How to Start a Car Repair Shop

With around 222 million people with a driver’s license in the United States, there will always be a great demand for car repair shops. For budding entrepreneurs with mechanic skills and hands-on experience, opening a car repair shop is a viable path towards small business success. 

Opening an auto repair shop won’t be easy: startup costs are on the high end and lots of experience with different cars is essential. However, those with a gung ho attitude and a smart business model can make a great career out of the business. 

In this guide, we’ll cover the necessary characteristics that make a great auto mechanic and then go step-by-step through the process of getting a car repair shop off the ground. 

Is the car repair business right for you?

Here are a few of the prerequisites to opening up an auto repair shop:

You have years of experience working as an auto mechanic.

Opening an auto mechanic shop requires skill and experience that can only be developed from a couple of years working as a mechanic for a professional garage. There’s no shortcut to gaining the necessary knowledge that on-the-job experience affords you,

You are ASE certified.

Professional certification from the National Insitute for Automotive Service Excellence (ASE) is often required in order for automotive technicians to open their own shop. Even if your state doesn’t require ASE certification, it will be next to impossible to obtain liability insurance for your auto repair shop without it. 

You can obtain the funding necessary to open your own shop.

As startup costs for opening an auto repair shop can reach $100,000, a loan from the Small Business Administration, a bank, or friends or family members may be necessary to cover the amount. 

A large loan like this may be difficult to get approved for and requires great credit and a spotless financial history. Many prospective auto repair shop owners may have trouble managing the start-up costs.

Starting an auto repair shop business

1. Refine your business idea

Before moving forward, its best to write a business plan in order to narrow down the particulars of your shop. An adequate auto repair shop business plan should address the following questions:

• Do you plan to specialize to work on a certain type of vehicle or offer service for a wide range of automobiles? Often, specializing in working on a particular type of high-end car or truck can mean higher profits. However, the demand in your area for a certain specialization may not be high enough to support a new business. 
• Will your shop specialize in a specific category of repairs, such as collision repair, oil changes, or engine repair? It’s a good idea to place the focus on your strengths as an auto mechanic rather than offering services for which your team is less suited. 
• Is there enough demand for an auto repair shop in your area? Do the research to determine whether your municipality can support a new auto repair garage. People are often loyal to a particular mechanic when it comes to getting a car repaired, and if there are already several successful car repair shops nearby, it may be difficult to bring in new customers. 
• Should you consider franchising or partnering with a car dealership? Making a business arrangement with an existing franchise such as Meineke or AAMCO will require a large one-time payment, however, being part of a nationally renowned brand can boost business significantly. 

2. Select a location

Choosing a location for a new auto repair shop is a major decision that will determine your target market, the wages you’ll pay your employees, and the rates you charge your customers.

Opening a shop in an urban area will mean a greater concentration of high-end vehicles, higher customer fees, and better wages for employees compared to suburban or rural areas. Do the research to find a spot where there is a demand for a new auto repair shop, and don’t be afraid to adjust your specialization and rates to meet local needs.   

3. Obtain the necessary licenses and certifications

Opening a car repair shop typically requires professional certification and possibly one or more special licenses. 

• ASE certification – There are dozens of unique ASE certifications covering a variety of different vehicles and vehicle components, each with their own written exams. Additionally, certification requires either two years of hands-on experience or one year of on-the-job training plus a two-year training degree.  

What’s more, mechanics that earn the Master Technician Certification upon passing the eight specific testing certifications cannot rest on their laurels, as every test must be recertified after five years. Being the owner of a car repair shop requires a willingness to become a lifelong student in the trade. 

• Business license – Most areas require that entrepreneurs obtain a general business license to open a car repair shop, although exact requirements vary between states and municipalities. Check with local officials to determine the exact requirements in your region.

4. Buy insurance coverage

Insurance coverage is an essential means of protection for most businesses and is particularly important for car repair shops where there is a degree of danger to the job and customers trust your business with their expensive vehicles. 

Additionally, auto repair shops with employees are required by the federal government to have two types of insurance, while others are strongly encouraged, or required at the state level. 

Here are the forms of insurance you should consider for your car repair shop:

Required forms of insurance for all business with employees:

• Workers’ compensation: Covers medical costs and disability benefits if an employee is injured or becomes ill on the job.
• Unemployment insurance: Provides benefits to workers after a loss of job through no personal fault.

Recommended forms of insurance for car repair shops:

• Professional liability insurance: Covers losses as a result of property damage, medical expenses, libel, slander, and negligence claims. 
• Commercial property insurance: Covers property damage to business-owned properties and possessions as a result of fire, theft, or storm.
• Disability insurance: Provides short-term benefits for employees suffering an illness or injury. Required in certain states such as California, New York, and Hawaii.

5. Acquire funding, choose a business entity, register your business, and obtain federal and state tax ID numbers

Refer to our How to Start a Business Guide for instructions on how to complete these essential steps.

6. Purchase equipment

Buying the necessary mechanic equipment and specialty tools will be a major expense, but by purchasing quality tools, you won’t have to replace them for years. Here are some of the major purchases an auto mechanic can expect to make for their car repair shop.

• Diagnostic machine – Also known as an automotive scanner, a diagnostic machine connects to a car’s data link connecter in order to diagnose issues with a vehicle. One or more diagnostic tools may be necessary depending on the services your repair shop offers. Expect to pay $3,000 to $5,000 per machine. 
• Mechanic’s toolset – No auto repair shop is complete without several sets of specialized mechanic’s tools and a wide assortment of power tools. The total cost for buying the required tools can range from $7,500 to $15,000. 
• Car lift – Buying one or more automotive lifts along with accessories will be essential for your business. Choose one or two lifts from the wide range of single-post lifts, two-post lifts, four-post lifts, and scissor lifts on the market to suit your shop’s needs.
• Safety equipment – Automotive repair can be a dangerous job, so supply your shop with an assortment of helmets, masks, goggles, suits, and gloves to ensure the safety of you and your employees.  

7. Hire Employees

Depending on the scope of your business, its a wise idea to hire 2-3 full-time auto mechanics to staff your auto shop and increase productivity. Depending on the area and specialization, the hourly wage for an auto mechanic ranges from $15 -$30. 

8. Market your car repair shop 

No auto repair business can exist on word-of-mouth alone. In order to become a success, you should run local advertisements and establish an online marketing presence. Here are the key steps for promoting your business:

• Create a website. Register a domain name for a company website (You can use domain.com, Bluehost, GoDaddy.com, or Namecheap.com). Hire a web designer to develop the website (or do it yourself). Be sure to include detailed contact information on the site.
• Open social media accounts. Register accounts on the popular social media services (Twitter, Facebook, Instagram)
• Register a Google profile. This will allow you to add pictures of your business, respond to positive customer reviews, and address customer concerns.
• Respond to online customer feedback. Register accounts on business review platforms such as Yelp and TripAdvisor. This will allow you to write thank-you notes in response to glowing reviews and address negative reviews.
• Take out ads on billboards and in local publications. It still pays to increase visibility by buying ads in local newspapers and on highway billboards. 

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Car repair shop business resources

• ASE: Automotive Service Excellence – The ASE website has everything a prospective auto mechanic needs to know about the wide range of available certifications and their requirements. You also can register for a test on the website and search for nearby testing centers. 
• IDEA: The Automotive Specialist – An online store with a huge array of auto mechanic tools and equipment from the most trusted brands. First-time buyers are eligible for free shipping on an order of $179 or more.  
• The Mechanic Doctor – Tips, instructional guides, and educational videos for the professional and amateur auto mechanic, alike.