Auto Salvage Yards: A Business Model

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PHOTO: FOTOLIA/OPENLENS
Auto salvage yards can be a necessity.  Beth Jacobs explains how to start your own salvage business.

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.