Overview
Car wash operators sometimes lease the land under the site through a ground lease, while others own the real estate outright. Both structures can work, but they affect financing, risk, and long-term value in different ways. The right choice depends on the business plan and how important real estate ownership is to the exit strategy.
Benefits of owning the land
- Long-term control over the site without lease renewal risk
- Potential appreciation and stronger collateral value for lenders
- More flexibility for redevelopment, expansion, or future sale
Benefits of leasing the land
- Lower upfront capital since less cash is required to control the location
- Potentially faster expansion by preserving capital for equipment and marketing
- Simplified transaction in some markets where prime sites are commonly ground-leased
How leasing affects financing
Lenders underwrite ground leases carefully because lease terms can create long-term risk. They often want to confirm remaining lease term, renewal options, rent escalations, and whether the lease can be assigned to a lender or buyer if needed.
Lease terms lenders care about
- Remaining term and renewal structure
- Rent escalations and how they affect future cash flow
- Assignment rights and lender protections
- Maintenance responsibilities and any unusual lease obligations
Choosing the right structure
Owning the land can support stronger collateral and long-term value, while leasing can preserve capital for growth. The best decision aligns with the operator’s time horizon, risk tolerance, and financing plan.
Bottom line
Leasing land vs owning for a car wash is a strategic decision that impacts financing and exit options. Ground leases can work well when terms are strong, but ownership often provides the most control and long-term resilience.