The Truth About Towing

August 4, 2003 by
Filed under: Uncategorized 

A wrecker arrives at your shop carrying a fresh wreck. The customer requested the vehicle be brought to your shop. The wrecker driver walks into your office and wants to know where to drop the car. You drop whatever you are in the middle of, and walk outside to search your lot for a suitable space to store this immovable vehicle until you are ready to work on it. After getting the car unloaded the wrecker driver returns to your office looking for a check. If your shop is in a dealership you spend the next fifteen minutes getting the check written and searching for two people to sign it. You get back to your office, give the driver the check and begin the search for information on the vehicles owner, because no one bothered to call you to say their car was on the way to your shop. You finally track down the owner and generate a repair order, write an estimate and begin the wait for the insurance company to come out to look at the car. The appraiser shows up 3 days later and cuts your estimate by two thirds. On your estimate he notices that you marked up the towing. He tells you his company doesn?t pay markups on towing charges. You shrug your shoulders submissively and say, ?Yeah, well I thought you?d say that.?

Sound familiar? It shouldn?t. If you did not tow the vehicle with your own wrecker and your own driver, you are entitled to a markup on the tow bill. The insurance companies will generally fight this viciously, but you are entitled to it.

As a licensed tower you are limited by the state what you can charge for towing and storage. But if you do not own a wrecker, and you have to hire someone to do your towing, you should be making money on that tow. Towing is simply another sublet operation. You?ve invested time and money dealing with the wrecker driver and getting a check written. You should make a gross profit on that investment. In fact, if you really think about it, you are obligated to make a gross profit on towing.

Say you pay out $10,000 a year for towing and storage to other towing companies. And let?s say your accountant explains that you need to make a 25% gross profit on all your sublet transactions. In order to make a 25% gross profit on your $10,000 pay out, you?d have collect $13,333. You?d have to mark up every tow bill by 33%. If you?re not collecting a markup on tows now, this additional $3,333 would be all net profit.

Now figure about 40% of that money goes to the government for taxes. If you failed to collect a markup on that $10,000 investment you would be screwing the government out of $1333 in tax money. Would the government come after you for that money?

Consider this. Recently at our dealership the state tax auditors gave us a thorough accounting enema. We failed to consider the worth of our loaner car service. Since the loaners are a free service, we didn?t pay any taxes related to that service. The state thought otherwise. They came up with a daily rate they thought the loaners were worth, calculated a reasonable profit, and then charged us back taxes on that amount. Our dealership has 15 loaner cars out at all times. It cost us a fortune.

For those body shops without a wrecker, the time has come to run your shop like every other business. If you buy something to sell, whether it is a tangible product or a service, you should make a profit on that purchase. If not, maybe you should think about applying for non-profit organization status. Ask your accountant what your minimum gross profit should be on towing and mark up those tow bills accordingly. For storage rates, do a cost analysis on the space in your lot, and in your building. Figure what that storage space is really worth and start charging the correct amount for storage fees. Your accountant can help you come up with a reasonable figure. It?s not an end-all solution to all your problems, but it?s a step toward prying the control of your business, your profits and your success out of the hands of the insurance companies.

Click this link for free software to help with your tow bill problems. Tow Bill Helper

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7 Comments on The Truth About Towing

  1. Drew Lechtenberg on Thu, 26th Apr 2007 5:39 pm
  2. Would this be the same for glass repair and paintless dent repair??

  3. Steve Beaghler on Thu, 10th Jul 2008 2:39 pm
  4. An adjuster told me today that we were not entitled to a markup on towing, since we did not “do anything”. That nothing involved writing an almost $800.00 check, and about 1/2 hour of my time. They would not accept my invoice from Tow Bill Helper.

    Following their logic, shops are not entitled to markups on any sublet, since we do not do anything. The same logic could be applied to parts, since we do not do anything, except write a check.

  5. Westly Smith on Thu, 14th Apr 2016 2:44 pm
  6. I didn’t know that towers were limited by the state government. I always thought that the companies decided their prices. I think it’s interesting how the government influences the towing business. Thanks for the great information, I’ve learned a lot.

  7. JJ ZAINE on Wed, 11th May 2016 12:05 pm
  8. I get so tired of always updating rules and regulations on us small business owners. I own a towing company in Canton Ohio and it makes me wonder why. What ever happened to people who work hard and have the guts to start their own business, to be able to make a profit? I’m not just speaking for my tow truck service, but for local businesses everywhere. This needs to stop!

  9. Tow Service in Akron on Fri, 9th Sep 2016 9:33 am
  10. I agree with JJ here. Sometimes dealing with these insurance companies is just crazy. People don’t know all the things that are listed in their policy. It’s nice to read an article that can help people out. Thanks for sharing!

  11. Michael on Tue, 11th Oct 2016 10:29 am
  12. The limitation on charging for towing varies state to state. My businessis in South Carolina and this is how the state code reads for us “A maximum charge of $160.00 shall be made for the use of a wrecker when a vehicle is disabled as the result of an accident.” It then goes into a bunch of caveats that justify increased charges, such as flipped vehicles.

  13. Bob J. on Tue, 25th Oct 2016 10:34 am
  14. This is mind blowing, to say the least. I guess our time is not valuable?? As a small business owner, it’s hard enough to come out on top after taxes and other regulations imposed upon us. This is just another obstacle to the small business owner trying to make a living for his family. Thanks for the informative article. Hopefully it will do some good, somewhere.

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