Auto Salvage Yards: A Business Model

Beth Jacobs shares business model for restoring and selling old cars; including information on dealing with red tape, financing, equipment and acquisitions.
By Beth Jacobs
March/April 1976
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Auto salvage yards can be a necessity.  Beth Jacobs explains how to start your own salvage business.
PHOTO: FOTOLIA/OPENLENS


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Does the idea of having your very own auto wrecking business turn you off? If so — and ladies, please pay particular attention! you'll want to learn why a 45-year-old California woman with three children became an authority on Detroit's old clunkers and how she uses her knowledge to turn piles of "junk" into heaps of $$$. Nope, there aren't any tricks involved, and you don't even have to be a mechanic to duplicate her success.

Four years ago, when I was 45, my husband left me with three children and the beginnings of a auto salvage yard. At the time I hardly knew an automobile starter from a generator (let alone whether any particular part was Ford, General Motors, or Chrysler). Nor was I especially fond of my business address: a short, unpaved, muddy, rutted lane that dead-ended at a sewer plant and a hog farm and which — ironically enough — was named Eden Road.

Today BJ's Auto Wreckers inventories 100 old cars on a quarter acre of land and the enterprise is thriving so vigorously that I now call the lane my "Garden of Eden Road".

What's more, if I (a mere woman) can successfully operate a wrecking yard — and make $1,000 a month doing it — you can too. All you'll really need is a hunk of ground on the outskirts of what currently passes for civilization, and a bare minimum of mechanical ability. Add the first to the second, throw in about $2,500 for the used salvage equipment described in this article, top with a few dollars of working capital and you'll be ready to start recycling America's Number One Product: The Automobile.

And, although not everyone sees it this way, I believe that mine is a worthy calling in the present age of economy and ecology. By recycling parts from old junkers that have already expired into younger junkers that are still running, I know that I'm both 1.) helping other people stretch limited dollars and 2.) somewhat lessening our society's need for the copper, steel, aluminum, etc., that goes into new cars. To think that I'm paid well for doing such meritorious work!

Dealing With Red Tape

If you'd like to give my calling a try, don't — for gosh's sake — shout your intentions to the world; not, at least, until you've planned your strategy for doing battle with the various governmental agencies that issue the multitude of permits you'll need. Auto salvage yards are as necessary in our country as sunshine is to the nation's crops but authorities balk at issuing a new wrecking yard permit until its prospective owner has jumped through more than his or her share of hoops.

Start by checking your local municipal zoning code to determine whether or not an "auto junkyard" is a permitted use of your property. If your town has no such ordinances or an ordinance which carries no restrictions against this use, you've cleared your first hurdle. (A note of caution: Salvage yards are generally prohibited by most urban and suburban codes or, if allowed, are frequently heavily restricted and regulated. Careful investigation at this point in the founding of your new business can save you time and money later. If you start the salvage operation without proper zoning clearance, you could soon find yourself defending a municipal court action or forced to seek a variance — which you might not receive — in the zoning code. Either course of action could be expensive and time consuming.—MOTHER.) 

Once you're squared away with your city (probably by promising that your operation eventually will be screened quite discreetly by a solid, ten-foot-high fence), you'll be ready to contact the appropriate state authorities. Try to learn exactly whom to approach, how to go about it, etc., from another auto wrecker in your state before you begin. If no one will help you, though, the Department of Motor Vehicles is a good place to start.

Here in California, all salvage yards are licensed to disassemble old automobiles by the Department of Motor Vehicles. I'm also required to send a notice of acquisition to the D.M.V. within 72 hours every time I acquire a vehicle. (One copy of this notice goes to the highway patrol and another to the justice department to notify their computer systems that the car or truck in question is off the road.) In most cases, I'm home free of additional red tape on that particular vehicle as I strip it and sell the individual parts to a number of customers over the next few years. In the rare cases when I sell the whole car or truck, however, the deal must be accompanied by some paperwork run through D.M.V. which identifies the vehicle as "reclaimed junk". (This involves various official inspections and certificates.)

If this all sounds like too much trouble, please bear in mind that California (where I operate) and Nevada probably have the stiffest D.M.V. laws in the country. Missouri, Iowa, and Illinois — for instance — do not require acquisition notices at all, although they do expect a salvage yard to keep on file signed ownership certificates or bills of sale for all vehicles in stock. As far as I know, any state you live in will require you to have a D.M.V. dismantler's license but, from there, every state has its own way of doing business. Don't guess about yours. Get the straight dope from the proper authorities.

And don't let the "paperwork blizzard" I've just described get you down. Once you've shoveled through this initial snowbank of rules and regulations, the rest — setting up a profitable auto recycling yard on a relatively small amount of capital — is easy.

Getting Start Up Capital

It's not easy to get bank financing for a salvage yard. At least it wasn't for me. I asked for minority business loan privileges as a lady wrecker and was refused. So I borrowed a small grubstake from a relative, bought a few junked cars, towed in some freebies, sold some parts, acquired more cars, and was soon on my way. True grit and determination are probably the most important "financial" capital you can have.

A Family Run Business

The funds my children and I had in the beginning were so meager that there was never any question of hiring "qualified" help to assist us in the operation of our yard. We just pitched in and did everything ourselves.

The kids have been great, even though mechanics and auto wrecking have never been especially interesting to any of them. The boys work before and after school towing in wrecks, taking off parts, cutting up junkers, and loading scrap iron. Even Suzanne, who has another job, works behind the counter on Saturdays. Pulling together this way, the family made a good living last year. I see no reason why yours couldn't do the same.

Hollander Parts Interchange — The Indispensable Guide

I consider the Hollander Parts Interchange absolutely mandatory for anyone trying to make a living in the auto salvage business. This series of reference books lists the parts from one car — engine, brake drums, springs, axles, drive lines, etc. — that will fit another model of the same — or, in some cases, a different brand of automobile. The used battery you have in stock may not be from exactly the same make and model of vehicle that your potential customer owns, in other words, but you can still make a sale if you know that it'll fit the car in need. Each volume in this invaluable series covers a ten-year period and is available at the Hollander Parts Interchange website.

Necessary Salvage Equipment

1.)  A tow truck, of course, is absolutely essential for hauling in the clunkers that will be your stock in trade. The ideal is a brand-new factory-built job, say a 440 Holmes with single boom crane, tow sling, front push bumper, dolly set, full light package, jumper box, vacuum brake lock, and tow adapter for the newer cars that have fiberglass front ends. Such a rig-from Fruehauf, Holmes, or Weld-Built also costs a minimum of $4,100, which was entirely out of our reach. So we did what a lot of the operators of smaller junkyards do: We cobbled together a tow truck. And so can you.

Take an old three-quarter-ton or a ton truck with dual rear wheels and mount an A-frame, power winch, power takeoff, cables, and safety straps on its back. A look around almost any wrecking yard will turn up one or two similar homemade beauties and give you all the ideas you'll need for designing your own.

2.)  It's also hard to run a salvage yard without a loader or boom truck. This is simply the big brother of the tow truck — built on a short wheelbase — with an extended (upward) A-frame for its hoist. The rig is used in the yard to lift engines out of junkers and move otherwise immobile car bodies from one spot to another.

Some wreckers keep an old forklift around as their boom truck, which is OK if the machine is capable of raising five tons to a height of 16 feet, is maneuverable in a small space, and is kept on level and solid terrain. Sink one of those babies in the mud, though, and it'll stay there until spring. (Forklifts are available at a reasonable price, however. I scouted government and private heavy equipment liquidation sales and found several suitable for junkyard work starting as low as $2,500.)

We inherited our loader from an old-time junkie and it can best be described as "jerry-built". The winch, at the time we got the highly modified Chevy truck, was raised and lowered by the low and reverse gears of an old Rambler automobile transmission which vibrated so much that it split its case once a month. As soon as we could get enough working capital together, we had a heavy equipment repair shop replace the defective unit with a surplus power winch.

We also had to reanchor the whole boom assembly to the old truck once after trying to lift a '56 Caddie in the yard. During that abortive attempt, the heavy diamond-plated steel rear decking of the boom peeled off like a sardine can lid and the A-frame crashed into the loader's cab. We now have extra safety cables on this "workhorse" and warily regard the boom truck as the "wild stallion" we know it can be.

3.) A cutting or burning torch — for hacking car bodies into scrap or reaching parts made inaccessible by an accident — is another mandatory piece of salvage yard equipment. You can operate yours on either oxygen-acetylene or oxygen-propane (whichever is less expensive in your area) but I do suggest 50 feet of hose and portable bottles. For even greater mobility, attach the cutting tanks to the side of your loader's boom or mount them in any old car that you can drive right up to the jobs you want to do.

4.) You'll also need a certain amount of mechanic's tools, although there's no need to go overboard here. Either of my sons can remove just about any American car part with what he carries in his hip pockets: two screwdrivers, a ratchet handle, an extension for the ratchet, a nine-sixteenths and a half-inch socket, and a pair of slipjoint pliers. Additional odds and ends can include a battery charger, floor jack, welder, compressor, a few power tools make up your own list.

My personal opinion is that — unless your local zoning ordinance absolutely forces you to erect that solid, ten-foot-high fence I mentioned earlier—you should be able to completely assemble all the tools and equipment you'll need (if, that is, you build rather than buy the tow and boom trucks) for the $2,500 that a used forklift alone can cost. I speak from experience.

How to Find the Starting Cars for Your Salvage Business

If you're like many modern American families, you already have the seeds — a couple of wheezing or completely inoperative jalopies—for a salvage yard sitting out behind the house someplace. And if you don't, a sizable number of people in your town do. Ask around. I'd always heard that the big male topic of conversation at the local pubs and garages was sex but, since becoming a lady wrecker, I know better: It's cars! Mention that you're starting a wrecking business, and folks will tell you where to find an incredible number of junks. All yours for the hauling. Granted, you can't be choosy on these deals but they'll sustain you until you have a grubstake and know what you can sell.

Finding Abandoned and Needed Cars

As you build your business, your clientele's needs and wants will guide the selection of your purchases. BJ's, for instance, borders East Oakland and my customers are poorer people trying to keep their old second and third hand chariots together. I deal in older cars, then, for very good reasons.

Many of the clunkers I tow in are abandoned in Alameda (a Navy town) by sailors who buy ancient junkers, drive 'em while in port and then sometimes just leave the vehicles on the street when they ship out. If such an owner abandons a car in this manner, I frequently do the necessary paperwork for a lien sale (if the jalopy is worth more than $200) or secure a police bill of sale (if the heap's value is estimated at less than two bills).

Most late model and near-new wrecks are bought by salvage yards through bids to insurance companies. Occasionally, I'll spring for one of these deals to fill a particular customer order. Generally, however, I can't afford to tie up that much money in a single automobile.

The wreckers who go for these later model, big buck deals usually tell me that it doesn't pay to fool with the old clunkers I handle, since it takes just as much labor to remove a '58 Buick fender and sell it for $15.00 as it does to make the same transaction on a '75 for four times that amount. Maybe so. But the guys who talk like that usually have more operating capital than I do and one or more full-time mechanics on the payroll. By keeping my overhead down, I net enough on the $15.00 deals to make it worth my while and I don't have $50,000 or $100,000 tied up to do it.

Besides, I'm assuming that any MOTHER reader interested in setting up a salvage yard will probably be forced by circumstances (a tight budget) to go about it somewhat the way I did. I'm also assuming that the typical reader of this magazine would prefer to deal with my kind of small family business, or with the little wrecker outside Paris, Idaho (where we once got an emergency water pump for our old Ford), or with the tiny yard in Crescent, Oregon (that happened to have an axle for my '59 Chevy when I needed it most).

These operations are more like Red Cross rescue units than wrecking yards. They gather up the countryside's junkers and enclose them in fenced areas behind small garages where a fellow native can come in with his own tools and get the engine, transmission, rear end, or axle he needs. Then, when a traveler breaks down in their territory, the wreckers dispatch their tow trucks and bring in the distressed. Sometimes they have just the part the wayfarer needs and he or she is soon on his or her way again. Occasionally the dealer patches up one of his "better" cars and trades it for the disabled vehicle plus a little cash. At worst, the stranded motorist spends a day or two in the shade of the garage while his or her machine's missing part is sent in from the outside world. I tell you, I can grow absolutely lyrical about the contributions that family-owned and -operated salvage yards make to our society!

Salvaging Farm Equipment

You might find it both interesting and profitable to expand your operation to handle farm machinery. On a cross-country trip I made through Texas and Colorado in 1973, in fact, I saw the hulks of tractors, combines, and cultivators mixed in with the automobiles and trucks in a number of wrecking yards. Collecting and recycling such equipment could be a valuable service for back-to-the-landers and homesteaders in your area. (I know of several salvage yards in Indiana and other farming states that handle nothing but tractors, combines, etc.—MOTHER.)  

Scrap Metal Brings in Money Too

Of course, no matter how narrow or wide a field you decide to serve, the recycled parts and occasional complete vehicle you sell should never account for all the money you take in. You'll also have out and out salvage to sell too. I've received $35.00 a ton for car bodies delivered to Pacific State Steel Milland I didn't even have to strip off the upholstery (only remove the tires, including spare, and cut the straps on the gas tank) to get it. The price for bodies, as well as Number One and Number Two scrap iron fluctuates monthly, as you might have imagined, and the smart dealers stockpile during times of low rates and sell when the offers are high.

There are also dollars in non-ferrous items. I know one old-time junkman who carries a magnet in his pocket and whose "gold" is everything the magnet won't pick up: pot metal such as car door handles, lead from batteries, aluminum, brass, and copper. (When copper sold for 68¢ a pound a few months ago, we had to padlock our scrap radiators at night to protect them from thieves.)

Then again, the biggest fortune of all is still waiting to be made in the junk business: Just discover a way to recycle rubber tires (they don't rust or decompose) and you'll be set for life. Despite the experiments now taking place in which the old casings are shredded up for road paving, nobody has yet devised the way to get rid of North America's millions upon millions of discarded tires. I pay 25¢ each to have mine hauled to a dump and they aren't wanted even there.

Setting a Price

Used auto, truck, and other parts sell for various figures in various parts of the country. Prices can even span a considerable range for the same item from one dealer to another operating out of the same town. This is because no two salvage yards have the same land, equipment, labor, and other factors to calculate into their overhead. No two yards do the same amount of business, compete for exactly the same market, specialize in the same selection of parts, or have the same amount and variety of stock on hand. About the only ironclad rule I can give you is that, in general, rural operators almost always have lower overhead and charge less — part for part — than their urban counterparts.

Whenever I'm setting a price for an item, I personally put the most weight on only two factors: 1.)  what I paid for the part or the wreck it came out of and 2.)  what the demand for the piece happens to be at the time. Although I do find myself haggling over price on occasion, my "feel" for the business generally makes the figure I ask stick the first time I ask it.

In the last analysis, of course, this "feel" — which I can't really teach you in an article — is your most important stock in trade. Learn or develop it as rapidly as you can. You'll never really know how much you can afford to pay for a wreck until you have a good idea of how many of its parts you can sell and what price you'lI get for them.

A Final Word

This has been only a spit-in-the-eye account of how almost anyone in the United States can set up and operate an automobile salvage yard. I didn't tell you about the seven days a week of the hardest damned work you can imagine or the greasy, busted knuckles you'll get removing a transmission or the customer who trades one old part for another and expects a new car guarantee.

Nor did I mention the Auto Wrecking Gods who advertise acres and acres of late model cars and million dollar inventories, who have special jitneys for hauling customers out to see parts, and whose offices are equipped with special hotlines to other dealers just in case you need a part that the yard you visited doesn't have in stock. That's not what this article has been about.

This article is simply my testimonial that anyone — even a gal with three children and no husband — can still start an auto wrecking business, one of the last unfranchised enterprises left in America, on little more than desperation and raw guts. And can, if he (or she) doesn't mind working and skinning his (or her) knuckles to the bone, make a decent living ($1,000 a month). Just ask me. I know from firsthand (first knuckle!) experience.


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