Selling an auto repair shop in Canada

A good repair shop is built on trust. Customers come back because they believe the shop will fix the car properly and charge fairly. A buyer is paying for that trust, the technicians who earn it and the equipment that does the work. Most of the job in selling is showing clean numbers, a team that will stay and a shop that runs without you. Here is what to expect and how to prepare.

What buyers look at first

Most buyers of a repair shop, whether general repair, tires, brakes, transmissions or a specialty shop, ask the same questions early. Have clear answers ready before you list:

• Sales and profit. Two or three years of numbers, split into labour and parts.
• Work volume. Repair orders a month, the average ticket and how busy the bays are.
• Customers. How many come back, any fleet or business accounts, and reviews.
• Technicians. Who they are, their certification, pay and whether they will stay.
• Premises. The lease or building, number of bays, lifts and the state of the equipment.
• You. Whether you are a working technician, the service writer or both.

Buyers will check these during due diligence, so it helps to gather them now. Our list of documents needed to sell a business is a good start.

Labour and parts numbers

Shop management software already holds most of what a buyer wants. Pull yearly and monthly totals for labour sales, parts sales and sublet work, and make sure they match your bank deposits and the sales on your tax and GST/HST returns. Show your labour rate, billed hours against paid technician hours, and your gross profit on parts. A buyer will use these to judge whether the shop is priced and run well.

If you pay yourself a wage, work as a technician or run personal vehicles and costs through the business, list them clearly as add-backs with proof. If a big fleet customer or warranty work makes up a large share of sales, say so early. If sales have dipped, explain why; see selling when sales are down.

Technicians and trade certification

Good technicians are hard to find, so a buyer will care a lot about who stays. Make a list of each person with their role, start date, pay, hours and certification. In British Columbia, automotive service technician became a Skilled Trades Certification trade under SkilledTradesBC, with an implementation date of September 1, 2024 and a one year transition. People doing the work generally need to be certified or registered apprentices, and employers keep records of their qualifications. Have those records ready, along with apprentice sponsorship details.

In BC, section 97 of the Employment Standards Act says that when a business is sold, the employment of an employee is considered continuous and uninterrupted, so a buyer who keeps your team takes on their years of service. Many buyers want to meet the lead technician before closing. Plan when and how to tell them; see what to tell employees.

Licences and inspection facilities

Most municipalities need a business licence for an auto repair shop, and a licence is usually issued to the owner, so a buyer in an asset sale applies for their own. If your shop is a Designated Inspection Facility for BC's commercial vehicle inspection program, the government's notice says those licences are not transferable or sellable to third parties, and the inspection guide says a facility must tell CVSE within 10 days of a change of owners. A buyer applies for their own licence, which needs a business licence, a garage policy in the business name, an operator course and an inspection of the facility. Build that time into the closing plan, because inspection work may pause if it is missed. See transferring contracts and licences.

Ask your insurance broker how your garage policy, liability cover and any customer vehicle cover move, since a buyer needs their own in place on closing day.

The building, lifts and environmental questions

Read your lease for assignment terms, how long is left and any options to renew, and check what it says about who is responsible for spills and contamination. See your commercial lease when selling. If you own the building, see selling a business and the building.

Repair shops handle used oil, coolant, solvents and old batteries, so buyers and their lenders often ask about environmental risk, especially when the building is part of the deal. Gather records of waste pickups, any oil and water separator or sump cleaning, and any past environmental reports. A buyer or lender may ask for an environmental site assessment, so it is better to know early. List the lifts, compressors, alignment and tire equipment with their age, service and inspection records.

Customer vehicles, warranties and open work

On closing day there will be customer vehicles in the bays and jobs half done. Agree how open repair orders, parts on order, deposits and money owed by fleet customers are handled. Decide who stands behind comebacks and warranty claims on work done before closing, and whether a small part of the price is held back to cover them; see holdback when selling and closing day adjustments.

Parts on the shelf, tires and fluids are usually counted on closing day at cost and added to the price. Separate slow moving and old parts, which are often worth less. See selling a business with inventory.

Tools, equipment and vehicles

In many shops the technicians own their own hand tools and tool boxes, and the shop owns the lifts, scanners, alignment machine, tire changer and balancer, compressors, shop software and any loaner or shuttle vehicles. Make a clear list of what belongs to the business, with model, year and condition, and note anything leased or financed, because those agreements need to be paid out or taken over. Diagnostic software subscriptions and parts supplier accounts usually need to be set up in the buyer's name.

Customer records and privacy

Customer names, phone numbers and vehicle service history are personal information, and service history is a big part of why customers return. In British Columbia, section 20 of the Personal Information Protection Act lets a business share customer information with a prospective buyer without consent, but only if it is needed to decide whether to go ahead and the buyer agrees to use it only for the deal. Many sellers share totals first, under a confidentiality agreement, and hand over the full records at closing. See telling customers and suppliers.

Tax on the sale

How the sale is taxed depends on whether you sell assets or shares and how the price is split between goodwill, equipment and parts. See asset sale vs share sale and taxes when selling a business. If you run the shop on your own without a company, see selling a sole proprietorship.

For GST/HST, the CRA explains that you and the buyer may be able to jointly elect under section 167 of the Excise Tax Act, using Form GST44, so that no GST/HST is payable on the sale. This generally needs the buyer to get at least 90% of the property needed to carry on the business, and if you are a registrant, the buyer must be one too. In British Columbia, PST generally applies to taxable goods sold with the business, such as equipment and parts, but not to goodwill, and the Province says a buyer should get a PST clearance certificate before buying a business. Alberta has no PST. See GST and PST when selling.

A simple worked example

These numbers are made up and rounded for illustration only. Your own deal, timing and tax will differ.

Questions to take to your lawyer and accountant

• Should this be an asset sale or a share sale, and how does that change the licences and accounts?
• When should the buyer apply for the business licence and inspection facility licence?
• What does my lease say about assignment and environmental responsibility?
• Which equipment leases, software and supplier agreements can be assigned?
• How should parts, open repair orders and comebacks be handled in the price?
• What do I owe my team, and what carries over to the buyer?
• Can we use the section 167 election for GST/HST, and how is PST handled?

For more, read what your lawyer and accountant do. Running a plumbing, electrical or HVAC company instead? See selling a trades business in Canada. Running a trucking or hauling company? See selling a trucking company in Canada. Running a car wash? See selling a car wash in Canada. This guide is general information, not legal or tax advice for your situation. Questions about listing with us go to hello@sellmybusinessdirect.com.