How Profitable is an Auto Repair Shop (2023 Stats)? (2024)

The auto repair industry is a significant part of the U.S. economy, bringing in $76.8 billion in revenue in 2023. But how profitable is an auto repair shop really?

With over 281,000 auto repair shops across the country, the competition is intense. This post dives into the 2023 statistics to give a clear picture of the industry’s profitability.

We’ll look at market size, average revenues, startup costs, and profit margins. If you’re thinking of starting a repair shop or just curious about the business side of car repairs, keep reading for some valuable insights.

Auto Repair market overview

As per IBIS, the auto repair market in the U.S. represented revenue of $76.8 billion in 2023 and is expected to grow to $98 billion by 2028.

Scheduled and preventive repair and maintenance service represents the largest share ($23.4 billion) followed by brake repair service ($14.6 billion), powertrain repair service ($14.2 billion), other repair and maintenance service ($8.1 billion), wheel alignment and repair service ($5.4 billion), electrical system repair service ($4.6 billion), heating repair service ($3.8 billion), and muffler and exhaust repair service ($2.7 billion). Yet, with over 281,000 auto repair businesses across the country, the competition is also fierce.

How much revenue does an auto repair shop make?

Using the data from more than 2,800 franchised auto repair shops, an auto repair shop earns $1,468,000 in gross revenue per year on average.

With an average cost of $1,500 per year per vehicle, that’s a total of ~970 vehicle per year. Assuming 250 working days per year, that’s on average 4 vehicles repairs per day per shop.

Yet, not all auto repair shops have the same yearly revenue. Logically, some will earn more than others because of many factors like location, reputation, skilled staff, service range, operational efficiency, marketing effectiveness, etc.

How much does it cost to start an auto repair shop?

On average, it costs between $236,000 to $1,094,000 to open your own auto repair shop.

This includes various costs such as security deposits, facility setup, furniture, fixtures, computer hardware and software, initial inventory, marketing, signage, training, insurance, business licenses, working capital, etc.

• Facilities (22%): Expenditures related to setting up and configuring the physical working environment.
• Furniture, fixtures, and equipment (49%): Costs associated with acquiring necessary items for the business, from office furniture to specialized equipment.
• Computer hardware and software (3%): Expenses for purchasing and installing computer systems and necessary software.
• Initial inventory (3%): The funds allocated for stocking the initial products or goods for sale.
• Marketing (7%): Expenditure on promotional activities to create awareness and attract customers.
• Signage (2%): Costs associated with designing and installing signs for the business location.
• Training expenses (2%): Investment in training programs for employees to ensure competence in their roles.
• Insurance and business license (4%): Costs for obtaining necessary insurance coverage and licenses to operate legally.
• Working capital: (7%) funds set aside to cover day-to-day operational expenses and ensure smooth business functioning for the first 3-6 months.
• Security deposit: (1%) A refundable amount paid to secure the lease or rental of a business space.

How profitable is an auto repair shop?

An auto repair shop has a ~25% operating profit margin (EBITDA margin) after operating costs (salaries, facilities, etc.) have been incurred.

Indeed, there are various recurring costs involved in running an auto repair shop. The major expenses include salaries followed by COGS:

• Salaries (~25-30% of revenue): this is the cost of compensating employees, reflecting a significant share of operational costs.
• COGS (~25-30% of revenue): this accounts for the direct costs associated with providing services or products, such as parts and materials.
• Marketing (1-5% of revenue): cost for promotional activities to attract customers and enhance the visibility of the auto repair business.
• Rent (5-10% of revenue): payment for leasing or renting the physical space where the auto repair shop operates.
• Other operating expenses (10-15% of revenue): this covers various additional costs essential for day-to-day operations, including utilities, maintenance, administrative expenses, etc.