Car Wash Feasibility Study

A car wash feasibility study is an independent analysis commissioned for a lender's credit file. It models the trade area, the competing washes, the cars per day the site can realistically capture, the membership ramp to stabilization, operating costs, the full development or acquisition budget, and debt service coverage year by year. Every MMCG car wash feasibility study ends in one of three written determinations: feasible, feasible as resized, or not feasible as proposed. The fee and the conclusion are independent of each other.

That determination language matters. No federal rule makes a feasibility study automatic for a car wash. Under 13 CFR 120.160(b), SBA "may require" a feasibility study, and in practice lenders ask for one on start-ups, ground-up tunnel construction and any credit that rests on projections rather than history. USDA is stricter: under 7 CFR 5001.306(a)(3)(i), a guaranteed loan greater than $1,000,000 to a new business must include a feasibility study prepared by an independent qualified consultant acceptable to the Agency. A study written to those standards, with a stated determination and a stressed coverage ratio, gives the credit memo evidence it can adopt rather than marketing it must discount.

Between January 1 and September 1, 2026, MMCG analyzed $2.3 billion in total construction cost and $1.7 billion in loan amount across client engagements, and car washes are one of the asset classes we underwrite most often. The work draws on MMCG's own national data estate and on MMCG's analysis of SBA loan-level data for NAICS 811192, the car wash industry code.

Each MMCG car wash feasibility study delivers:

Traffic counts are always reported with the counting station, the source and the year, because broker flyers for the same parcel routinely differ by thousands of vehicles per day.

The study's demand model, cost basis and labor plan all change with the format, so the format decision is tested, not assumed.

Express exterior tunnels are the dominant new-build format: an 80 to 180 foot conveyor, pay stations with license plate recognition, free central vacuums and an unlimited membership program. Practical throughput runs 60 to 120 or more cars per hour depending on conveyor length and loading discipline. This is the format behind nearly all of the industry's recent expansion, and the one most exposed to corridor saturation. Site size sets the conveyor: a 100-foot tunnel with stacking and vacuums fits on roughly 0.85 acres, while longer conveyors in Charlotte-area car wash rezonings have been sized at 1.59 to 1.66 acres.

Flex-serve and full-service washes add interior cleaning and detail services on top of the tunnel. Labor rises sharply, tickets rise with it, and the underwriting question becomes service mix and labor cost rather than pure volume.

Mini tunnels and in-bay automatics serve smaller trade areas and infill pads. In-bay automatics are frequently co-located with fuel; a wash attached to a gas station is underwritten within the fuel facility's economics, and we cover that case in the gas station feasibility study. Truck and fleet washes within travel centers are covered in the truck stop feasibility study.

Self-serve bays remain the lowest-cost format, with the lowest water use per vehicle, and often anchor rural and small-market projects, including USDA-financed ones. In a rural county seat, a short tunnel paired with in-bay automatics and self-serve bays, one of them sized for trucks, often fits the market better than a full express tunnel; MMCG's Antigo, Wisconsin model study underwrites that combined format under USDA B&I.

Water use separates the formats in a way regulators now track. EPA WaterSense reports conveyor washes averaging 30 gallons of fresh water per vehicle in the industry's 2018 study, in-bay automatics at 44.8 gallons, and self-serve at 15.0 gallons, and recommends new conveyor builds be designed to 35 gallons per vehicle or less. Reclaim systems cut fresh water demand by 50 to 83 percent, and several jurisdictions now mandate them.

Capture rate is the share of passing vehicles, or of trade area vehicles, that become washes. Industry worked examples multiply a rate by a traffic count, but published capture rates are not calibrated to any single site, and we have found no survey that validates a universal figure. Lenders give more weight to three things: break-even cars per day computed from the site's own budget, member counts observed at comparable washes, and stress cases for new competition.

The break-even moves with the cost basis, and every study computes it for the site's own budget. Across MMCG's published model studies, express tunnel projects costing $5.1 million to $5.7 million break even before debt service at 143 to 162 cars per day and reach 1.0x debt service coverage at 247 to 306 cars per day, while a $6.75 million project needs about 345 cars per day to cover its debt. The distance between the two thresholds is the central credit fact of the asset class: an express wash covers its operating costs long before it covers its loan. That is why the ramp matters as much as the stabilized year.

The ramp is long. Mister Car Wash, the largest U.S. operator, states in its FY2025 annual report that new locations reach average unit volumes after approximately three full years of operation. MMCG underwrites a three-year ramp as the defensible base case; a two-year stabilization assumption is aggressive and is flagged as such. The early-year coverage shortfall is sized explicitly, and the study states the interest reserve or working capital the capital stack must carry to bridge it.

As screening practice, MMCG looks for established commercial corridors with strong directional counts before a new express tunnel is modeled, but the determination rests on the site's own break-even math and verified station counts, not on a rule of thumb.

Membership is the economic engine of the modern express wash, and it is where weak studies fail. Industry benchmarking through mid-2026 shows member revenue growing 10.4 percent year over year while retail revenue declines 3.9 percent, so a pro forma built on retail capture alone is underwriting the shrinking half of the business.

MMCG models membership month by month, not as a stabilized percentage. The inputs we underwrite:

Membership also changes how weather risk reaches the lender. In the snow belt, a mild winter reduces visits, but members pay the same monthly price whether they wash twice or four times, and fewer visits lower variable cost. The study tests the weather case explicitly rather than assuming every winter is severe.

The membership section of the study reconciles the ramp with the trade area's household count, incomes and vehicle base, because a 4,000-member target in a 10,000-household trade area is a different claim than the same target in a 40,000-household one.

Saturation is real at the corridor level, and 2026 is the year the market said so out loud. New express openings fell from 943 in 2022 to roughly 550 in 2025 by industry estimates, with MMCG projecting 450 or fewer in 2026. The industry's largest 2025 credit event, the Chapter 11 reorganization of a roughly 260-site platform that entered bankruptcy in February 2025 with $653.9 million of funded debt and rejected dozens of leases, was a saturation story: too many tunnels opened on the same corridors at peak-cycle costs.

Local governments have responded. Mission, Texas adopted a 180-day car wash moratorium in March 2026, layered on a one-mile spacing rule; Warren and Roseville, Michigan both restricted new car washes and gas stations in 2026; Birmingham, Alabama extended its moratorium on automated washes; Avon, Ohio ran a multi-year moratorium through late 2025; and Hesperia, California now requires 2,000 feet between express washes. Mesa, Arizona limits car washes, fuel stations and auto sales to two within 600 feet of an arterial intersection, a rule that ended a car wash ground lease negotiated at $1.4 million of annual rent in 2024 and that decides where a new tunnel can go in the East Valley; MMCG's Mesa model study resizes a corner proposal around it. Texas law adds procedure rather than relief: since September 2025, cities there must hold two public hearings at least 30 days apart before adopting a moratorium.

Water rules are a second entitlement layer. California requires new conveyor and in-bay washes to recycle at least 60 percent of wash and rinse water under Water Code Section 10951; Fuquay-Varina, North Carolina requires 80 percent; Lawton, Oklahoma and Arvada, Colorado require 50 percent; El Segundo, California requires recycling systems on all new conveyor washes; and the Metro North Georgia Water Planning District's model ordinance pushes the same requirement across its member cities. In Arizona, the Department of Water Resources model ordinance sets a 50 percent recycling minimum for new commercial car washes, and the state's Colorado River reduction rises to 760,000 acre-feet a year in 2027 and 2028. Drought rules usually favor professional washes over driveway washing: Charlotte Water's 2026 Stage 2 restrictions banned discretionary home vehicle washing and expressly permitted commercial car washes. They also make the reclaim system a compliance item rather than an option.

For acquisitions, the zoning question is different: many older washes are nonconforming uses under current codes, and nonconforming status typically bars structural alteration and enlargement without board relief and ends after a period of discontinued use or removal of the equipment. A repositioning budget that ignores that status can cost the buyer the right to operate.

Every MMCG study counts the operating, permitted and proposed washes in the trade area, verifies the zoning district and any prescribed conditions in the controlling ordinance, and checks for moratoriums and spacing rules before any determination is issued. Entitlement risk is a line item, not a footnote.

An express tunnel that cost $3 million to $5 million all-in at the start of the decade now runs $4 million to $8 million including land. Prime one-acre Sunbelt pads alone trade at $1.0 million to $2.5 million or more, a 100 to 150 foot tunnel equipment package runs $1.0 million to $1.5 million, and franchise data publishers report a total investment range of roughly $4.98 million to $8.52 million in the largest express franchise system's 2025 disclosure document. Utility fees are material and local: in Charlotte, a new wash on a 2-inch meter faces $52,147 in water and sewer system development fees in fiscal 2027, before the at-cost connection charge. Cold-climate projects add in-floor heat, boilers, freeze protection and snow storage to the budget, and in Wisconsin the equipment package itself carries sales and use tax.

Tariffs sit inside every 2026 equipment budget. Section 232 duties on imported steel and aluminum have stood at 50 percent since June 4, 2025, the steel mill products producer price index rose 17 percent in 2025, and construction machinery prices rose at their fastest pace in two years. MMCG carries an explicit equipment contingency in every car wash cost build-up and reconciles the budget against Marshall & Swift cost data and vendor quotes.

The study's cost section produces the complete project build-up in MMCG's standard format: land, hard cost, equipment, soft cost, contingency, financial cost and the working capital or interest reserve the ramp requires, each stated in dollar terms, as a percentage of total cost and per square foot. For the mechanics of construction budgets under SBA rules, see the construction loan feasibility study; for the full cost anatomy of a tunnel, see the tunnel construction cost breakdown.

Sales tax on car washing varies more by state than most pro formas acknowledge, and the study states the treatment for the subject's state. Texas does not tax car washing. North Carolina taxes car washing as a repair and maintenance service but exempts a limited-service wash in which employees only take payment, guide the vehicle onto the conveyor, apply a pre-spray or place protective tape, so the menu design decides the tax. Pennsylvania taxes washing at 6 percent. Wisconsin taxes manual, coin-operated, self-service and automatic washes and allows no exemption on the equipment used to provide them. Ohio exempts automated washes but treats the exemption as lost where RFID stickers or tags let customers bypass the pay points. Arizona taxes car washes through the city transaction privilege tax under the rental classification, and municipal guidance states that membership fees for repeated access are taxable. Where tax applies, the price ladder is modeled exclusive of tax and the competitive comparison is made on the same basis.

SBA lending is the backbone of car wash finance for independent operators: MMCG's analysis of SBA loan-level data counts 4,227 7(a) loans totaling $5.26 billion and about 1,580 504 projects for car washes since FY2010, with 243 7(a) loans for $272 million in FY2025 alone. Car washes sit on SBA's example list of special purpose properties, which raises the 504 borrower contribution to 15 percent, or 20 percent when the business is also new. SOP 50 10 8.1, which applies to applications received by SBA on or after October 1, 2026, changes car wash structures in both directions: initial acquisitions must cover their debt 1.25 times on historical cash flow, and 7(a) exposure no longer reduces the 504 financing a borrower can access, which makes a 504 loan for the real estate and equipment paired with a small 7(a) loan for franchise and pre-opening costs a practical structure. The full treatment, including the special purpose rules, the job standard, the environmental review path, franchise eligibility and the acquisition tests, is on the dedicated SBA car wash feasibility study page, with the program-wide rules on the SBA feasibility study hub and the regulatory text on the SBA underwriting regulatory spine.

USDA Business and Industry guarantees finance car washes in eligible rural areas, and self-serve, in-bay and mini tunnel formats frequently fit rural trade areas better than a full express tunnel. Under the FY2026 notice, the most recent published at this writing, the guarantee is 85 percent on loans of less than $5 million and 80 percent from $5 million to $25 million, with an initial guarantee fee of 3.0 percent of the guaranteed portion and an annual retention fee of 0.55 percent; aggregate borrower exposure is capped at $25 million. The feasibility rule is specific: under 7 CFR 5001.306(a)(3)(i), a guaranteed loan greater than $1,000,000 to a new business requires a feasibility study prepared by an independent qualified consultant acceptable to the Agency, and the Agency may require one below that threshold. Part 5001 treats an established operator opening in a new market as a new business, and it measures debt coverage as EBITDA less reasonably expected replacement capital expenditure, divided by annual debt service. MMCG prepares studies to the USDA framework as standing practice; see the USDA feasibility study hub, the USDA regulatory spine, the plain-English guide to the $1 million new business trigger, and the Antigo, Wisconsin model study; check a site on the USDA eligibility map or size a structure with the B&I loan calculator.

Conventional construction and acquisition lenders publish little, and keep car wash terms in term sheets. The best available public evidence from industry advisory sources puts typical requirements at a minimum debt service coverage of 1.25x to 1.35x and 10 to 25 percent cash equity, with construction facilities running 12 to 18 months interest-only. Net lease capital prices the finished asset: marketed car wash sale-leasebacks averaged a 6.21 percent asking cap rate in April 2026 across 190 listings, with tenant credit moving pricing from 5.56 to 6.45 percent. The study states the capital stack it was underwritten to, so the lender can re-run coverage on its own terms. To compare program structures side by side, use the SBA and USDA loan comparison calculator.

The three documents answer different questions, and lenders frequently need more than one. A market study asks whether demand exists in the trade area; it is an input, not a credit conclusion. An appraisal asks what the property is worth; for an operating wash that is a going concern value that must allocate land, building, equipment and intangible business value separately, prepared by an appraiser experienced with the property type. A feasibility study asks whether this project repays this loan: it carries the full operating model, the ramp, the capital stack and coverage by year, and it ends in a determination. MMCG also prepares standalone market studies and highest and best use studies where the engagement calls for them.

MMCG's conclusions are not for sale. The fee is fixed before work begins, it is set from the format, the number of sites, market saturation and the lender program, and it does not depend on the outcome. Feasible as resized and not feasible as proposed are regular outcomes of our practice: of the five car wash model studies published below, two found the project not feasible as proposed and feasible only as resized. Lenders commission us precisely because those outcomes are possible.

Studies are prepared under the direction of Michal Mohelsky, J.D., FMVA, Practicing Affiliate of the Appraisal Institute, and every figure in the report carries its source and year.

Working with a car wash feasibility study consultant should be predictable. MMCG engagements start at $4,900 with fixed-fee scoping; the quote is issued before work begins and does not change with the conclusion. Standard delivery is 9 to 16 business days, with rush delivery available from 5 business days. Payment terms are 50 percent at engagement and 50 percent on delivery of the final report. Every study carries MMCG's written acceptance guarantee: revisions required by the lender or agency are made at no additional cost. The study is addressed to the lender and the applicant and is prepared for SBA, USDA or conventional credit files as the program requires.

MMCG's car wash model studies apply the methodology end to end on real markets, each with the full cost build-up, the membership ramp, coverage by year, sensitivity cases and the stated determination: