How to Start an Auto Salvage Business

A junk car may be worthless to a driver, but for someone who knows how to dismantle it, the parts and metal it contains can be worth a small fortune. Starting an auto-salvage business isn't for everyone, and there are a few hurdles to get through for a license, but for those who don't mind getting their hands dirty, it can be a profitable business.

Starting a Salvage-Yard Business

When you picture a salvage yard, you likely envision hundreds of cars stacked in piles in a yard with a crane and a car compactor. This would be the case if you're able to find a junkyard business for sale, which should come with the equipment and contacts in the auto industry that you will need for sourcing salvage cars and for clients needing parts.

If you're not buying an existing business, you will need to start making those connections yourself, beginning with local repair shops. You will also need to have a place for storing vehicles and parts. This doesn't have to necessarily be a 10-acre salvage yard. You can start off much smaller as a scavenger by buying one old car at a time using your own driveway or garage if local zoning laws don't prohibit such work.

State Salvage-Yard Requirements

State requirements for a salvage business vary widely, so it's important that you research the requirements in your state. In California, you need to apply for a vehicle dismantler license from the DMV. Among other requirements, you will need to be fingerprinted, submit to a criminal background check and prepare for a physical inspection of your facilities.

The Wisconsin Department of Transportation issues four types of licenses depending on your facilities and the type of salvage operations you perform:

  • Type One: Vehicle-salvage dealership that dismantles vehicles and sells parts, with facilities that include an office and a yard

  • Type Two: Vehicle-salvage dealership that dismantles vehicles and sells parts within a building only

  • Type Three: Scrap-metal recycler or processor that does not dismantle vehicles or sell parts, operating from a building without a yard

  • Type Four (scavenger license): Business that buys vehicles and then transports them to a licensed salvage yard or recycler, with facilities that include an office and a place to park vehicles before transporting them

To qualify for a license in Wisconsin, you will need:

  • Proof of an established place of business that complies with local zoning and permit requirements

  • A financial statement showing a net worth of at least $5,000 or a $25,000 surety bond

  • A state sales tax permit if you're applying for a type one or type two license.

  • A sign with your salvage dealer license number on any vehicle used to transport salvage vehicles

  • A business sign with posted hours of operation

  • Proof that you are in compliance with environmental regulations

Zoning and Environmental Regulations for Salvage Operations

The Environmental Protection Agency and state and local governments will require that you conform with their requirements before you can get your salvage business license. Zoning requirements will likely limit where you are able to store salvage vehicles. If you are storing vehicles in a yard, you will need to construct a fence and post signs.

Of particular importance will be getting a stormwater discharge permit. Dismantling vehicles and storing the resulting parts involves possible leaks of oil, grease, ethylene glycol and heavy metals like mercury. These substances come from batteries, chrome bumpers, tires and rims, filters, radiators, catalytic converters, engine blocks, mufflers and other vehicle components.

If you plan to salvage any vehicles with air conditioning systems, you will need to register with the state to recover refrigerants. Alternatively, you can make arrangements to have a registered company recover the refrigerant for you depending on state law.