Auto Shops Need Financing

Why do independent auto shops need brokers and equipment financing? Auto repair shop owners are in a tough spot. Demand for their services is growing, but so are the technical demands of the job—and the associated costs.

Here’s the good news: Brokers backed by TimePayment financing can get their engines revving.

The breakdown: Here’s why the road is rocky for indie auto repair:

• Drivers are keeping cars on the road longer: Thanks to high borrowing rates and growing economic pain, drivers are hanging on to vehicles far longer than they normally would. That’s pushing up demand for repair services.
• Equipment costs are outpacing shop profits: Cars are also becoming computers on wheels, requiring sophisticated diagnostic tools that cost more than many larger shops’ annual profits—$45K–$85K per service bay, at a time when independent auto shops generate only $2,800 per month in average profit. (For another example, new diagnostic scanners cost $15K–$45K each, but shops need multiple units plus annual software updates averaging $8,000.) This creates financing needs that exceed traditional loan capacities.
• Technology updates are nonnegotiable: Shops that can’t diagnose new vehicle systems stand to lose 14% of their recurring customer base to car dealership service bays. This means equipment updates are critical, not optional, for independent shops.
• Banks devalue automotive repair: Traditional lenders have been slow to adjust to these shifts in the category. So despite auto repair being recession-proof, with 68% repeat customer rates, many lenders categorize shops as “high-risk” based on outdated perceptions rather than current financial realities. That leaves small auto shops struggling to find financing, even as their service bays fill up with customers.

The broker bottom line: The auto repair industry faces an equipment crisis—and that’s an opportunity for brokers who understand the sector.

• Independent shops need advocates who can secure financing for the technology they need to survive, creating loyal long-term relationships.
• TimePayment has a proud history of helping brokers serve this essential industry.*