How to Start an Auto Repair Business

There are over 280,000 auto repair businesses operating in the US. An auto repair business helps customers fix internal parts like an engine when damaged or disabled. Are you wondering how to start an auto repair business? This article will examine the steps to set your auto repair business up for success, like creating a website, getting auto repair business insurance, and getting the appropriate licenses.

How to Start an Auto Repair Business

Do you want to know how to start an auto repair business? Critical steps to follow when starting your business include choosing a name, opening a bank account, and registering your business legally.

Choose a Brand Focus

An essential step in learning how to start a mechanic shop is choosing how you want to appeal to customers. Some branding focuses you could choose for your business include:

  • Customer service: If you choose to focus on customer service, you will want to talk about your ability to go above and beyond for your customer. You will want to hire experienced service representatives who will be friendly and follow up with customers to make them feel special.

  • Quality: If you position yourself as someone who offers quality services, you can appeal to customers willing to pay more for benefits and features. You can also clarify to customers that the mechanics you hire have more experience than competitors.

  • Customer needs: Customers may have problems you can address in the auto repair business. By focusing your branding around solving a common customer problem, like slow service times, you can create a niche for your business that makes you stand out.

  • Location-based: Certain customers see local businesses as better than more corporatized businesses by certain customers. You can use this increased value perception by branding your business with your area. Potential customers might assume things about a local business, like they offer better service and are more trustworthy.

  • Service speed: Auto repair customers often are in a hurry to get repairs done. Without a vehicle, they cannot commute to work or vacation. Someone might be more likely to choose your shop if you can promise them faster delivery of services.

Decide Your Name

What you decide your business name to be is an important step to solve when researching how to open a mechanic shop. The name of your business should be simple and easy to remember. This makes it stick out in a customer's mind when considering where to go for auto services. Your business name should communicate your business type and the advantage of using your service. For example, if you want to focus on how quickly you can fix vehicles, you could use a business name like “48-hour auto repair.”

Register Your Business

A critical step to accomplish when learning how to start a small mechanic shop is registering your business as a legal entity. When registering your business, you have several options to choose from, which offer different benefits. Common business structures for auto repair businesses are compared below.

Business structureAdvantagesDisadvantages
Sole proprietorshipEasy to start, retain sole ownershipCan’t issue stocks, personally liable for business debts.
PartnershipShare start-up costs with partners, avoid corporate taxesShare profits with partners, no business liability protection
CorporationCan issue stocks to raise capital, protection from business liabilityTaxed on a corporate level, stricter rules, more expensive to form
Limited liability companyBusiness liability protection, no corporate taxHarder to start than a sole proprietorship,

Get a Tax ID Number

Getting an employer identification number (EIN) is another step to follow when learning how to start a auto repair shop. An EIN helps the IRS identify your business for tax purposes. It is also required once you start hiring employees and opening a business bank account. To get an EIN, you must:

  1. Apply through the IRS website, by fax, or by mail

  2. Follow IRS guidelines. You can only apply for one EIN daily, and you must finish the form without 15 minutes of inactivity if you apply online.

  3. Submit information on Form SS-4. This form asks questions about your business structure, address, and employees.

  4. Maintain a copy of the form in your files. If you apply online, your EIN will be instantly delivered upon approval. You must wait a few weeks for confirmation if you applied by mail.

Get a Business Bank Account

Are you wondering how to start your own mechanic shop? A business bank account can help you start your business because you can apply for loans to pay for starting expenses. You can process customer debit and credit card payments with a merchant account. A checking account lets you keep your personal and business finances separate. With a savings account, you can slowly earn interest on your business profits over time.

Get Licenses

Another step you need to resolve when learning how to start an automotive repair shop is applying for the right licenses. Once you start selling customer services, you will need a vendor license to charge customers sales tax. You may also need a hazardous waste permit to be allowed to create harmful air emissions and wastewater during business. Without having this permit, you may incur penalties like a fine.

Decide What Services to Offer

The next step to figure out when learning how to start an auto shop is to discover which services you can offer to customers. Some examples of common auto repair services include:

  • Oil changes: You remove the old oil in a customer’s engine before replacing it with new oil. This helps lubricate your vehicle’s engine and keep it running smoothly.

  • Tire replacement: A tire replacement service will remove old tires before installing new tires. Tires must be replaced periodically on a vehicle or if a customer’s tire has a hole-in tear.

  • Engine repair: Engines will experience wear and tear damage over a vehicle's lifetime.

  • New batteries: Batteries in vehicles need to be replaced every so often. Typically batteries need to be replaced every four years or so.

  • Vehicle maintenance: Period vehicle maintenance allows you to catch vehicles earlier before a problem gets out of control. Typically you will change a customer's oil, check the headlights, and replace the air filter.

  • Muffler repair: As vehicles age, they may get louder due to errors with the muffler. A functioning muffler will allow a vehicle to run quietly with less pollution.

  • Tire alignment: You can offer customer tire alignment services to improve vehicle handling. Misaligned tires can create problems when driving on, like causing a vehicle to pull in one direction.

Hire Employees

When learning how to start a car repair shop, you will eventually discover the potential that employees can bring to your business. You may be able to handle all your customer business initially, but hiring employees can bring value to your business and take on higher quantities of clients at once. You will want to hire auto repair mechanics with experience repairing engines and other internal vehicle parts. A business assistant can interact with customers and process their payments in your auto repair shop. With a bookkeeper, you can manage payments your business needs to make, including payroll for your employees.

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A mechanic making repairs on the underside of a vehicle.

How to Run a Successful Auto Repair Shop

Do you want to learn about how to run an auto repair shop successfully? To keep consumer interest in your new business, you should create a website and get active on social media.

Appeal to Your Customer Base

Are you wondering how to open your own mechanic shop? Creating a niche in your market is a big part of setting your business up for success. You will want to do research to find out what kinds of problems customers have in your area and what you can do to solve them. Get information about customer needs from competitor reviews and from market surveys.

Run a Social Media Account

In the modern day; you are expected to have some form of online presence. Suppose your business is not creating content in an online space like social media. In that case, you miss free advertising and direct customer interaction. Create a social media account on a platform like Twitter, Facebook, or Instagram. You can contact customers through these platforms about your promotions and services. Customers are more likely to trust a business with an established online presence.

Create a Website

Another way to boost your visibility to customers and draw in your business is a website. To create a website, you must:

  1. Find a domain name: Through a service like Google Domains, you can purchase a domain address so customers can access your site. Choose a domain name that is easy to spell and related to your business name and brand identity.

  2. Acquire a web host: A web host will store data that allows your website to function. Once you get more traffic, a web host can help you handle the impact of people accessing your page.

  3. Design the website: Through a service like Wix or Squarespace, you can build a website through a template. You will want to add web pages with contact information, FAQS, and descriptions of your services.

  4. Curate content: Add content to your site, like blogs, polls, and social media embeds. You want customers to spend more time on your site and visit it when they have questions.

Invest in Advertising

According to LinkedIn, about 12% of sales are leveraged from advertising. If you use advertising to promote a new product, you can increase sales by an average of 21%. To get the word out about your new business, you should invest in advertising like:

  • Influencers: Paid influencer advertising can translate the trust of people who follow popular influencers to your business.

  • Click ads: Investing in pay-per-click ads online can instantly boost traffic to your website or storefront.

  • Video ads: Video ads boost the credibility of your business and expand your visibility.

Focus on Customer Service

While you may think that expertise in auto repair should be your main focus, customer service is just as important. Customers need to feel like they can trust you to perform repairs correctly and charge them a fair price. A good customer service experience will boost your sales and build a core base of loyal customers. Hopefully, people who discover you will come back to you for all their vehicle-related problems and regular maintenance.

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How Much do Auto Repair Owners Make?

As the owner of an auto repair business, you will make an average salary of $87,992 per year. Auto repair owners typically make between $34,500 and $160,500 annually. You will make $42 an hour on average. The top-paying cities for auto repair owners are compared below.

CityAverage Annual SalaryAverage Hourly Rate
Richmond, California$110,348$53.05
Bellevue, Washington$109,979$52.87
Federal Way, Washington$104,453$50.22
Stamford, Connecticut$103,759$49.88
San Francisco, California$102,904$49.47
Santa Clara, California$102,886$49.46
Pasadena, California$102,812$49.43
Portland, Oregon$101,674$48.88
Glendale, California$101,590$48.84
San Jose, California$100,466$48.30

Insurance Requirements for Boosting Income

One of your most important investments is your insurance policy. Insurance protects your hard-earned business income from an unexpected lawsuit or event that damages your equipment or auto repair garage. Below are the most critical insurance policies for your auto repair business.

Business Owner’s Policy

A business owner’s policy combines property damage coverage and general liability insurance. You choose this insurance if you want a comprehensive insurance option that can be customized further. It often includes business interruption insurance, which helps you cover business costs when you close your business due to an event like a fire. NEXT is our choice for a business owner’s policy. They combine the convenience of online-based insurance with the personal touch of tailored policies. NEXT gives you instant access to your online insurance certificate. They respond to claims within 48 hours and handle all their own claims. NEXT has a 4.7/5 rating from its customer reviews. They have an A- from AM Best and a B+ from the Better Business Bureau.

General Liability Insurance

General liability insurance protects your business against many third-party claims. Typically it covers property damage, advertising injury, and bodily injury claims. You will use this coverage if a customer or member of the public slips and falls on your property. We recommend Thimble for your general liability policy. They offer the option to purchase short-term general liability insurance. You can set the coverage to expire down to the month, day, and hour. Thimble is a fast-growing insurance company with an A+ rating from the Better Business Bureau.

Professional Liability Insurance

A professional liability policy protects your business against negligence and business mistake claims. This policy is often called errors and omissions insurance because of the type of events it covers. With this policy, you can pay for legal costs that arise from a customer lawsuit.

Hiscox offers specialty professional liability insurance. You can buy a policy personalized by an insurance agent with no pressure. Hiscox lets you refund policies you are unsatisfied with up to 14 days in. You can also get discounts when bundling different insurance policies. Hiscox has an A rating from financial rater AM Best.

Commercial Property Insurance

Commercial property insurance protects your equipment and building from incidents related to fires, theft, vandalism, water damage, and more. Without this coverage, you will be left paying for the devastating costs of a fire in your shop or a thief breaking into your garage. CoverWallet is our top pick for commercial property insurance. The company operates in 48 states and offers policies from over ten trusted partners. Your policies can all be managed from one place thanks to their convenient policy dashboard. CoverWallet has an A+ score from the Better Business Bureau.

Commercial Auto Insurance

Your commercial auto insurance protects your business against liability from vehicle accidents. If your vehicles, drivers, or passengers are involved in an accident, it can pay for medical payments and property damage. Tivly is our recommendation for commercial auto insurance. They are a digital insurance platform with a selection of 200 insurance partners. Thanks to their enormous selection, you will likely find a policy addressing many of your business needs. Tivly boasts a 4-second phone answer rate. They have an A rating from the Better Business Bureau.

Workers’ Compensation Insurance

A workers’ compensation insurance policy is required in most states once you start hiring employees. You use this policy to cover the medical expenses of injured employees. It will also help employees supplement income if their illness or injury causes them to miss work or work at a reduced capacity. The Hartford is an excellent choice for worker’s compensation insurance. They have enhanced policy options that grant employees access to over 65,000 pharmacies. The company has a 100% rating on the Corporate Equality Index. The Hartford has over 200 years of insurance experience and has an A- rating with AM Best.

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