Why Bonus Depreciation Is Fueling a Car Wash M&A Surge in 2025
If you’re a car wash owner thinking about selling, you’ve probably heard the buzz around bonus depreciation. But what’s really driving the surge in deals this year? And how does it affect you?
Let’s break it down—with insights from Jeff Pavone, founding partner at Amplify Capital Group, and one of the most trusted voices in car wash M&A.
What Is Bonus Depreciation—and Why It Matters
Bonus depreciation allows buyers to deduct the full cost of qualifying assets, like equipment and fixtures, in the year they’re placed in service. As Jeff Pavone explains:
“Bonus depreciation just allows the owner to deduct certain assets, right? So, like equipment, certain fixtures, and on a typical car wash bill, that could be a couple million dollars. So it’s super advantageous to a buyer.”
This tax treatment improves cash flow and ROI, making car wash acquisitions more attractive. But it’s not just about taxes, it’s about how deals are structured and who’s showing up to buy.
Why the Market Is Moving Fast
The One Big Beautiful Bill Act, signed into law on July 4, 2025, permanently restored 100% bonus depreciation for most tangible business property acquired after January 19, 2025. This change has unlocked a new pool of capital, especially from 1031 exchange buyers and real estate investors.
“When you see private equity selling the real estate to the investor market, the 1031 market, the investor not only gets a very attractive tenant, but they get that bonus depreciation. So it makes car washes stand out amongst all the inventory that’s out there.” — Jeff Pavone
This shift is driving cap rates down—from the high 6s and 7s to the high 5s—and increasing deal velocity.
“The appetite from the investment community is really high because they want to get this deduction. So you’ll see a lot of activity happening towards the end of the year so people can get those write-offs done.” — Jeff Pavone
What This Means for Founder-Led Car Wash Owners
If you’re running a car wash business and considering a sale, here’s what you need to know:
Buyers Are Looking for Quality
The market has shifted from “get big fast” to “get profitable fast.” Buyers are more disciplined, data-driven, and focused on operational excellence.
“The great operators have one thing in common—they build a car wash company. They don’t just build car washes.” — Jeff Pavone
Valuations Are Strong, but Selective
Well-run car washes with clean financials, strong membership models, and efficient operations are commanding premium offers. But buyers are scrutinizing every line item—from chemistry cost per car to labor efficiency.
Timing Matters
Most deals close in Q3 and Q4. With bonus depreciation in play, many buyers are pushing to finalize acquisitions before year-end to maximize tax benefits.
How to Prepare for a Sale
Here’s how to position your business for a successful exit:
- Get a Professional Valuation
Understand your business’s true worth—including equipment, real estate, and recurring revenue. - Clean Up Your Financials
Buyers want transparency. Organize your books, depreciation schedules, and asset records. - Model Your Tax Position
Work with a tax advisor to understand how different deal structures affect your after-tax proceeds. - Know Your Buyer Pool
Private equity, family offices, and 1031 buyers each have different priorities. Tailor your approach accordingly. - Focus on Operational Excellence
Metrics like car count, membership penetration, and operating margin matter more than ever.
Looking Ahead: Innovation and Opportunity
The car wash industry is evolving. Technology, data, and customer experience are becoming key differentiators.
“We’re going to see innovation like crazy this year. Especially with more tunnels and more customers, it becomes more profitable. But we’re going to see innovation come from all angles.”
Jeff Pavone
Whether it’s AI-driven personalization, smarter membership tools, or robotic cleaning systems, the future is bright—and fast-moving.
Final Thoughts
This isn’t just a tax story. It’s a market story. Bonus depreciation is one piece of a larger puzzle that’s making car washes one of the most sought-after assets in real estate and private equity.
“This is a marathon—trying to make smart decisions that impact as many people in our circle as possible.” — Jeff Pavone
If you’re a founder-led operator, now is the time to think strategically. Whether you’re ready to sell or just want to understand your options, the key is preparation.
Video Transcript
So, first thing, what is bonus depreciation? So, bonus depreciation lets you write off most of the cost of your car wash equipment or certain improvements immediately instead of spreading the deduction out over many years. So, it’s an accelerated tax write-off. In other words, you get that deduction now as opposed to later. So, for example, you know, if you buy a $1,000,000 piece of equipment, you get to realize that $1,000,000 expense in year one, which offers an immediate tax advantage to the entity or individual who is making that capital expenditure.
When the One Big Beautiful Bill Act was signed in July of this year, what it did is it restored one of the key provisions of Trump-era tax law from 2017, which is 100% bonus depreciation for qualifying property and improvements. In comparison, before the act was signed in July of this year, bonus depreciation from the Tax and Jobs Act in 2017 was on its way of phasing out in full. In fact, in 2025, 40% of eligible expenses were eligible for bonus depreciation. Now, we have 100% of bonus depreciation restored into perpetuity.
For an operator today, it’s certainly an advantage and an incentive for you to make the relevant capital expenditures, either in reloading your car wash tunnels and restoring by way of rehabilitation, or by just simply expanding a unit count. Today, let’s say, for example, you’re spending $2 million in equipment and improvements that’s eligible for bonus depreciation. Assuming top tax rates at about 37%, that’s over a $750,000 tax shield to the operator. For an operator today, the restoration of bonus depreciation certainly motivates and incentivize the acceleration and further capital expenditures to improve and expand.
One other thing high level as it relates to these valuations in this space, which ties into why this benefits the buyer pool, there’s a direct impact to the real estate value for car wash real estate. Car wash real estate is, in fact, a single-use property. One very valuable source of capitalization for the consolidation of the car wash sector has been, in fact, leveraging the real estate by way of the sale-leaseback process. In other words, an acquirer of a car wash asset could buy both the operation and the real estate that supports the operation, carve out the real estate, sell it to a triple-net investor, and recoup the proceeds from that real estate.
What we’ve seen is that bonus depreciation has lowered cap rates in the real estate. Why is that important? Cap rates and real estate values are inversely related. When cap rates go down, real estate value goes up. The reason for this, again, is the tax yield, the post-tax yield. By having this tax shield in the form of bonus depreciation in a piece of real estate and in a business that is capital-intensive, a lot of equipment is used in car washing. With that equipment being eligible for bonus depreciation, a triple-net investor in car wash real estate can take advantage of that tax shield, thus lowering cap rates in car wash real estate and increasing the value of that real estate that supports a car wash operation.
This has certainly been a nice tailwind into the acceleration of car wash M&A. The reason for that is the institutional triple-net providers in this space have been slower to allocate more capital in the car wash sale leaseback process. What this has done is it’s unlocked a new pool of capital in the 1031 real estate investor. Leveraging IRS tax law, 1031 exchange allows a seller of real estate to defer their capital gains by rolling those proceeds into another like piece of real estate. That’s called an in-kind transaction. That already in itself offers a tax benefit to the triple-net investor. But now you layer on bonus depreciation, it’s even more of a tax benefit.
So now we’re seeing a lot of interest in car wash real estate within the 1031 exchange market. This has unlocked an entirely new pool of capital to car wash consolidators, which again makes that real estate to the car wash operation that much more valuable to that acquire the car wash operation. So we definitely expect this will be a continuation of a tailwind in the car wash M&A, just landscape. And we’re certainly see that manifest in widening evaluation multiples, right? We’ve seen valuation multiples compressed coming from their highs in 2022. This has been a nice breath of fresh air to car wash M&A, restoring valuation multiples to not quite to where they were, that’s for sure, but nonetheless a very healthy level. So definitely makes selling a good opportunity. And for a buyer, it makes that real estate that you’re acquiring more valuable in the sale-leaseback process.