Average Requirements to open a scrap yard or auto salvage yard

A question we get from customers from all over the country looking at possibly opening there own auto salvage, u pull it, or scrap yard is what does it take and how much is roughly involved in the process including a rough estimate of expenses to just open and get running.

In this post we will cover these things and more. But please keep in mind that these will vary from state to state and maybe different for your city / town.

What are the required steps to get started?

1. Well the first step should always be a solid business plan to cover at least 5 years but keep in mind you can always add to this plan as time goes on and things change in the industry but dont forget no auto salvage yard or scrap yard becomes a large business overnight.

2. The next thing to do is consult legal counsel, your proposed city / towns code enforcement and / or town manager for all required local permitting as well as make sure your county dosent have additional licenses or requirements for the business. Once you find all this out and you have your state licensing requirements including DOT required screening requirements you can progress to the next step.

3. Now that you have the local, county, and state information (licensing will be covered later on), you can start looking for a place to buy or lease if you dont already have one. Now keep in mind in most areas recycling businesses are only allowed in rural, commercial, industrial, or heavy industrial areas so this can really limit you to where you can be located. Your best bet would be to contact some real estate agents and see what they may have available, cost, and locations.

4. Once you have the location you like and it meets all zoning requirements if any, now you have to figure out will any buildings on the lot work. Take for example the average salvage yard requires the following:

• A Office with public rest rooms in most states
• A Storage area for non ferrous metals, and cores
• A dismantling area for draining vehicles and removing parts including mercury switches
• A area to crush motor vehicles which should be a covered area with a concrete slab but this will vary by location some cities and towns require the entire junkyard be covered in cement to keep stormwater discharges to a minimal.
  Once this is all figured out now comes how will the proposed facility be laid out and how many tons of scrap iron / crushed cars, or motor vehicles will you be able to store (some areas have a limit on this so be sure to check local, county, and state laws), as well as your stormwater plan which will be covered in a later section.

1. Now you have figured out your layout, building needs, etc... now comes equipment now since your just starting out you should only start out with what you really need this may include but not limited to:

• Draining Equipment (Catch pans, brass punch for fuel tanks, etc...)
• Car Trailer or a Rollback Tow Truck (wreckers work fine but a rollback or car trailer can handle cars with no wheels)
• Tire changer to demount tires and rims and save from bringing them to a local tire shop
• Fluid storage tanks - Clean 55 gallon drums and oil barrels work fine with secondary cement barriers to help prevent spills / leaks from getting out of control
• Basic automotive tools
• Shelving for storing parts and / or cores
• Office equipment such as computers, chairs, desk, printers, etc...
• Truck and Floor Scales if buying by the pound
• and any equipment required by local or state laws.

1. Now comes the licensing process get your city license applications ready and make sure there filled out properly this may include planning board forms for approval, city license for the town manager or code enforcement, any local notifications for city water or sewer, and anything else the town may require.

Once you have local approval now you will need county and / or State approval. Now if your in state such as Maine you will need the following permits from the state:

Example list:

• City Junkyard permit
• State Recycler License
• DEP Stormwater Permit
• EPA ID # issued by state Department of Environmental Protection
• Haz Mat license for storage of fluids and tires
• Retailer Certificate to collect and remit tax to revenue services
• and additional plans such as Stormwater management, and vehicle crushing plans.

Once all of the required licenses and permits are you issued you can advance onto the next step.

1. Now that you have legal operating status you now start getting insurance before you open this will include commercial vehicle insurance, business liability insurance, fire and flood insurance, on hook if doing towing for the public, garage keepers if you plan to impound vehicles, workers comp if you plan on hiring employees right off.
   You may also want to post notices about customers selling you scrap as to what will get them banned such as what can and cant be turned in for scrap, that your not responsible for any personal or vehicle damage by entering the scrap yard. If you have a truck scale its also a good idea to post a speed limit sign.

2. Now that we have covered buildings, zoning, licenses, and more we can move on to advertising and getting your companies name our there.

Some good places to post include:

• Your local news paper
• Radio Stations
• Facebook Groups
• Craigslist
• Local Classified Sites such as eBay Classifieds
• and others as maybe available in your area.

Also be sure to give everyone you pick up from or that delivers vehicles or metal a receipt and businesses card with your contact information. Remember a customers first impression of your company is what sticks with them. Word of mouth referral even tho it may sound old fashion is still your best form of advertising even in the 21st century and is the best form of advertising we have with all our locations.

1. As your business grows and times change make sure to change with them and add and update your business plan, add equipment such as material handlers, fork lifts, etc... as time goes on. But also keep in mind that you should have dealer pricing at scrap yards you plan to sell to. These prices are always higher then the general public receives and you need to ask for dealer pricing it usually requires so much per week to be hauled in to get these prices so dont get disappointed if they deny you dealer pricing right off we have all been the new company on the block at one or another. Just keep hauling and wait a few months then ask again. Remember it never hurts to ask questions and there is no such thing as a stupid question.

Since that sums up most of everything involved we will go on and add some additional information to keep in mind from this point forward.

When your out hauling vehicles make sure all your drivers have proper licenses, DOT medical card if required in your state (states such as Florida dont require this) or if you cross state lines, log books if you travel over 100 air miles from base, as well as make sure all trucks are legally inspected, registered, and meet all Federal Motor Carrier Safety Standards including Federal inspection requirements.

Also make sure your office and shop are neat and organized at all times this will cut down on clutter and make your job 10 times easier in the long run. Also have a computerized system such as car-part.com or Hollander makes finding parts and vehicles in stock 1000 times faster and easier for your sales team.

Additional certifications to look into even if there not required by your state include:
For tow operators:

• Wreckmaster Certification
• TRAA Level 1 at minimal Certification
• TIM First Responder Certification - Free and can be done online

For Dismantlers:

• EPA 608 Type 1 Certification - Open book and can be obtained online
• EPA 609 Motor Vehicle Air Conditioning - Refrigerant Recover - Can be done online also open book training.
• OSHA 10 hour certification
• ARA - Automotive Recyclers Association University Training for Dismantlers

You may also look into becoming a member of ARA and / or your local or state ARA Chapter to keep up with industry changes, law proposals, and more. There are also several sub reddits on reddit, and several groups on Facebook that are more then helpful for salvage yards and scrap yards, as well as dismantlers, and managers.

Now comes the part you should keep in mind. To open a auto salvage yard it can cost several hundred thousand to get your foot into the door and this dosent even include property cost or insurance. Equipment, training, etc... are the most expensive things. Sometimes it is best to buy a operating auto recycling facility or junkyard that's up for sale.
For scrap yards this can be about the same amount but can exceed a few million dollars just to open and get all required permits, insurance, contracts, and more.

Our best advice is if you dont have this kind of cash to look into a SBA loan, keep hauling scrap on the side, or if you can owner finance a scrap yard or salvage yard that is for sale or for lease.
If your just starting out hauling scrap to a local scrap yard then make sure you call around for the best prices but also when selling you may feel there has to be better customer service at another yard. Dont forget just because there paying the highest dosent mean that a yard that pays even $5 less dosent have better customer service.

We hope this post helps someone and as a disclaimer all images are property of there respective owners and are used for demonstration purposes only.

The truck Image is property of Upscale Auto Parts and Waite Auto Salvage.