67. Tow Trucks

Summary

Episode 67: Tow Trucks

Release Date: October 21, 2024
Podcast: The Economics of Everyday Things
Host: Zachary Crockett
Produced by: Freakonomics Network & Zachary Crockett

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Introduction to the Towing Industry

In Episode 67 of The Economics of Everyday Things, host Zachary Crockett delves into the multifaceted world of tow trucks, uncovering the economic dynamics, operational challenges, and ethical dilemmas that underpin this $12 billion-a-year industry in the United States. Through insightful interviews with industry professionals and consumer advocates, the episode reveals the complexities of towing services, both consensual and non-consensual, and examines the thin line tow operators walk between being everyday heroes and perceived villains.

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The Business of Towing

A Day in the Life of a Towing Company

Bill Georges, president of Mike's Wrecker Service in Saginaw, Michigan, provides an insider's perspective on running a towing business. With over 35,000 towing companies nationwide, the industry encompasses a broad spectrum of services, from roadside assistance to impound tows.

[01:49] Bill Georges: "A lot of the pain is brought on the owner by themselves. People get really upset, but it's like if you didn't park where you weren't supposed to, you wouldn't have gotten your car towed."

Mike's Wrecker Service operates as a generalist tower, handling everything from passenger cars to large commercial vehicles like ambulances and tractor trailers. The financial commitments in this business are substantial, with standard light-duty tow trucks costing around $100,000 and heavy-duty models reaching up to $1.8 million each.

Operational Costs and Pricing Strategies

The high cost of equipment is matched by expensive insurance premiums, typically ranging from $2,000 to $5,000 annually per truck. Additionally, tow truck drivers earn commissions of 20-30% per job, compelling operators like Georges to meticulously price their services. For instance, a standard breakdown hookup costs approximately $78 for the first five miles, with an additional $5 per mile thereafter.

[05:51] Bill Georges: "Probably the largest that I've ever billed was over $50,000. And that was a tanker that had rolled over that was loaded with an acid that was very, very caustic."

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Consensual vs. Non-Consensual Tows

Consensual Tows: When You Call the Service

Consensual tows occur when the vehicle owner requests assistance, typically during breakdowns or accidents. These scenarios are often perceived positively, as tow operators are seen as providing a necessary service in times of need.

Non-Consensual Tows: The Darker Side

Non-consensual tows, on the other hand, involve the removal of vehicles without the owner's request, usually initiated by police officers or property owners. These tows are often associated with higher fees and can lead to significant financial burdens for vehicle owners.

[14:19] Bill Georges: "That's going to be when somebody gets arrested. Drunk driving, driving while suspended, no insurance, improper plates, or they park in a no parking zone and they're blocking the use of someone's driveway, or they're blocking the use of business."

Economic Implications

Non-consensual tows can escalate costs substantially. While a standard consensual tow might cost around $80, impound tows can reach up to $147, and in cities like San Francisco, fees can soar to $500 or more due to additional administrative charges. Storage fees further compound these costs, typically ranging from $30 to $40 per day.

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Challenges in the Towing Industry

Operational Risks and Safety Concerns

Tow truck operations are fraught with risks. Operators often work in hazardous environments, such as busy highways or accident scenes, exposing them to potential accidents and confrontations with reckless drivers.

[09:30] Bill Georges: "Unfortunately, we had one of our drivers killed by a drunk driver. And it's not uncommon for Towers to get killed on the highway."

Personal Accounts of Danger

Max Karimi, co-owner of HM Roadside in Pensacola, Florida, shares harrowing experiences highlighting the perils of the job.

[09:55] Max Karimi: "I've been lucky to escape serious injury. I've been hit twice. I've caught mirrors off cars twice at accident scenes... A tow truck driver here with another company... was forced to retire out of the industry. He woke up underneath his truck with an eyeball hanging out of his head and both of his legs broken."

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Predatory Towing Practices

Unethical Tactics and Consumer Exploitation

Theresa Murray, director of the Consumer Watchdog Program at U.S. Public Interest Research Group, exposes the rampant issue of predatory towing—where companies exploit consumers through unjustified tows and exorbitant fees.

[19:26] Theresa Murray: "It basically involves either taking advantage of someone who deserves to be towed or in some cases, illegally towing someone when they didn't deserve to be towed."

Common Predatory Practices:

• Patrolling and Opportunistic Towing: Companies patrol parking lots, especially near colleges and apartment complexes, waiting to tow vehicles at the slightest infraction.

  [20:58] Zachary Crockett: "Max Karimi... says that one predatory tactic he sees a lot is something called patrolling."

• Kickback Deals: Some operators enter into illicit agreements with property owners to tow more vehicles in exchange for financial incentives.

  [23:05] Theresa Murray: "So say you own an apartment complex and I own a tow truck company, it may be that I'm allowed to patrol that parking lot and for every car that I tow, if I give you 20 bucks of it, that's not cool."

Regulatory Gaps

Murray highlights significant regulatory shortcomings:

• Lack of Bans on Kickbacks: Two-thirds of states have no laws banning kickbacks for private towing companies.
• Absence of Fee Caps: About half of the states lack caps on towing and storage fees.
• Inadequate Signage Requirements: 40% of states do not mandate clear signs warning about towing policies on private property.

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Industry Regulations and Reforms

Legislative Efforts to Curb Predatory Practices

In response to growing concerns, states like Michigan are advocating for stricter regulations. Proposed changes include mandatory photographic evidence before towing a vehicle on private property, aiming to reduce unlawful and unnecessary tows.

[24:25] Bill Georges: "There are some abuses in our industry. We know that. And so there's going to be some changes coming."

Industry Perspective on Reforms

Operators like Georges recognize the need for reform to maintain the integrity of the industry. He emphasizes a commitment to ethical practices and collaboration with legislators to balance the interests of both tow operators and consumers.

[24:59] Bill Georges: "If I'm a doctor or I'm a tow guy, I'm going to help people every day. That's how you stay the hero. More than the zero."

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Personal Stories and Insights

Navigating Ethical Dilemmas and Operational Challenges

Max Karimi recounts specific instances that illustrate both the challenges and ethical decisions tow operators face daily. For example, he describes rejecting a contract with an apartment complex known for aggressive towing tactics, prioritizing moral integrity over business gains.

[21:17] Max Karimi: "I pulled my contract from that complex."

Similarly, Bill Georges shares his personal journey from aspiring doctor to tow company owner, highlighting a sense of duty and responsibility in providing essential services despite initial career aspirations.

[24:25] Bill Georges: "My father wanted something better for me... if I'm a doctor or I'm a tow guy, I'm going to help people every day."

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Conclusion

Episode 67 of The Economics of Everyday Things offers a comprehensive exploration of the towing industry's economic and ethical landscape. Through candid conversations with industry insiders and consumer advocates, Zachary Crockett illuminates the delicate balance tow operators maintain between providing critical services and navigating the pitfalls of predatory practices. As legislative reforms loom on the horizon, the episode underscores the importance of fostering an industry that upholds both efficiency and fairness for all stakeholders involved.

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Notable Quotes:

• Bill Georges [01:49]: "A lot of the pain is brought on the owner by themselves. People get really upset, but it's like if you didn't park where you weren't supposed to, you wouldn't have gotten your car towed."

• Theresa Murray [19:26]: "It basically involves either taking advantage of someone who deserves to be towed or in some cases, illegally towing someone when they didn't deserve to be towed."

• Max Karimi [22:57]: "The self loader trucks, you don't even have to get out of the cab of the truck to hook the car up... that's a lot of the predatory guys do."

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For More Information:

• Mike's Wrecker Service: mikeswrecker.com
• Consumer Watchdog Report by U.S. PIRG: uspirg.org
• The Economics of Everyday Things Podcast: Available on SiriusXM Podcasts+ and Apple Podcasts

Transcript

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[Zachary Crockett]

Let'S say you're running a few errands downtown on a Friday afternoon. You circle around looking for a parking spot and you finally see one. It kind of looks like the curb is red, but you decide to take the risk. A few hours later you come back and your car is gone. Your stomach drops, your heart races, your hands start to get clammy. Did I forget where I actually parked? Did someone steal my car? Should I call the cops? But somewhere across town, the guy who's in possession of your vehicle doesn't have much sympathy for your plight.

[Bill Georges]

A lot of the pain is brought on the owner by themselves. People get really upset, but it's like you know if you didn't park where you weren't supposed to, you wouldn't have gotten your car towed.

[Zachary Crockett]

Bill Georges is the president of Mike's Wrecker Service, based in Saginaw, Michigan. It's one of more than 35,000 towing companies in the US. They make up a $12 billion a year industry.

[Bill Georges]

We cover the entire gamut of towing. We tow people who break down with a passenger car or a personal vehicle. And then we also do impound tows, which is going to be drunk driving or stolen vehicles or where somebody parks where they are not supposed to.

[Zachary Crockett]

Whether you get stuck on a desolate road at 2 o'clock in the morning or park in a red zone, a tower will be there to whisk your vehicle away. And when they send you the bill, they don't expect you to thank them.

[Bill Georges]

We go from Hero to zero in about 30 seconds.

[Zachary Crockett]

For the Freakonomics radio Network. This is the economics of everyday things. I'm Zachary Crockett. Today, tow trucks. Bill Georges never planned on going into the towing business. When he graduated from College in the 80s, his dream was to be a doctor.

[Bill Georges]

My next step was going to be medical school and that's what my father wanted for me.

[Zachary Crockett]

But when his dad got sick, Georges had to help out with the family business.

[Bill Georges]

I did kind of like the full range of things at the business, from scrubbing the toilets all the way to operating our biggest trucks. 38 years later, I'm still here today.

[Zachary Crockett]

He's the second generation owner of Mike's Wrecker Service. The company has three locations across Central Michigan and it's what's known as a generalist tower. They take on all kinds of work. There are many different types of towing, and jobs are often classified by the weight of the vehicle that's being towed. There's light duty, which are your typical passenger cars. There's medium duty for things like RVs and motorhomes. And there's heavy duty for the really big stuff.

[Bill Georges]

We have a large group of commercial accounts. Ambulances, school buses, garbage trucks and cement trucks, tractor trailers, delivery vehicles like FedEx and Amazon and UPS.

[Zachary Crockett]

To take care of all these jobs, Mike's Wrecker Service has a big fleet of expensive vehicles. The standard light duty tow truck that shows up to tow your car usually runs around $100,000. The bigger trucks are many times more.

[Bill Georges]

A 40 to 50 ton wrecker is somewhere between 700 and $900,000. If I buy a large rotator like a 75 ton or a hundred ton truck, I'm talking one and a half to $1.8 million for one tow truck. Now I show up with two other flatbeds that are $170,000 apiece. A skid steer with forks, that's 90,000 and a forklift, that's 60,000. I have almost two and a half million dollars of equipment on that scene and I have to have it available 24 hours a day.

[Zachary Crockett]

These machines are also costly to insure, usually somewhere between 2,000 and $5,000 a year per truck. And a towing company has to pay its drivers, who typically work on Commission and get 20 to 30% of each job. Operators like Georges have to account for this overhead when pricing their services. For a typical breakdown involving a standard car, Georgis charges 78 bucks for the hookup and the first five miles and then $5 for each additional mile. For more complicated stuff, they might charge higher hourly rates.

[Bill Georges]

Well, probably the largest that I've ever billed was over $50,000. And that was a tanker that had rolled over that was loaded with an acid that was very, very caustic.

[Zachary Crockett]

When it comes to earning money, there's one job that most towing companies don't enjoy taking on. Working with roadside service providers like AAA or geico. Drivers pay an annual fee for roadside coverage. If they have a breakdown, they call the insurance company which passes on the request to a towing contractor like Mike's Wrecker Service. And when Georges gets that call, he knows he'll be paid way less than his usual rate.

[Bill Georges]

They look at the lowest common denominator and that's price. They're looking for the cheapest provider to get that service.

[Zachary Crockett]

As a result, he ends up prioritizing other jobs before he rescues the AAA customer who's waiting on the shoulder of the highway.

[Bill Georges]

If I have a road service tow that pays 35 or $40 and you call in and you're going to pay me $78, who's going first? I'm towing the cash customer. And here this road service customer is waiting and they're waiting and they're waiting and they're waiting.

[Zachary Crockett]

For most tow truck drivers, AAA calls are a nuisance. But the rest of the job is full of surprises.

[Max Karimi]

One of the most recent interesting jobs we did was a gentleman passed out behind the wheel and wound up with his car in a river. It was a little old like Saturn four door sedan.

[Zachary Crockett]

Max Karimi is the co owner of HM Roadside, a small towing company in Pensacola, Florida.

[Max Karimi]

The water was sweet tea colored. You could stick your hand in the water, not see it two inches away. So the first thing we did is took a magnet with a rope and started magnet fishing for the car, trying to figure out how deep it was. Once we figured it was roughly 20 foot deep, I contacted our local volunteer search and rescue operation and asked about seeing if they had some divers that could help us out. They tie a rope to the car, then they go down there with our rigging. It took us about four and a half hours from the time we all got there to have his car back on dry land.

[Zachary Crockett]

Even the straightforward jobs involve a fair bit of geometry.

[Max Karimi]

If you can't understand angles, you're never going to cut it. As a tow truck driver you have to know if you put this here and this pulley here, what way this car is going to go to make it do what you want and not damage something.

[Zachary Crockett]

One of the biggest everyday challenges in towing is hooking up a car without scratching its paint or ripping off its bumper. Karimi says cars used to come with standard slots in the frame that tow truck drivers could hook into. But many manufacturers have done away with them, and operators now have to get creative.

[Max Karimi]

In recent years in newer cars, it seems like manufacturers have forgotten their cars have to be towed. These newer cars have little eyelet hooks that screw into the front bumper. And tow truck drivers hate them. I refuse to use them because they're held onto the bumper. Any resistance and that whole thing is coming off.

[Zachary Crockett]

Tow operators now often have to get under the car and hook up a big V shaped strap to the suspension. And performing a job like that on the side of a busy road or highway can also be dangerous. Bill Georges knows this firsthand.

[Bill Georges]

Unfortunately, we had one of our drivers killed by a drunk driver. And it's not uncommon for Towers to get killed on the highway. And it's basically what we call the D drivers, the dumb, the drugged, the distracted, the drowsy people that will come through that accident scene and they're going by us at 80 or 90 miles an hour with their phone in their hand.

[Zachary Crockett]

Karimi has had his own close calls.

[Max Karimi]

I've been lucky to escape serious injury. I've been hit twice. I've caught mirrors off cars twice at accident scenes. Luckily, the worst I've had is just some really bad bruising. I was able to see the cars coming and get most of the way out of the way. We had a tow truck driver here with another company that almost lost his life and was forced to retire out of the industry. And it was a hit and run. He woke up underneath his truck with an eyeball hanging out of his head and both of his legs broken.

[Zachary Crockett]

Helping stranded customers is so risky that Towers often call these kinds of jobs hero tows. But there's another side of the business, one that casts Towers as the villain.

[Max Karimi]

I've been called every name in the book. I've been called a crook, a con artist. I've had somebody try to hit me with their car after they picked it up from impound.

[Zachary Crockett]

That's coming up.

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[Zachary Crockett]

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[Bill Georges]

That's going to be when somebody gets arrested. Drunk driving, driving while suspended, no insurance, improper plates, or they park in a no parking zone and they're blocking the use of someone's driveway, or they're blocking the use of business.

[Zachary Crockett]

Operators like Bill Georges of Mike's wrecker service get these jobs by forming relationships with police departments and local businesses.

[Bill Georges]

Sometimes they call for one truck, sometimes they call for 10, all at the same time. So, you know, you have to be able to mobilize that equipment and that manpower 24 hours a day with an unpredictable need. In large places like Ann Arbor, Michigan, during a U. Of M football game, 110,000 people come into the big house, and there's a huge amount of what we would call private trespass tows that happen at that point in time. And, you know, is it fair to park at the 711 or the convenience store and block that company's ability to do business so you can go to the football game? Well, no, it's not.

[Zachary Crockett]

Non consensual tows come with higher fees. While Georges charges around $80 to hook up a breakdown, his rates can go up to $147 for simple impounds, not including additional mileage charges. In some cities, like San Francisco, an impound tow can run upwards of $500, thanks to additional administrative fees charged by the city. And that doesn't include the cost of storage. When your car is towed, non consensually, it's taken to an impound lot where it's stored until you come to claim it. Sometimes these lots are owned by a city or a third party. But many towers like Georges own their own lots and charge a daily rate for storage, typically around 30 to $40 per day.

[Bill Georges]

You have to have a piece of properly fenced, properly zoned, lighted, staffed, surveilled property in order to conduct that business. As soon as I attach to a vehicle, I have a duty and responsibility to return that car to the owner in the same condition that we received it. So we have to protect and preserve that car. So as soon as I hook onto it, I'm insuring that vehicle until the owner picks that vehicle up.

[Zachary Crockett]

Most states require tow companies to notify a driver when a car is towed. Often that notification comes by mail. And if the car isn't picked up from the impound lot within a certain period. After that, notification is sent out, usually around 30 days or so. The towing company has the right to file your car as abandoned, Georges says. This is fairly common.

[Bill Georges]

We see a lot of what's called the title jump, where people buy the car and never transfer it into their name. In order to get the car and drive it off the lot, it has to have plates and insurance. If somebody buys a $500 hooptie just to go back and forth to work or school with and they drive it around until it gets impounded, that car, if they lose it and just let it go, is cheaper than the cost of insurance for one year.

[Zachary Crockett]

If the owner doesn't pick up their car, the tow company doesn't get paid, which means it has to sell the car at auction to recoup its costs. In many states, like Michigan, any proceeds beyond the total towing and storage charges have to be sent to the state, and the owner has a right to claim them. But those proceeds often don't cover the towing company's bills, and operators have to take a loss.

[Bill Georges]

We're going to clean up an accident scene, remove all the debris, take it all, and we're never going to get paid other than a couple hundred dollars of scrap money after we hold the car until it can be legally processed for us to dispose of it.

[Zachary Crockett]

Operators like Bill Georges take pride in doing things by the book, but the same cannot be said for all towers. The industry has a reputation for unscrupulous behavior.

[Theresa Murray]

A lot of the things that towing companies do are not reasonable, even if the person deserved to be towed in the first place.

[Zachary Crockett]

Theresa Murray is the director of the Consumer watchdog program at U.S. public Interest Research Group. She's researched a variety of shady business practices, from flimsy airline refund policies to robocalls. In a recent report, she honed in on the world of towing, and she didn't like what she found.

[Theresa Murray]

I mean, we believe absolutely that if you park improperly on private property or in a public space, then it's reasonable that there could be consequences. But those consequences should be fair. And as we looked into the issue, I was just shocked at how egregious some of the behavior is out there in some of the states.

[Zachary Crockett]

Murray focused on a side of the industry called predatory towing.

[Theresa Murray]

It basically involves either taking advantage of someone who deserves to be towed or in some cases, illegally towing someone when they didn't deserve to be towed. Predatory towing seems to target particularly college campuses, communities of color, senior citizens, a lot of Times lower income apartment complexes. Just the people who are basically least equipped to be able to deal with it.

[Zachary Crockett]

Predatory towing can take a lot of forms. Sometimes it's policies that make it harder for you to pick up your car.

[Theresa Murray]

A predatory towing company might tow your vehicle an hour away. They don't accept credit cards or debit cards. Cash only in some cases. Some of the storage places are not open after 5pm or not open on weekends.

[Zachary Crockett]

In other cases, it could be just towing people for frivolous reasons.

[Theresa Murray]

In some states, it's just like the Wild west and people were getting towed because the towing company thought maybe they had just a few pounds too little of air pressure in their tires. Or maybe they weren't perfectly centered in the yellow lines of the parking space that they had paid for and were allowed to be in. Maybe they didn't have all four screws on their license plate.

[Max Karimi]

This industry, because you can legally take somebody's car and force them to pay you, attracts a lot of less than stellar individuals because they see it as free money.

[Zachary Crockett]

Max Karimi of HM Roadside in Pensacola, Florida says that one predatory tactic he sees a lot is something called patrolling. Tow trucks will hide around the corner of certain hotspots waiting to pounce on unsuspecting Parkers.

[Max Karimi]

There's a lot of businesses where they literally have somebody just walking around the parking lot all day, and if you're off the property for 30 seconds, they've got a tow truck there taking your car. One that I got asked to do was an apartment complex that has 182 apartments and 65 parking spaces. And if you didn't buy a parking space, you can't park there. So if you imagine with them having three times the units, there's constantly people parking in those parking spaces. And we would drive through at night and find any car that didn't have a parking pass on it and tow it, which obviously upset a lot of people. And then I started talking to some of the residents and these are all college kids that had just moved here, didn't know anything about our town and were misled about there being available parking and now are trapped in a lease in somewhere they don't know with nowhere to park. I didn't feel like that was morally right. So I pulled my contract from that complex.

[Zachary Crockett]

In many states, if you catch a tow truck in the act of towing your car, the operator has a legal obligation to unhook it and is only allowed to charge you a drop fee. That usually ends up being roughly half of what the tow would have otherwise cost. But some operators use special tow trucks that are designed to tow a car in a matter of seconds.

[Max Karimi]

The self loader trucks, you don't even have to get out of the cab of the truck to hook the car up. You have controls in the cab that lower your boom and push it in and out and close the wheel grids around the wheels. Once I'm off that property, I can charge you full price. So what a lot of the predatory guys do is just pull it out into the street and then finish tying it down.

[Zachary Crockett]

Teresa Murray says that some tow truck operators even strike kickback deals with restaurants or apartment complexes.

[Theresa Murray]

So say you own an apartment complex and I own a tow truck company, it may be that I'm allowed to patrol that parking lot and for every car that I tow, if I give you 20 bucks of it, that's not cool.

[Zachary Crockett]

Deals like that incentivize businesses to tow more cars, even in cases where the infraction is questionable. In her report, Murray found that two thirds of states have no laws banning kickbacks for private towing companies. Around half don't have any caps on what companies can charge for towing in storage, and 40% don't require signs on private property warning that cars parked there might be towed.

[Theresa Murray]

The bottom line is states that don't have enough consumer protections and where the towing companies don't feel like anybody's watching over their shoulder, the towing companies are pretty much free to do whatever they want.

[Zachary Crockett]

In recent years, a handful of states have taken steps to clamp down on predatory towing. In Michigan, legislators are currently proposing changes to the state vehicle code. The revisions would, among other things, require towers to take photographs of an infraction before towing a car on private property. Bill Georges understands the need to eliminate bad actors.

[Bill Georges]

There are some abuses in our industry. We know that. And so there's going to be some changes coming. And we're working with the legislature and the state to make it both appropriate for the tower, but also appropriate for the consumer. My father wanted something better for me. He said to me, son, I don't want you to waste your life in this business. And I said, you know, if I'm a doctor or I'm a tow guy, I'm going to help people every day. That's how you stay the hero. More than the zero.

[Zachary Crockett]

For the economics of everyday things. I'm Zachary Crockett. This episode was produced by me and Sarah Lilly and mixed by Jeremy Johnston. We had help from Daniel Moritz Rapson.

[Max Karimi]

You can almost pick a vehicle and I can tell you what their most common problem is off of what we run into, like BMWs. You couldn't pay me to own one with the amount of electrical issues they have.

[Theresa Murray]

The Freakonomics Radio Network the hidden side.

[Zachary Crockett]

Of everything.

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[Zachary Crockett]

JPMorgan Chase Bank NA member FDSE subject to credit approval.