Nearly nine out of 10 garages (86%) missed at least one introduced fault and 40% missed at least one service item.
The Department of Trade and Industry is introducing a 'Good Garage' scheme to help tackle the problem.
Consumer minister Melanie Johnson said: 'The industry needs to take strong action to improve standards. A commitment to a set of minimum service standards is needed urgently and I am pleased that the industry has agreed in principle to work to develop a 'Good Garage' scheme to deliver a better deal for consumers.'
The survey took place between March and June this year, investigating 119 franchised and 88 independent garages, along with 58 fast-fit centres.
Nearly a third of fast-fit centres (27%) recommended unnecessary replacement of parts, and only 3% carried out checks comprehensive enough to find and rectify simple faults, such as blown reversing lights or deflated spare tyres.
There was a discrepancy that suggests women get a raw deal when they take their cars in for servicing: 51% missed a problem if the customer was a woman, while only 33% missed problems if the customer was male.
Matthew Carrington, incoming chief executive of the Retail Motor Industry Federation, added: 'We will examine the results of the survey, and co-operate fully with Government to find ways of strengthening the service the industry offers.'
Although there was widespread support among traders - 80% said there was a need for such a scheme – only 34% said they would join it. There was stronger interest from the franchised garages and fast-fit chains.