An auto repair shop, as the name suggests, is a repair shop company that fixes broken cars. So, are you considering opening your own auto-repair business?
In that case, you’d be required to plan auto repair shop monthly expenses, including opening costs, the cost of purchasing specialty tools, and operational, rental, and salary costs.
Well, we have determined that the typical cost to open a 5,000 square foot auto repair shop is between $67,200 to $225,500. In addition, the first few months of operation require an additional $84,000 to $96,000 in operating expenses.
Wish to learn more? With specific examples, we’ll go through all the expenses you’ll have to pay to open your own vehicle repair shop in this post. Let’s start now!
The Startup Costs for Auto Repair Business
The least enjoyable but most important phase in starting your own auto repair shop is raising cash. The startup costs associated with an auto repair shop vary depending on the shop’s size and the services you intend to provide.
Indeed, the equipment, machinery, and renovation charges you’ll have to pay before starting your business will represent by far the greatest initial costs and that should be roughly $50,000.
For a typical auto repair shop, initial costs will range from $67,200 to $225,500, assuming you choose to rent the land and the building rather than own them.
Let’s look at the breakdown of these mentioned costs.
| Startup Cost | Amount |
| Equipment requirements | $32,000 – $150,000 |
| Building refurbishment | $20,000 – $50,000 |
| Rental deposit | $15,000 – $25,000 |
| Business License | $200 – $500 |
| Total | $67,200 – $225,500 |
The Cost of Purchasing Auto Repair Equipment
The type of equipment you need will depend on the business model of the vehicle repair shop and the services you intend to provide.
For instance, the cost of effective diagnostic tools can reach $9,000 on their own. Alternatively, the cost of a single automobile lift will range from $1,500 to $15,000 for the more powerful ones.
According to Best buy auto equipment, the majority of auto repair firms will require a minimum of $32,000 and a maximum of $150,000 to cover equipment-only costs.
Essential Initial Equipements
Engine crane, Hydraulic vehicle lift, Workbench, Jack, Air compressor, and Diagnostics machine can be included in the potential equipment list but this list is by no means comprehensive, as you might need more tools depending on the kinds of automobiles you work on and other aspects. But as a proprietor of an auto repair shop, you will unquestionably require at least one of these.
The more you can purchase ahead of time, the less cash you’ll need when it comes time to open the auto repair shop. Many procedures and duties are outsourced by certain technicians for the auto shop. Although some people might benefit from this, we don’t advise it because it will probably deplete your profits.
Budgeted Purchase of Supplies
You don’t have to spend a fortune to have good, dependable equipment. Locating name brands with little wear may be worthwhile. Vehicle lifts and brake lathes, for example, are durable items at auto repairs place.
Searching for stores that no longer require specific pieces of equipment is one method to get excellent prices. They are not of lower quality, but many stores have upgraded. There are also closing repair shops that require equipment to be moved.
Depending on the services you plan to offer, equip your shop with the necessary tools to complete the work quickly and profitably.
Auto Repair Shop’s Operating Expenses
Using industry data provided directly from the sources like BizStats to build your operating expense estimates for your auto business plan is the simplest method. The following table shows expense percentages like
| Other Operating Expenses | Percentage Distribution |
| Officers Compensation | 7.40% |
| Labor costs | 12.86% |
| Rent | 6.64% |
| Payroll Taxes | 3.21% |
| Advertising | 1.18% |
| Benefits/Pension | 1.28% |
| Repairs | 0.94% |
| Bad debts | 0.11% |
| Other SG&A Exp | 11.55% |
| Amort. & Dep. | 0.00% |
| Interest Earned | 0.01% |
| Interest Expense | 0.59% |
| Other Income | 0.52% |
| Net or Average Profit | 6.58% |
These operational costs are all shown as a percentage of sales. In order to apply these percentages to your sales, you will first need to construct your sales projections.
Auto Repair Renovation Costs
You will need to do some repairs before you can install the equipment unless you are buying or leasing an existing auto repair shop or auto repair business building.
Additionally, you might want to construct certain routine services for the office(s), customer reception, restrooms, and other areas in the commercial property.
Your financial outlay will mostly rely on the structure of the auto repair shop you select. As a result, it is difficult for us to estimate accurately.
Make sure to budget anywhere between $20,000 and $50,000 if you need to perform some simple modifications in the reception and office spaces.
Deposition of Mortgage
You must pay a down payment regardless of whether you decide to buy or rent the space for the auto shop (either to the business owner, or a down-payment for the loan to the bank).
In the US, renting commercial space typically ranges from $8 to $23 per square foot. Therefore, you will have to put down a deposit of $18,750 if you decide to rent a 5,000-square-foot commercial space for your auto repair business at a rate of $15 per square foot per year plus a three-month security deposit.
Business Licenses and Permits
To open and run an auto shop, you are required by law to get a business license and all essential permissions for business insurance, and sales tax regulation.
Depending on the states you aim to operate in and the auto repair services you intend to provide, the cost of business licenses and permits will vary. You must, for example, have a resale permit in California and, more significantly, be registered with the Bureau of Automotive Repair. The total cost of the application is $200.
Initial Cost of Certifications
Many businesses promote the ASE certification of their mechanics. Although obtaining and maintaining certificates may not seem crucial to you at first, they may increase the value that new customers see in you. So even if you don’t currently have plans in place for it, you still need to keep this component in mind.
Operating Costs for New Auto Repair Shops
You must also take into account the overall recurrent expenditures of operating an auto repair business in addition to the beginning costs. The costs differ depending on the scope of the auto repair and the services you provide.
A typical 5,000-square-foot auto repair shop with four mechanics (including the business owner/manager) and $100,000 in monthly revenue would have the following running costs:
| Operating Costs | Amount (per month) |
| Staff salaries | $20,000 – $25,000 |
| COGS | $50,000 – $55,000 |
| Rent | $8,000 |
| Marketing Strategy Expenses | $5,000 |
| Admin, bookkeeping & other | $1,000 – $3,000 |
| Total | $84,000 – $96,000 |
Staff Costs for Auto repair shop
For an auto shop firm to be successful, numerous essential services must be provided. Additionally, you will require more than just a decent tool set if you intend for it.
You’ll need to put together a strong team that can handle the necessary tasks in areas like sales, marketing, accounting, IT, and human resources. For instance, you’ll need experienced accountants for billing and customer accounts.
You run the danger of failing if you don’t invest in human resources. You must now determine how many employees you’ll hire and at what pay scale, depending on the size of your company.
Payroll expenditures rank among the most significant overhead expenses for an auto repair shop. For instance, the US average income for a technician is $48,000. As a manager, you should therefore anticipate paying between $20,000 and $25,000 in workers compensation each month, assuming you have three full-time staff (including taxes and benefits).
To ensure that you are fully compliant, you may also need to research the labor regulations in your region.
Cost of Goods Sold (COGS)
The variable costs incurred to repair the cars, such as the spare parts, tools, oil, paint, and other similar consumables, are known as the Cost of Goods Sold (COGS).
It is safe to predict that your COGS will account for between 50% and 55% of your total sales if you assume an average gross profit margin of 28% for parts and 50-65% for the labor.
In the first few months, assuming sales of $100,000, you will need to spend between $50,000 and $60,000 on sold goods costs.
Rental costs
Using the same 5,000-square-foot auto repair shop example and a rent rate of $15 per square foot per year, you can anticipate paying about $6,250 in rent alone for the repair shops.
Startup costs like electricity, water, and gas expenses should be added on at a rate of an additional 25%, bringing the total to almost $5,000 to $15,000 each month.
Marketing costs for Auto shop repair
Auto repair shops can market using a variety of platforms, such as social media and even conventional ways. In the first few months, you’ll probably pay more cost on marketing because you’ll need to attract potential customers.
Later, as the business grows, organic development like recommendations from friends and family will reduce your need for marketing. For small firms as a whole, the Small Businesses Administration advises allocating 7% to 8% of gross revenue to marketing and advertising.
Customers may be more inclined to purchase from auto body shops than from other comparable brick-and-mortar businesses because these services are frequently required rather than discretionary (such as regular checkups) and the auto shop’s fees are in range.
Average Profit of an Auto Body Shop
A larger auto shop firm can often earn $100,000 annually, and a good mechanic can earn between $30,000 and $50,000. Of course, this will change based on where you are and what you know. The costs vary from one car shop to the next.
In contrast to an automotive repair shop at a dealership, which can charge between $80 and $150 per hour, an independent shop will probably charge its customers between $70 and $100 per hour. Additionally, many shops charge set charges for common services like tune-ups and oil changes.
You should be aware that these figures do not cover personnel pay, a marketing budget, gadgets, or prospective space redesign costs, so you will need to set aside more money than $50,000 to truly launch your successful business auto shop.
Budget for unexpected costs
Last, but not least, once you’re one of the auto repair shop owners, you must be prepared for challenges other than technical ones, such as late payments from customers.
The peak and sluggish business seasons (fluctuations in demand for your services) leave no choice but to imply flat rates on services and products to at least reach the breakeven point.
In order to complete a general liability. A specific yet unforeseen time off for your employees owing to sick days, vacations, etc.
Always keep in mind that running a restaurant may not be successful for even the best cook. Make sure you’re equipped as a mechanic to meet the challenges of successfully managing a business.
Conclusion
In summary, you must allocate about $200,000 to your auto shop especially if you intend to keep reserve funding to pay rent and other running costs for the first several months until you reach breakeven. Equipment, supplies, business expenses, marketing expenses, and the cost of human resources are all included in the list for an auto shop to run successfully.