How to Determine How Much to Charge for Towing a Car

One of the trickiest parts of being in the towing industry is figuring out how much to charge for your towing services. Setting your prices can be difficult – you want to make a profit and keep your business running, but you also want to keep your pricing competitive. There are a lot of other tow truck businesses out there, after all, and you’re all competing for the same potential customers. To help you get an idea of how to price towing, we’ll give you the average cost of a tow and some tips for calculating a rough estimate for prices.

What’s the Average Cost of a Tow?

Angie’s List puts the average cost of a tow at $109, which is still a good baseline. However, towing rates can vary significantly. According to recent data, the cost for a five-mile tow ranges from $50 to $125, a ten-mile tow ranges from $65 to $135, a twenty-mile tow ranges from $105 to $185, and a fifty-mile tow ranges from $165 to $300​​. For longer distances, such as a 100-mile tow, the cost can range from $325 to $450​.

Additional charges may apply for towing on weekends, holidays, or at night, and for special situations like winching a car out of a ditch or mud​.

How Does Tow Pricing Work?

Most towing or wrecker companies will charge a base fee or hook-up fee to attach the car to the truck. Then they will charge a per-mile fee on top of that. The hook-up fee generally ranges from $35 to $100, and the per-mile fee ranges from $2.50 to $7​​. Some companies may include the first five to seven miles in the hook-up fee, so you have to decide if that’s something that will work for you or not.

Pricing Towing Services for Your Business

Step 1: Calculate Your Business Expenses

First, you need to take all of your expenses from the previous year and sum them up. This includes anything that is a part of how much it cost you to run your business last year, such as rollback insurance, gas expenses, marketing, your employees’ wages, office supplies, rent, utilities, and other related costs. Once you’ve got that sum, divide it by the number of calls you did in that last year. (If you’re a new venture, you may have to estimate some of these numbers.)

For example:

  • Total expenses: $120,000
  • Number of calls: 5,000
  • Cost per call: $120,000 / 5,000 = $24

Step 2: Determine Your Desired ROI (Return on Investment)

Calculating the desired ROI by taking a percentage of your total investment and dividing it by the number of calls provides a clear target for profit per call.

Example:

  • Investment cost: $450,000
  • Desired ROI: 15%
  • ROI in dollars: $450,000 * 0.15 = $67,500
  • ROI per call: $67,500 / 5,000 = $13.50

Step 3: Account for Equipment Maintenance and Replacement

Tow trucks are very pricey and expensive to maintain. You need to factor in maintenance costs to ensure your business remains profitable. Archer suggests including $1 for every mile driven as your “replacement/maintenance cost.” If you do 70,000 miles in a year, you need to make $70,000 from your 5,000 tows.

  • Maintenance cost per job: $70,000 / 5,000 = $14

Final Calculation: Setting Your Price

Adding the three figures together gives you a comprehensive cost per call, ensuring you cover expenses, achieve your desired ROI, and account for maintenance.

Total:

  • Cost per call: $24
  • ROI per call: $13.50
  • Maintenance cost per call: $14

Final price: $24 + $13.50 + $14 = $51.50

This makes sense and provides a solid foundation for setting a price that covers all aspects of the business.

Please note that the figures provided in this article are examples. You should calculate your actual costs and use these formulas to get your rough towing price. Adjustments may be necessary based on your specific business conditions and market rates.

Additional Considerations

This formula provides a starting point. There are other factors to consider, such as the market rates in your area and additional charges for special circumstances (e.g., weekend or holiday tows).

Do I Need a Business License for Roadside Assistance?

Yes, operating a roadside assistance business typically requires a business license. Each state has different requirements, so it’s crucial to check local regulations and ensure your business is compliant.

Finding the Cheapest Tow Truck Insurance

Finding affordable tow truck insurance is crucial for keeping your expenses low. Look for rollback insurance and compare quotes from different providers to get the best deal. Don’t hesitate to seek professional advice to navigate the complexities of tow truck insurance.

Conclusion

Pricing your tow truck services can be complex, but by following these steps, you can ensure that your rates are fair and competitive. Remember, providing quality service and ensuring your business is profitable are key to long-term success. If you need tow truck insurance for your wrecker business, we can help you shop around for the best rates. Fill out our online form or give us a call today!

Source

https://insurancehub.com/cost-tow-car/

 

 

 

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