Investing in Car Washes: A Guide To Clean Profits
Years ago, I wanted to start investing in real estate and decided to go the passive route with real estate syndications. As a periodontist, I didn’t have time to deal with tenants (nor did I want to) and found that the “hands-off” approach was the best route.
Most of the deals available then were single-family homes and apartment syndications. Since then, I’ve diversified into:
When new Passive Investor Circle members ask me what I’m investing in, I tell them whatever asset class is seeing the most growth with the highest returns.
And one of those is car washes.
With a growing demand for car washing services and various investment options available, investing in different types of car washes can be a great way to generate passive income for busy professionals.
In this article, we’ll:
- highlight the car wash industry’s potential for profitability
- discuss common risks and rewards
- give recommendations for evaluating different types of car wash investments
- offer strategies for maximizing returns through site selection and effective operations
And for those like me that want to invest passively, we’ll discuss the investment opportunities available that can generate returns with minimal effort.
Is A Car Wash A Good Investment?
In business, a customer’s high demand is what propels growth. And as long as cars are on the road, car washes offer a service that’ll always be required. Although hand washing a car is always an option, more and more people prefer the convenience and speed of automatic car washes.
The percentage of drivers who wash their cars at home has drastically decreased over the past ten years, according to the International Carwash Association (ICA).
Compared to 1994, when 48% of drivers said they frequently washed their cars, 77% of drivers in 2019 said the same. The yearly sales of vehicle washes are thought to reach $24 billion.
The ridesharing (Uber, Lyft, etc.) trend has also created a new customer base for car washes. These drivers wash their cars multiple times a week to maintain customer satisfaction.
Car Wash Industry Stats
Here are some facts about the car wash market that will show you how much potential this area has:
- 66% of people who own cars in the United States have them washed 1-2x a month
- Car washes clean more than 8 million cars every day
- In 2022, the professional car wash business brought in $14.7 billion
- There are 58,664 car washes in the U.S. as of 2023, an increase of 1.1% from 2022
- A self-service car wash can bring in as much as $41,000 annually, making less than tunnel or in-bay automatic washes.
- 32% of a car wash’s income comes from the winter, 25% from spring to summer, and 18% in the fall
- The average profit per car is 29%, so if a wash costs $15, the average profit is $4.35
- More than 2 billion cars are washed by professionals in North America each year.
- There are 16,976 car washes in the U.S., but only 9,048 are owned and run by small businesses instead of large corporations.
Market Trends and Potential for Profitability
Market trends for the car wash sector are increasing steadily and are expected to continue in the years to come. The U.S. market has annual sales of over $14 billion. According to a recent analysis by IBISWorld, it is predicted to increase at an average yearly rate of 3.7% through 2026.
This is taking place for several reasons. One of the main ones is the growing number of vehicles on the road, which increases the demand for washes.
Also, people are choosing to use car washes rather than wash their own at home as they become more environmentally concerned, which helps conserve water.
The potential for profitability and high cash flow makes investing in car washes highly desirable, especially for high-income professionals.
Are you an accredited investor wanting to invest in car washes? Click HERE for more information.
Risks and Benefits of Investing in Car Washes
Investing in a car wash business comes with risks and benefits, just like any other investment. Let’s discuss the risks first.
Risks
Competition – When you invest in a car wash, competition is one of your biggest risks. Other car washes can be found in many places, and sometimes right next to each other.
Expensive repairs – When pieces of specialized car wash equipment break, it can be expensive to fix or replace them, which can go into your bottom line.
Weather – The weather (i.e., rainy weather) is another risk of the car wash business. One bad month or season can significantly affect how much money you make in a year. But this risk potential has been dramatically reduced by the rise of unlimited wash plans, which give operators guaranteed monthly income.
Benefits
Passive investment – One of my favorite benefits to investing in car washes is the potential for building passive income streams as they can generate consistent revenue daily. With low initial costs and a short construction time, automated washes can quickly become a passive investment.
Increasing demand – There are more rideshare vehicles on the road (Uber, Lyft, etc.), plus more people rely on cars in general, both driving up the demand for car washes.
Tax benefits – Another benefit appealing to high-income earners is the tax benefits (depreciation) associated with it.
When deciding whether to invest in a car wash, it’s important to do your research to minimize risks and maximize returns.
This includes evaluating how well existing car wash businesses are doing financially, choosing the right location and business model, and using technology and social media to improve operations and reach new customers.
4 Different Types of Car Wash Investments
For those wanting to become car wash investors, there are four different kinds of washes to consider, each with pros and cons. Knowing the different types can help you make smart choices based on your investment goals and business plan.
#1. Self-service car wash
This type of wash allows customers to wash their cars using tools such as foam brushes and pressure washers. They’re a less expensive investment alternative as they need fewer employees and equipment.
On the other hand, they may need more upkeep and be trickier to keep clean.
#2. In-bay automatics
These washes use tools like conveyor belts and brushes. Due to the cost of equipment and staff, they can be more expensive to run, but are more convenient for customers and can bring in more money.
You can usually find them at gas stations or convenience stores because they take up less space and require less work than other car washes.
They’re also better for the environment than tunnel washes because they only use an average of 10 to 50 gallons of water per car.
#3. Express Car Wash (Tunnels)
Modern tunnel car washes move cars through a tunnel while equipment cleans them.
These have the most profit potential and are easier to scale because they require less maintenance and payroll.
Most of the time, more cars can be washed than with the other types since more than one car can be washed at once.
Each car takes between 14 and 60 gallons of water to wash. Occasionally, investors in car washes take an already-built car wash and turn it into an express wash.
#4. Full-Service Car Wash
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Full-service car washes are the most labor-intensive and usually involve an attendant that hand-washes vehicles, or a tunnel may also be available.
Detailing includes:
- exterior wash
- waxing and polishing
- tire and window cleaning
- vacuuming and upholstery services
- headlight restoration
These washes are the most demanding and costly for customers and owners, possibly affecting investor returns.
Are you an accredited investor wanting to invest in car washes? Click HERE for more information.
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