Do you want to know how much oil change shops make yearly? If YES, here are 8 factors that determine the income & profit margin for oil change businesses. An oil change business helps ensure that cars are maintained and on the road by providing regular services such as oil changes, windshield wiper replacement, and air conditioning recharging.
This business is renowned for their speedy service with a smile and competitive pricing that encourages customers to come back the next time. According to reports, the oil change services market is a $7 billion industry and continues to grow consistently.
Mobile oil change businesses don’t need to capture much of the market to make a handsome profit. Hence, by providing convenience that is unparalleled in the industry they can get a solid foothold in the market.
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How Do Oil Change Businesses Make Money
Note that everybody who drives a car is a potential customer to the oil change industry. The most profitable areas for this business are located at the edge of urban markets, as suburban families own more vehicles and will spend money on simple services. Rural markets have fewer customers, and some of those will want to change their own oil.
Most customers who come for oil change and other related services pay a minimal fee for completing a quick oil change on their personal vehicle. Most businesses in this industry are advised to connect with local car rental agencies or delivery services to generate a larger base of repeat customers. In this business, when a shop expands the number of services offered, clients will return more often, thereby increasing profits.
A simple oil change averages between $25 and $55. Most services at a quick oil change shop will cost under $100, but accessories and parts like windshield wipers provide excellent profit margins. With most franchises in the industry raking in nearly $250,000 a year, as the owner, it is possible to see a net profit of $75,000 to $80,000 a year.
Any owner whose location and market can support the demand for additional bays should expect increase in operational income above the average, especially if their schedule is filled with appointments from open to close. To properly analyze the amount of profit an oil change business can make in the United States, these are factors to consider.
8 Factors That Determine How Much Money Do Oil Change Shops Make
1. Business Model
Some oil change businesses start as a brick-and-mortar shop, while some owners choose the mobile oil change route. Each model will bring in varying range of incomes due to convenience and access to customers. Mobile oil change businesses, for instance, provide quick oil changes and other basic automotive services at clients’ sites, while a brick-and-mortar shop will expect customers to come to them. Most mobile oil change businesses work out of a trailer that is equipped with all required tools, parts and fluids.
2. Customer Service Approach
The oil change industry has an edge over other forms of competition providing lubrication services because they are expected to do the job in minimal time for maximum convenience. With the customer in the car, confidence is generated because they are in a position to see and hear the service being performed.
Although a waiting area can be necessary sometimes because of extreme weather conditions, length of an additional service or unforeseen delays. But it affects the customer retention ability of an oil change business, which will also affect the ability of the business to generate more profits.
3. Brand Perception
Knowing what perception to groom in the oil change business is very crucial to the success of any oil change business, because any successful shop in the industry wants their customer to have confidence in what they do. Indeed the customer has absolutely no direct sensory input to convey the message.
They can’t see what is flowing through hoses. They have absolutely no direct way of judging the quality of the products the shop is using or the competency of the team. They determine it all by perception.
Note that shops that create favourable perceptions tend to be more successful and rake in more profit in the industry. The signage, dialogue, menus, demeanour, conversational skills, appearance, checklists and the attitude of the crew are all tools to convey the message of quality and competency.
The location of an oil change business and the customers it attract will, without doubt, affects the bottom line of the business. Just like it was stated above, the most profitable areas are located at the edge of urban markets, as suburban families own more vehicles and will spend money on simple services.
Rural markets have fewer customers available, and some of those will want to change their own oil. Inner cities have higher costs associated with property while customers have less cash for extras. Hence, the exact location of an oil change shop will ultimately affect the profit and revenue of the shop, directly or even indirectly.
5. Owners Management Style
An oil change business owner who wants to generate more revenue needs to have an attitude of service. Those who serve their employees by giving them the proper tools, training and work environment earn better than those who simply “boss”. When a leader promotes and focuses on the role of the business, their driveways tend to fill and bottom lines also increase.
The beauty of showmanship is that it often costs a business nothing, but earns them almost everything. There is an old saying, “There is more profit in the sizzle than the steak.” It’s just as true for a fast lube as it is for a restaurant. Showmanship has to do with how the service is delivered.
Showmanship is the exaggeration of favourable perceptions. For instance, expressions of courtesy and respect such as, “Sir,” “Thank you” and “Please” are expected in business relationships. Showmanship is exaggerating it. More successful oil change business operators hire actors who have the right appearance and can play the role. They can teach them to change oil.
The oil change business is a personal service business similar to restaurants and resorts. Oil change shops are expected to sell convenience, confidence and ego gratification. There is a significant difference in the delivery, and showmanship is the key. The differences between two businesses that practice or not practice this will ultimately tell in their profit margins.
Being the best in town requires the most highly trained crew, and this will ensure that customers flock to the shop. Most successful business owners in this industry constantly learn and teach employees how to relate to others for the most favourable perceptions and how to appeal to the psychological instincts of the customer and how to sell service.
Lube tech training is mostly formalized for at least 40 hours, with exams and a diploma. A new – hire should not be placed on the line until fully qualified for the position or they might discourage a customer and make the business lose money. Most profitable oil change businesses have a written operations manual used as a textbook so all training is oriented around the owner’s attitudes, goals and operating philosophy.
8. Package deals
Package deals make it easier for the customer to say yes to add – on services. They are a win/win situation because more value can be offered while increasing the overall net profit for the job. There is a reason cars are named Mustang, Barracuda, Corvette and Regal. It works for package deals, too. Try, “Off Road Sportsman” for a fluid change in every gearbox for a Jeep. Other packages like “VIP service” for luxury car owners.
Even a “Birthday Bash,” a package of everything marketed with a pre – paid ticket and bouquet of flowers for customers on their birthday. Things like this encourage customers to become loyal to a shop, express their satisfaction to friends, market the shop, and ultimately indicates the possible amount of profit a business in this field can make.
These are the most important factors that directly or indirectly dictate the amount of profit any given oil change shop can make in the United States. Promoting any single one isn’t an assurance of success. The more favourable factors the owner of an oil change business employs, the better the odds of success and profit for the business.
Estimated Profit Margin of an Oil Change Shop
While an oil change business in itself makes very little profit, the addition of extra services for each customer raises the average profit margin up to 35 percent. Oil and lubrication service sales represent $1.6 billion in revenue for independent tire dealers every year, or $60,651 per dealer.
That averages out to $39.18 per oil change, according to industry reports, well above the average advertised price for an oil change in the aftermarket. To call the oil change business a loss leader would be inaccurate. By offering the service, an average dealer earns an additional $21,228 annually.
However, there are a number of ways to increase that amount. A shop could raise the price of a standard oil change, or push full synthetic oil changes. They could dedicate bays and technicians to the service. Advertised oil changes continue to entice people into automotive service facilities.