washes, though some private equity funds do not offer this type of commercial investment.

Private equity funds set their own goals and strategies for investments, and they invest in all types of businesses, including car washes. This type of diversification will allow you to see investments in various businesses.

This method could be ideal for those who want a hands-off approach to investing. Here, you will not have any say in the actual business model but will contribute to the fund where the advisors make decisions. The revenue potential will be different based on the overall risks involved.

See Related: Best Ways to Invest in Affordable Housing

7. Owning Stock in a Private or Public Company

Yet another opportunity to participate in the car wash industry without owning a self-serve car wash is to invest in a car wash company. Work with a financial advisor or use a financial investment platform to help you do this.

You’ll want to consider several franchise car wash companies or a larger company listed on the stock market. You can also invest in a private company by purchasing ownership directly from the other owners. In either situation, your role in the day-to-day running of the car wash will vary based on your needs and goals.

Typically, you’ll need to make a sizable investment if you purchase part of the company in a private sale. If you’re buying stock in a publicly traded company, you can often purchase for much less, based on how much a single share is selling for.

8. Investing in Real Estate Crowdfunding

If you just want to support other people who own or are growing a car wash, you can join a real estate crowdfunding site like RealtyMogul. Here, you can invest in REITs and private markets, where people are looking for individual investors to help them build their businesses.

Other sites allow you to contribute to the specific business goals of a car wash owner or investor. The key here is to do your homework and learn as much as possible about the organization running the car wash or the related business.

9. Invest in a Mobile Car Cleaning Business

If you do not want to buy automatic car washes or worry about owning a car wash at a local location, think about a mobile car wash instead. This model allows you, as the car wash and car detailer, to go to the customer’s location and clean their car for them there.

This business model is slightly different because you do much of the physical work yourself. You will need to purchase the materials you need and market your business.

However, the typical costs will be much lower as you start this business. For many people, this is a good starting point or a side hustle that allows them to work how much or how little they need to without a huge initial investment.

Customers appreciate this type of car wash because it is easily accessible. For example, you can visit them while they are at work or in the evening, so their day is not impacted.

If you have a local customer base, you could build up this model to offer routine services over time. You can also advance the services you offer. For example, additional services may include upholstery cleaning or detailing to add to your offering and earn more revenue.

10. Provide Car Wash Cleaning Services to Businesses

A different method within the same field is a mobile commercial cleaning service. In this situation, you will go to car dealerships, fleet managers, and other organizations that provide vehicles for clients and then provide them with a cleaning service. For example, smaller car dealerships often use a mobile provider to clean the new trade-in they receive to quickly get it ready for the market.

In this type of business, you must consider numerous other factors, including whether you have local dealerships or other services that may need this service. You may also have to purchase all of the equipment you need.

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What Factors Can Make Your Car Wash Business More Successful?

What kind of car wash makes the most money? What time do you have to invest in your new business venture?

People have questions like these as they seek ways to make their new business model competitive and profitable. The following are some key factors to consider when entering this industry.

Technology Matters

The demand for car wash services in many areas is quite high, and as a result, you may need the most advanced technology available and a very modern setup. For example, a tunnel car wash can be an excellent choice if its technology can help reduce cleaning and water use, provide a high level of cleaning care, and move cars through quickly.

By contrast, if you are considering an older car wash that has not been updated, you may not only have to deal with lower revenue potential but also expensive repairs if the car wash damages your customers’ property. Modern car wash technology may help to:

• Lower operating costs associated with your investment
• Increase profit margins
• Allow you to clean more cars within each hour
• Provide a higher quality wash that your customers may desire
• Reduce overall operating costs if you can move to a fully automatic design without employees

Technology has to be upgraded over time. That’s an important factor to keep in mind when making a purchase.

Does Location Matter?

The short answer is yes. A good location can make a big difference in your business’s profitability. Here are some things to consider when choosing a location.

• Is the location in a busy area with enough traffic moving through the community? Like a gas station, many people choose a car wash based on what they pass on their way to and from work each day.
• Does the location make getting in and out of the lot easy? If it’s hard to access, your customer base will be limited.
• Can the location handle more than one vehicle at a time? Though vehicles can queue up at a tunnel car wash in self-serve bays, people do not always want to wait for a spot to become available.

If you look at the top 100 car washes in the country, chances are good they are near busy thoroughfares with a lot of traffic moving in front of them. Ensure the car wash you buy is located in the same environment.

Increase Management Skill

For those who purchase a car wash to own and operate on their own or with a partner, there is a component of facility management to consider. Someone must be there to meet customer needs, handle emergency repairs, and collect the revenue generated.

Maintaining the property is necessary to ensure it is safe for car owners. You must also keep the equipment maintained and serviced property to protect warranties.

Depending on the car wash type, you may spend a lot of time hiring, training, and managing employees. There may be some situations where you spend much less time in the hands-on operation, but you still have to oversee the business.

What is the initial debt load needed to start a car wash?

Another factor to consider as you go into this process is the debt loan or the amount of money you will need to borrow or use from your savings to establish your car wash business. This depends on many factors, including the size and type of car wash, location, and whether you are building from the ground up. You could reduce debt by working with a partner or securing an angel investor.

Car washes do require a lot of money to establish, though. Most of the earnings during your first years will likely go to covering that debt and paying down your borrowed funds.

Frequently Asked Questions

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