How to Start an Auto Repair Shop in [2024]

Many people dream of opening a business and becoming their own boss.

If you have a few years of experience as a mechanic under your belt, you might be thinking of opening your own auto repair shop.

Before you open your own shop, there are some things you will first need to consider.

6 Steps to Starting Your Auto Repair Shop

Here, we will look at how to open your own auto repair shop, broken down into some easy steps:

Step 1: Put Together a Business Plan

Before you can really get going on this, you need to write a business plan. Business plans are a great tool that will help you map out what you need to start your auto shop, and they can also help you if you need loans to get going.

Do not rush when putting your business plan together. The more time you spend planning it out, the more prepared you will be when the time comes to get going on your business. Get feedback from anyone you know who can help; this can give you insight and help you avoid mistakes.

Keep in mind that your business plan is flexible; you can always edit it if you find something is not working when you get started; it is more like guidelines.

There are a few questions that you will need to answer in your business plan.

What services will you offer?

There are many paths you can take with your auto shop. You can be a specialist shop that focuses on a specific service, like engine repair or transmissions. You can also offer general repairs and maintenance or focus on pretty much anything with four wheels.

When determining this, keep in mind the costs of any special tools you will need for the services that you offer. If you have limited capital to start your auto shop, you might not be able to focus on everything or on something that requires a lot of specialty equipment right away.

What location do you want to be in?

There are a few factors to consider when determining the location of your auto shop. You need to determine what your target market is going to be and find a location that will be near them.

You need to make your location accessible and visible, so you can potentially get walk-ins. Another thing to consider is if you will want to buy or rent an existing space or have your own shop custom built.

You can start shopping for a location now and think about whether buying a brand-new building for your shop is the right choice or if you should buy or rent an existing location.

If you have a custom-built new location, the optimal choice for your mechanic shop is a steel building. Steel buildings cost less to construct and are significantly more durable than buildings made from other materials. Insurance costs are often cheaper in a steel building because they are so much more durable.

What are your startup costs?

Typically, an auto shop costs at least $50,000 to open, though this can vary depending on the equipment you need and your location.

How will you obtain funding?

Money is one of the key components to starting any business, so you must determine what you need for capital. Do you have enough in savings set aside? Can you get a loan from a bank?

Who will your competitors be?

Take some time to find out where other auto shops in your area that offer similar services to you and determine how they will affect your business. It will be easier for you to get started if you know who you will be up against.

What will you name your auto repair shop?

It can be challenging to find the perfect name for your auto repair shop. Once you pick out a name that you like, look up the records in your state to see if that name is taken, as well as the state and federal trademark records.

Then, check social media platforms to make sure the name is available there, and finally, make sure that the web domain name is available. If you need to make some changes to the name because it is taken, it is better to find out now, in the planning stages of your business.

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Step 2: Make Everything Legal

Once you finish finalizing your business plan, it is time to get your legalities in order.

Form a Legal Entity

You will need to form a legal entity for your business. There are four different types of business structures: sole proprietorship, partnership, limited liability company (LLC), and corporation.

Forming an LLC is the best option for you because it will protect you from having your personal finances brought into play if a lawsuit or something else happens to your business.

Register for Taxes

Once your auto repair shop is a legal entity, you need to register for state and federal taxes. If you have employees, you will also need to apply for an employer identification number (EIN) for your employees.

Step 3: Secure Financing

Unless you have enough money in your savings account to cover your startup costs, you will need to secure financing to get your business going. The Small Business Administration (SBA) has loan programs in place that can help you secure funding for your auto repair shop business.

These loans have better interest rates and more flexible terms than you might get from a bank alone. The SBA loans are also insured by the federal government, so if you default on your loan, the SBA will step in and pay a guaranteed amount to minimize loss.

Step 4: Get Permits and Licenses

No matter where you live, when you open a new business, there are some permits and licenses that you will need to obtain. Without obtaining all of the correct permits and licenses, you might end up getting fined, or your business may even get shut down.

Take the time to look into your local laws to ensure you get all of the necessary permits and licenses, which can include some of the following.

Obtain a Business License

You will need a business license for your auto repair shop for whatever state you are in. The price varies depending on your area, but it typically costs between $50 and $100.

Certificate of Occupancy

Since your auto repair shop will have a physical location that you operate out of, you will need a Certificate of Occupancy. If you are renting the garage, then it will be the landlord’s responsibility to obtain the Certificate of Occupancy.

If any major renovations are done on the property before you lease it, the building will need a new Certificate of Occupancy. Check-in with the landlord about this before signing a lease.

If you are buying an existing building or having a new building custom-made for your business, you will need to obtain the Certificate of Occupancy yourself from your local government.

You will also need to review the local building codes and zoning requirements to make sure your building is in compliance with your Certificate of Occupancy.

Environmental Certification

All auto repair shops are required by the Environmental Protection Agency (EPA) to have a refrigerant handling certification if they will be working on air conditioning systems for cars. If your shop will not be working on these, you will not need to worry about this certification.

ASE Certification

While you technically do not need an Automotive Service Excellence (ASE) certification, it can help you build credibility with your customers. An ASE certification may also help you secure small business loans since it shows that you are an expert in your field.

Step 5: Get Insurance for the Business

Your business will need insurance to operate legally. Insurance will help protect your auto repair shop if you suffer a loss of some kind. There are many types of insurance policies for businesses that you can choose from.

The most common coverage for a business is general liability insurance, so if you are not sure what you will need, that is a good place to start. If you are having your auto repair shop custom built, if it is in a steel building, your insurance rate may end up being slightly lower.

If you will have employees, you will also need to get Workers’ Compensation Insurance. Most states will require you to have this, but even if your state does not, it is a good idea to get it anyway.

Step 6: Make a Marketing Plan

When you open a business, you need to get the word out about it. To do this, you will need to put together a marketing strategy or hire a digital marketing agency to help. Here are some of the essentials for getting the word out about your new auto repair shop.

Website

You do not need a huge website to get started, but having something basic will make it easier for your customers to find you online, especially if you invest in search engine optimization (SEO). There are plenty of DIY website-building sites out there, so you can put something together pretty easily.

Social Media

Another important thing you will need to get the word out about your new mechanic shop is getting on social media. Start engaging with your prospective customers to create some hype for your grand opening.

Advertising

Set up some ads on social media, Google, and take out some ads in your local paper, the TV, and local radio stations. All of this will help get the word out about your business before you open your doors.

Hold a Grand Opening

When you begin advertising, you should consider holding a grand opening for your new business to help get the word out about it and connect with your customers. You can offer grand opening sales or bonuses — have fun with it.

Partner with Other Companies

You can try to partner with local towing businesses, so they take vehicles they tow that need repairs to you. If you specialize in one specific thing, like repairing transmissions, you can partner with another mechanic who specializes in brakes, so you can send each other that business.

You can also make deals with local car dealerships that do not have a mechanic attached to them, so they can refer those customers to you. Then, if you have someone who needs a new car, you can refer them to that dealership.

Final Thoughts

We hope this guide for starting an auto repair shop helps you get your business going. Opening a new business is hard, but the auto repair industry can be quite lucrative, so you can succeed.

About the Author
Auz Burger is a freelance writer and an expert in steel buildings. She has a BA from Washington State University and has been writing and editing professionally for over a decade.