Car being towed on a tow truck

Guide To How To Start a Towing Business From Scratch

So, you’re wondering how to start a towing business. Whether you’re an experienced tow truck operator or just getting started in the industry, this blog will give you the information you need to get your operations up and running. We’ll cover everything from choosing the right towing equipment to how much it costs to start a towing business and where to get financing help.

What Is a Towing Business?

A towing business provides a service to remove vehicles that are illegally parked, disabled, or abandoned from public and private property. Towing operators may also be contracted to remove vehicles from impound lots.

Business owners make money by charging a fee to remove the vehicle and, in some cases, to store the unit until it is claimed by the owner.

Towing businesses are regulated by state and local laws. Before starting your business, check with your local city or county clerk to see what permits or licenses you need to obtain.

Starting a Towing Business: Equipment Needed

To get started in the towing business, you’ll need a tow truck and the proper towing equipment. The type of tow truck you’ll need will depend on the types of vehicles you’ll be towing and the terrain where your business will be operating.

There are three main types of tow trucks:

  • Light duty: Light duty tow trucks are used to tow smaller vehicles like passenger cars and light trucks. These units typically have a towing capacity of 10,000 lbs or less. Light duty trucks usually cost between $30,000 and $60,000.
  • Medium duty: Medium duty tow trucks are used to tow larger vehicles like buses and medium-sized trucks. These units typically have a towing capacity of 10,001 to 26,000 lbs. The cost of medium duty trucks ranges from $50,000 to $100,000.
  • Heavy duty: Heavy duty tow trucks are used to tow the largest vehicles, like semi-trucks and construction equipment. These units typically have a towing capacity of 26,001 lbs or more. These will cost you at least $100,000.

Additional Towing Equipment

In addition to a tow truck, you’ll need the following towing equipment

  • Safety chains: Safety chains are used to secure the towed vehicle to the tow truck.
  • Wheel lift: A wheel lift is a device that is attached to the tow truck to lift and secure the front or rear wheels of the towed vehicle off the ground.
  • Boom: A boom is a hydraulic arm that is used to secure and lift the towed vehicle onto the flatbed of the tow truck.
  • Flatbed: A flatbed is a towing platform that can be used to transport vehicles that cannot be towed using a regular tow truck.
  • Winch: A winch is a device that is used to pull the vehicle onto the flatbed or to secure it to the boom.

What Are the Costs of Running a Towing Business?

One of the most common misconceptions about starting a towing business is that it’s extremely expensive. While it does require some initial investment, towing is a relatively low-cost business to start and operate.

The most significant expense will be the tow truck and towing equipment, which can range from $10,000 to $100,000+ depending on the type of truck and equipment you need. Other common expenses include:

  • Insurance: You’ll need to carry liability insurance to protect your business in the event that you damage a vehicle while towing it. The typical cost of liability insurance for a towing business is $500 to $1,000 per year.
  • Fuel: Towing is a fuel-intensive business, so you’ll need to budget for fuel costs, which can range from $500 to $2,000 monthly.
  • Maintenance: Tow trucks and towing equipment require regular maintenance, so you’ll need to budget for these costs, which can range from $200 to $500 per month.
  • Storage: If you plan to offer storage services, you’ll need to budget for the cost of renting or leasing a storage facility. These can cost you from $200 to $2,000 monthly.

Overall, you can expect to spend anywhere from $50,000 to $200,000 to start your towing business.

Buying vs. Leasing Towing Equipment

One of the biggest decisions you’ll need to make when starting your towing business is whether to buy or lease your tow truck and towing equipment.

There are pros and cons to both options, and the best decision for your business will depend on your specific circumstances.

Some of the advantages of buying towing equipment include:

  • You own the equipment and can sell it when you’re ready to retire or exit the business.
  • You have complete control over how and when the equipment is used.
  • You don’t have to worry about making payments after your business is up and running.

Some of the disadvantages of buying towing equipment include:

  • The initial cost is usually higher than leasing.
  • You’re responsible for all repairs and maintenance costs.
  • The equipment may become outdated quickly, which can limit your towing capacity and options.

On the other hand, there are advantages to leasing towing equipment, including:

  • The initial cost is usually lower than buying.
  • You have the option to upgrade to newer equipment as it’s released.
  • You’re not responsible for repairs or maintenance.

Some of the disadvantages of leasing towing equipment include:

  • You don’t own the equipment, so you can’t sell it when you’re ready to retire or exit the business.
  • You have to make payments even if your business is slow or not doing well.
  • You’re usually required to maintain a certain towing capacity, which can limit your options if your business grows.

No matter which option you choose, be sure to work with a reputable dealer to get the best possible terms on your towing equipment.

Get Financing for Your Towing Business With Charter Capital

Starting a towing business requires some initial investment, but with the right financing partner, it doesn’t have to be overwhelming.

Charter Capital is a family-run financing provider that has over 40 years of experience providing funding assistance to small businesses, and we’re dedicated to helping you get the funding you need to succeed. We have built strong relationships with the over 20 lending partners in our roster, so you can rest assured that you and your business are in safe and capable hands.

To learn more about our financing options for towing businesses, or to apply for financing, please contact us today.