We have a 2.5HP and it works fine. The HP of your compressor only determines how fast it will replenish the air in the tank. The size of the tank on the otherhand affects the quantity of air you have at your disposal.
If you are just using mechanics air tools (die grinders, drills, impact wrench, air ratchet) you should be fine with a 3HP with 25+ gal tank.
I got annoyed trying to do sand blasting with my 2.5HP 25 gal tank... It just uses SO much air to sandblast. That and paint. If you're going to do LOTS of painting, you'd probably want a larger tank to keep the pressure even.
The factor that you need to consider is the Cubic Feet per Minute rating of the compressor and the pressure. This will be stated as 3.5cfm @ 90psi. The different air tools you use will work differently / better with higher cfm and higher psi. Unfortunately this translates into more powerful compressors and bigger tanks in order to do so, and therefore, more expensive.
The best way to determine which compressor you need is to look at your individual tools, and chart the cfm/psi requirements, and then find the compressor that best fits your budget and will service the majority of your tools. Also make sure that it will fit where you want it to go.
More than likely there will be a couple tools that you will not have the cfm/psi to fully meet, usually the psi isn't the problem (most tools are between 50 and 90 psi) but the cfm. You'll still be able to run these tools, just not for very long before you evacuate the whole tank and the compressor is now playing catch up. If you continue to run the tool you'll find that the compressor is on ALL the time and you can overheat your compressor, get tons of moisture in the line / tank, and also not run your tool as well or even in a damaging way. The trick is to then use it for short periods of time.
An example of this is my long-board sander. it requires [email protected] and I have a 3hp/20gal compressor that puts out [email protected] When I use the long-board I can usually get 3-4 minutes of continuous use before the compressor kicks in and then it will stay on and run for about 5-10 minutes AFTER I stop using the sander. As long as I stop every once in a while and let the compressor catch up, I'm ok, but if I run it for a long period of time, the sander eventually will catch and not actuate as well as start spitting water out of the vent.
If this is just plain old NOT going to work, then bite the bullet, and buy a bigger compressor.
Well I just went through this w/ mine. I bought a cheaper Cambel Hausfeld 5hp 15 gal direct drive set. It worked well for what I was doing but when I was doing alot of work the compressor ran alot. Unfortinately after about a year the motor burned out. I didn't want to go through that hassle again so I looked for a better one. If you want it to last for a long time I strongly recommed you look at the belt driven models w/ a larger external motor. These are more reliable and much quieter. The direct drive units are very noisy. I mean if you are next to it, it will startle you when it kicks on and can be very annoying to you and your neighbors. The belt drive units are much, much quieter. You can stand next to it and not have to yell in order to be heard. Also, the external units require a little more maitenance. You have to periodically check the oil, refill it and change it at regular intervals. However, they will last alot longer. So, if you are very limited in your budget and don't plan on using it frequently, a cheaper unit w/ less hp and an internal drive may be okay. I my self spent about $400 on a nice 25 gal 6 hp unit that will last a long time and has a very good flow rating. Plus, I disconnected the motor from the old one and now I use it as a second tank, giving me a total of 40gal now. Another consideration is the max tank pressure. The higher the pressure the longer you can run tools before the compressor has to replenish the tank. Of course these higher pressure units are more expensive. The previous advice about looking at what tools you will use is good. For example, w/ my old unit I could take one wheel off the car w/ the impact wrench and I'd have to wait for the compressor to fill up before the next one. Now I can get at least two off before I have to wait, the new compressor cost twice as much. Hopefully it will last more than twice as long.
I'd recommend the largest you can afford that your shop can power. Cheap tools are no bargin. If you get a 3HP compressor, rated at 50% duty, and run it over it's duty cycle, you'll burn it out in a couple years or less. If you get a 6 HP, but your electrical can't handle it, and the voltage to the compressor drops under 90% of the rated Voltage, you'll burn up the compressor motor. If you can run 220 to a 5 or 6 HP compressor, it'll supply the air you need, stay under the rated duty cycle, and not overload due to weak line voltage.
General rule of thumb: The larger the reciever you use, the less installed HP you will need to handle "impulse loads".
What does this mean? Well, generally a reciprocating compressor will produce 2.5 to 3.5 CFM per HP at 100psi. For air tools, thats the rating you want to look at, rating at 90 or 100 psi. If you plan on using a tool for extended periods, you will need a compressor that produces at least as much CFM as you most hoggish tool. Mine is a mix between sandblaster or diegrinder. The sandblaster uses 14CFM. This would equate to a 7HP compressor at 100psi.
If I was using it continuously, at 100psi.
Sometimes I do, sometimes I don't. When stripping heavy rust with alox, I use 100psi for minutes at a time, and the compressor I currently have (6hp) runs continously. Most of the time, that compressor is more than enough. What's more important is that I have it on a 80 gallon tank, connected to another older tank that's 30 gallon, giving me 110 gallons of storage. I have a regulator at the big tank to drop the pressure to 90-125psi to the sattelite tank, and another regulator at the small tank (it's mounted on casters so I can move it where I want it) to regulate the pressure where I need it (30-90psi).
This allows time for the wwater to drop out, two stages of regulation which acts similarly to a larger reciever as you only use the air you NEED, and not full-pressure air (more pressure is also like a larger tank if you don't need the full pressure)
Long story short: If I had the chance, I'd have bought a cast-iron Campbell-Hausfeld 7HP 220V single pahse unit, or the Ingersoll-Rand Cast Iron 30-T series unit rather than the 6HP Devillbis Oil-Free unit I have.
But I got the Devillbiss for free, so, hey...
The cast iron units I've mentioned should last a lifetime and give more than enough air for all your needs. The light-alloy high-speed units scare me, and I'm in the business.
If you want some info on setting up your air system, drop me an e-mail and I'll go into it further if you want. It's what I do on a daily basis.