How to Start a Salvage Yard

Written by dr. r. a. benson
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How to Start a Salvage Yard
Every community needs a salvage yard (junkyard image by blaine stiger from

While often overlooked and under-appreciated, salvage yards are an integral part of every community. Salvage yards are businesses that maintain an inventory of vehicles no longer operable, or deemed junk, so customers may purchase usable parts from these vehicles. An estimated 10 to 12 million cars are taken to salvage yards and disposed of in the US annually. Roughly 75 per cent of a salvaged vehicle can be recycled and sold for the benefit of the salvage yard owner, while the rest of the car is disposed of in a landfill. If you wish to open a salvage yard, there are quite a few factors to weigh and requirements to meet.

Skill level:

Things you need

  • Business plan
  • Land
  • Salvaging equipment
  • Insurance
  • Marketing materials

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  1. 1

    Draft a business plan to detail the scope of your business and how it will operate. The elements of a business plan are executive summary, company description, product/service, market analysis, organisation/management, marketing plan and financial plan. The Small Business Administration, or SBA, is the government agency designated to assist small business owners will planning and funding their business ventures. The SBA website's "small businesses planner" feature will give help your with details for structuring your business plan.

  2. 2

    Register your business with the state. The Secretary of State, or SOS, in every state is responsible for the registration of new businesses. Most states require that you register your articles of incorporation---also called articles of association, which outlines how the business is governed and directed. You can find these forms at office supply stores, and they are often available on the Secretary of State website. The regulations and procedures change from state to state, so contact the SOS in your state for information on forms and registration procedures.

  3. 3

    Obtain an employer identification number, or EIN, from the Internal Revenue Service. The EIN is like the Social Security number for your business, and is required to open a business bank account---which should be opened at this time, also. The SS-4 form is the required form for securing an EIN. The IRS has an online EIN assistant, which allows you to fill out the SS-4 online and receive your EIN instantly.

  4. 4

    Research environmental codes and regulations for your state. The Environmental Protection Agency, or EPA, in every state outlines the regulations for salvage yards that operate within the state. These regulations relate to how various materials and fluids extracted from vehicles are handled. The handling and disposal of materials and fluids, such as oil, fuel, antifreeze, Freon, tires, lead acid batteries, mercury and solvent are typically regulated by the EPA. Contact the state EPA office for salvage yard regulations in your state.

  5. 5

    Secure financing for your salvage yard. If you do not have the capital to initiate your business, you will need to obtain funding. Your business plan should fit the criteria for a small business loan. The SBA will assist businesses with strong business plans with securing loans with participating financial institutions all over the country. Contact the SBA office or visit the SBA website to find out which banks are SBA partners in your area.

  6. 6

    Lease or purchase land suitable for a salvage yard. The property should have plenty of room for a storage/administration facility, in addition to enough room for your automobile inventory outside. An acre or two is safe amount of space to start with, and will facilitate expansion.

  7. 7

    Purchase or lease equipment and machinery for your salvage yard. You will need a tow truck and plenty of tools for this venture, but look into some of the more sophisticated equipment, such as industrial magnets, car crushers and loader tractors to make your job easier and maximise your efficiency.

  8. 8

    Talk to an insurance agent licensed in your state about an insurance policy. Insurance is necessary in the salvage business, so you want a good "umbrella" policy that will cover all bases. Remember that if you require your customers to remove their own parts, there is a high risk of minor injury, and fire is always a threat with hazardous chemicals on-site. You may opt for a plan that covers liability, medical, theft and fire in one policy. Your insurance agent will assist you in finding the right policy for your salvage yard.

  9. 9

    Market your salvage yard to the public. Invest in marketing materials, such as business cards, business stationary, pamphlets/flyers and T-shirts. Canvass the community for any businesses or residents that may need your service. Place an ad in the yellow pages section of the phone directory. Create a website for your salvage yard. Your website should have service, location and contact information for the public.

Tips and warnings

  • Know who your competition is and make sure your prices are competitive.
  • Customer service is important, and can be the difference between someone coming to your salvage yard or your competitor's. Be courteous to all of your customers.
  • Keep a first aid kit handy in case someone is injured in your salvage yard.

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