Yahel, a loyal MR reader, asks:
What's
the model of towing? I live in Philadelphia, and have noticed one
particular company, Lew Blum, seems to have most of the market cornered
for towing cars parked illegally in private parking spots. How does one
acquire market share? Do the owners of private parking spots pay for
having someone like Lew Blum come and tow the cars that are taking
their spots? Or does Lew Blum offer money for the right to tow their
problematic cars (as they charge the owner of the car $150 to get the
car back, and $25 for every day it sits in their lot.) I can imagine
rationales for either model. On the one hand, Lew Blum is providing
owners of the spots a service by clearing out the vagrants. On the
other, he's guaranteed $150+ for every car he tows, so he (and all of
his competitors) wants to maximize the number of spots/lots they
'protect', and that competition should drive the 'cost' of the service
down to at least $0, if not negative $ (ie paying for the right).
A Google search on "economics of towing" doesn't turn up much. This site indicates that tow trucks were "deregulated" in 1995 and free entry, without traditional municipal permits, became the norm. That same post has a long discussion of "rogue towing," which I suppose is not hard to figure out. In many locales they are supposed to wait an hour before towing your car, even if it is illegally parked.
Here are the San Francisco towing regulations.
I'm puzzled that I can't find any discussions of towing company kickbacks to merchants, for giving them the towing call. Why isn't this more common? Surely the marginal profits on a tow are positive.
Overall towing seems like a "tragedy of the commons" problem, with an incentive for overly rapid and indiscriminate towing. If towing is a natural monopoly, the monopolist may be less quick to tow, because the alternative is that the firm will likely "capture" your car anyway. So if overtowing is a problem, monopoly may be preferred.
What else can you tell us about the economics of towing?
Here is a discussion of illegally parked tow trucks.
I believe that here (in Ann Arbor), towing companies must be paying owners of private lots for the enforcement contract. That’s because there are a number of lots downtown owned by businesses that are closed at night and, in former years, could be used by people going out for the evening. But now nearly all have (not very prominent signs) saying “No parking, 24 hours, violators will be towed, yadda yadda”. It seems to me that the owners of these lots would have no incentive at all to keep people out at night if the towing companies weren’t paying something for the right to enforce — even if only a cut of any fees generated. And those fees are considerable. One our cars was left (not in a lot but on the street in an illegal space) by somebody else who had been using it, and by the time you added up all the of the state and local fines & fees, the cost to get it back was over $300.
You’d think that the revenue would trickle down to nothing over time as locals all learned the ropes, but Ann Arbor has a continual influx of thousands of new students every year and many visitors come in from out of town to go to restaurants and clubs, and so there seems to be a steady supply of potential new victims.
In Chicago, the lot owners give the towing companies “fishing rights” to their lots.
The late Steve Goodman did the classic analysis of this issue:
http://lyricsplayground.com/alpha/songs/l/lincolnparkpirates.shtml
About once a year the Washington Post writes a story about parking in Bethesda Maryland. It seems that valet companies rent the private lots of banks/office builds at night for use. The valet companies but up huge signs that say no parking. Yet, many still try to park there. Instead of towing, the valet companies just boot the car and charge 100′s to take the boot off the car.
I think the owner of a lot can choose or decide who he wants to use his lot or not. Towing trucks or companies don’t just tow any car they see fit to be towed; they are instructed to do so. At the college that I am in, I think the campus police work directly with the towing companies when it comes tothe towing of cars. When on patrol, the campus police are on a lookout for cars which have been parked in places they shouldn’t have, cars which don’t belong to students or workers in the school, or cars without a campus sticker. Even though there a couple of no parking signs in the school, it is expected of the student to know which parking lots he or she can or can’t use. Visitor’s however have a higher chance of getting their car towed because first of all they don’t have a campus sticker, and secondly it is hard to tell which lots are authorized or unauthorized lots for visitors.
I think the solution to this problem is that, businesses, firms or schools have to put out road signs or lot signs in order to communicate information effectively to drivers. I also think that no parking signs must be customized signs which vary in the information that they have on them and must have important things like how long a visitor can have his or her car parked on them. It is all about communicating information using visible signs so that a law breaker can have little or nothing to argue about when his or her car gets towed.
I always wondered how the price charged to owners of towed cars is set. Presumably they could charge close to lesser of the full value of the car and the expected cost of breaking into the storage lot unless there is some sort of regulation or jurisprudence limiting fees (and making breaking in to recover your car illegal). It always seemed like a sketchy business to me, and that perception was only reinforced by the time I received an invalid demand for $5000 in storage fees (for a destroyed car that I had long ago relinquished title to) and an offer of amnesty for half price that was supposedly a mistake. But I guess Oakland towing companies might just have low-quality business information systems.
How can it be a natural monopoly when the variable costs of fuel are such a large percentage of towing costs?
When I lived in Baltimore’s Charles Village, the street parking restrictions were almost undefeatable without a parking permit (and now all those spots have been replaced with meters). My car was towed several times there.
What really struck me was that the only things needed to get my car back was the license plate number, a driver’s license, and the money ($300). You can see all the cars in the lot before talking to the attendant, so if you have a fake driver’s license, you could get any car you want for free in under 20 minutes.
Classic Baltimore.
Wouldn’t you also need the key to said car? Or at least a shady locksmith on hand. . .
> What if I don’t claim my car once it has been towed? Does it say anywhere, like the state law, that the owner HAS to retrieve it?
i am not aware of any kind of law like that, but the owners of the towing company (or the govt agency holding the car) has the right to auction the car off after a while. you still have to pay towing and storage charges.
Obviously towing is conducted in high density areas with a short supple of cheap parking space. Towing is an expense like anything else. How much do I need a vehicle even if it will be towed? Or a risk taker phenomenom. How much am I willing to risk to avoid paying a parking fee? Or what is the utility of owning a vehicle that might be towed?
it is a pox on out-of-towners.
Sydney towies are perhaps the worst in terms of violence and intimidation. Check this out:
“Industry sources say some other operators who have had their vehicles burnt have links to witnesses who appeared at a Supreme Court trial two years ago involving the murder of Albert Brikha, the driver whose death forced the first government inquiry and promises of reform.
It is understood 14 trucks have been fire-bombed or set alight in the past 18 months. Nine were in the past six months, including last weekend’s three attacks. “
Wes,
Very true, though I would think that anyone who knows what to do with a stolen vehicle probably knows how to pick a lock and hotwire a car as well.
New Haven has “street sweeping” when snowplows are off-season, and students in the quiet grad ghetto are often harassed with unannounced, lightly flyered sweepings. It costs around $150, cash only, exact change, to get your car back and that’s before the ticket. I would not be surprised if there are more than the normally sustainable number of towing companies in the area. The disgust for towing companies’ corruption nearly rivals that for local politicians’.
Like one commenter noted, information is the key, but nothing will happen while the status quo remains in the local government’s interest.
Raivo Pommer
raimo1@hot.ee
OECD-Papiergeld
Der Satz ist kryptisch: Liechtenstein akzeptiere die OECD-Standards für Transparenz und Informationsaustausch in Steuerfragen und unterstütze die internationalen Maßnahmen gegen die Nichteinhaltung von Steuergesetzen. So teilte es die Regierung des Fürstentums mit. Hinter diesem Satz verbirgt sich jedoch eine echte Revoulution: Liechtenstein beugt sich dem internationalen Druck – und hebt sein striktes Bankgeheimnis teilweise auf. Damit will das kleine Land sein Image von der unkooperativen Steueroase abstreifen.
Mit den USA hat das Fürstentum bereits ein Abkommen geschlossen, wonach Informationen in Steuerfragen ausgetauscht werden können. Es tritt 2010 in Kraft. Damit wird deutlich: Das Land wird sich im Kampf gegen die internationale Steuerflucht künftig nicht mehr auf das Bankgeheimnis berufen.
Seit Juni 2000 steht Liechtenstein auf der OECD-Liste der Steueroasen. Auf dieser schwarzen Liste zu finden sind derzeit auch Andorra und Monaco. Schärfster Kritiker des Liechtensteiner Bankgeheimnisses ist Deutschland. Denn viele Deutsche haben versucht, über den Umweg Liechtenstein dem deutschen Fiskus Steuergeld vorzuenthalten. Prominentester Steuersünder war der ehemalige Postchef Klaus Zumwinkel. Dieser wurde im Januar vom Landgericht Bochum wegen Steuerhinterziehung zu zwei Jahren Gefängnis auf Bewährung und einer Geldstrafe verurteilt.
Oh, this is something I know a great deal about. I’m so excited.
First of all, towing companies make some money off of towing, but they really clean up on the storing, because they have to pay the tow truck drivers a lot of the towing costs. So what they really want to do is hold your car for a long time.
There are several things towing companies lobby for (1) the right to set prices (2) the right to close early and on weekends (you can’t get your car back if they aren’t open) (3) the right to demand cash payments (it’s hard to raise cash quickly for many people) (4) The right to count ‘days’ instead of ‘hours’, so if your car is towed at 11pm and picked up 7 hours later at 6am, that’s two days and (5) limited signage.
They also place their facilities far away from everything else. Not only is the land cheaper, but it’s not transit or pedestrian friendly. They rarely put up signs (they don’t want you to find it).
If pricing isn’t set by law (in Maryland it isn’t), it’s set at the pain threshold. If your car is towed you usually have the right to a show cause hearing, where the towing company is required to explain why they took your property. Attending these are an inconvenience and since most towings are illegal (states usually have a nuisance clause that tow trucks violate) a well informed litigant will always win – another reason they like the cars of poor people. Anyway if they get a lot of “show cause hearing” letters, they lower the price.
If they keep your car for a certain time (often 30 days) they can sell it and keep what the towee owes them. If the sale doesn’t cover the bill, the usual case, they sell the debt to a debt collector. Some times they sell the cars to friends for as little as $5. This isn’t always illegal.
It’s truly an ugly industry that’s poorly regulated (the predatory part).
“in most cities the towing “market” is a hideous collusion of government and assholes.”
Very true. Here in Brisbane, Australia a certain towing company beginning with the letter ‘R’ dominates a large geographic area within Brisbane. The individuals who run the company are also ex-Police officers and at one stage were found to had been paying off emergency response officers and civilians to ring them when car accidents occurred (often BEFORE telling other police). There was a big investigation into, but alas, not much reported in the news. And the monopoly continues …
Many of our customers at Fox car rental complain that the cars they lease from us got towed. I agree that if you park in an illegal place your car should be towed, but only if there are specially designed places for parking in the area.
You bring up some really good points. I have never thought about towing companies monopolizing. It could become a big problem in small areas that use their own, private towing companies.
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