How to Start a Repo Business

by Christopher Raines; Updated September 26, 2017
tow truck towing car

When someone can't pay off a car loan and the lender needs to repossess the car, a repo business gets the call. If you're interested in starting a repossession business, consider in your planning and initial financing the equipment and space you must acquire as well as the laws that may govern your enterprise and those you hire.

Get Your License

Depending on where you plan to operate, you might need a license to repossess or tow vehicles. Requirements for repossession licenses vary by state. For example, California requires applicants to pass a test on repossession laws, while Florida applicants must have at least one year of experience in repossessing vehicles or boats. A repossession license will allow you to collect debts in Pennsylvania, but not Maine. If a towing license is required, your state may require certification from the Towing and Recovery Association of America. For either type of license, you must pass a criminal background check, obtain liability insurance and be bonded.

The Storage Lot

Select a lot that is large enough to securely and safely store repossessed vehicles. You may wish to locate the lot adjacent to your office. In Oklahoma, towing businesses must have at least one impound lot within a two-mile radius of the office. Your local zoning laws may also dictate the location of your facility. Erect fencing of adequate height around the storage lot. Oklahoma law requires a minimum height of six feet, subject to local zoning restrictions. Install a security system with alarms and recording cameras around your impound lot and office.

The Tools of Repossession

RepoIndustry.com estimates that a new wrecker costs $55,000 on average. If you purchase used ones, the existing wear and tear, problems and repair costs may erode the price breaks. Put a global positioning system (GPS) into each of your wreckers. Equip your employees with cell phones so that they can verify the identification numbers, descriptions and locations of their target vehicles.

Finding Qualified Employees

The drivers you hire will need a commercial driver's license, or CDL, if your tow trucks weigh more than 26,000 pounds or if the tow truck and vehicle to be towed have a combined weight over 26,000 pounds -- unless the towed vehicle is no more than 10,000 pounds. Certain states require drivers to be licensed to repossess or tow vehicles. Perform a background check of your applicants. If you rely on a credit record, get the applicant's permission to pull it. You must inform the applicant if you based your rejection on the contents of the report and provide him a copy of the report.

About the Author

Christopher Raines enjoys sharing his knowledge of business, financial matters and the law. He earned his business administration and law degrees from the University of North Carolina at Chapel Hill. As a lawyer since August 1996, Raines has handled cases involving business, consumer and other areas of the law.

Photo Credits

  • liveslow/iStock/Getty Images