The Economics of Everyday Things - 67. Tow Trucks

Episode Date: October 21, 2024

Tow-truck drivers: roadside rescuers or car confiscators? Zachary Crockett gets hooked. SOURCES:Bill Giorgis, president of Mike’s Wrecker Service.Max Karimi, co-owner of H&M Roadside.Teresa Murray, director of the Consumer Watchdog Program at U.S. Public Interest Research Group. RESOURCES:"Getting Off the Hook of a Predatory Tow - Part II," by Jacob van Cleef and Teresa Murray (U.S. PIRG Education Fund, 2022)."Getting Off the Hook of a Predatory Tow," by Grace Brombach (U.S. PIRG Education Fund, 2021)."Beware of Car Towing Companies That Patrol Private Parking Lots," by Ann Carrns (The New York Times, 2021)."After a Wave of Injuries, Tow Truck Drivers Want Us All to Slow Down," by Kristian Foden-Vencil (Oregon Public Broadcasting, 2021)."AAA’s Grip Forcing West Coast Tow Companies Out of Business, Owners Say," by Annie Sciacca (East Bay Times, 2016).r/Hookit.

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. 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. 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 U.S. They make up a $12 billion a year industry. 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 gonna be drunk driving or stolen vehicles,

or where somebody parks where they are not supposed to. Whether you get stuck on a desolate road at two o'clock in the morning or park in a red zone, a tow-er will be there to whisk your vehicle away. And when they send you the bill, they don't expect you to thank them. We go from hero to zero in about 30 seconds. For the Freakonomics Radio Network, this is the economics of everyday things. I'm Zachary Crackett.

Today, tow trucks. Bill Georgis never planned on going into the towing business. When he graduated from college in the 80s, his dream was to be a doctor. My next step was going to be medical school, and that's what my father wanted for me. But when his dad got sick, Georgius had to help out with the family business. 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, 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 toer. They take on all kinds of work. to a funeralist toer. 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. 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. 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. A 40- to 50-ton wrecker is somewhere between $700,000 and $900,000. If I buy a large rotator like a 75 ton or a 100 ton truck, I'm talking one and a half to 1.8 million dollars for one tow truck. Now I show up with two other flatbeds that are $170,000 a piece, 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. These machines are also costly to ensure,

usually somewhere between two thousand and five thousand dollars 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 Georgis have to account for this overhead when pricing their services. For a typical breakdown involving a standard car, Georgis charges $78 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. Well, probably the largest that I've ever built was over $50,000 and that was a tanker that had rolled over that was loaded with an acid that was very very caustic.

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 Georgius gets that call, he knows he'll be paid way less than his usual rate. They look at the lowest common denominator and that's price. They're looking for the cheapest provider to get that service.

As a result, he ends up prioritizing other jobs before he rescues the AAA customer who's waiting on the shoulder of the highway. 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. For most tow truck drivers, AAA calls are a nuisance, but the rest of the job is full of surprises.

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. Max Karimi is the co-owner of H&M Roadside, a small towing company in Pensacola, Florida. The water was sweet tea colored. You could stick your hand in the water and 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. Even the straightforward jobs involve a fair bit of geometry. 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. 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. 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 on to the bumper. Any resistance and that whole thing is coming off. Toe 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 Georgias knows this firsthand. 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. Karimi has had his own close calls. 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. Sgt. John H. H. H. H. Helping stranded customers is so risky that toers often call these kinds of jobs hero

toes. But there's another side of the business, one that casts toers as the villain. 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. That's coming up. All the towing jobs you've heard about so far are called consensual tows. Those are situations like breakdowns or accidents, where you, the driver, are the one requesting the service.

But there are also non-consensual tows, the jobs you don't ask for. In those cases, the tow truck driver's customer isn't you, it's a police officer or a property owner who wants your vehicle removed. 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 a business. Operators like Bill Georges of Mike's Wrecker Service get these jobs by forming relationships

with police departments and local businesses. Sometimes they call for one truck, sometimes they call for ten all at the same time. So 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 toads that happen at that point in time. And is it fair to park at the 7-Eleven 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. Non-consensual to toes come with higher fees. While George just 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 toe 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. 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 on to it, I'm insuring that vehicle until the owner picks that vehicle up. 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. Georgeus says this is fairly common. 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. 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. 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. Operators like Bill Georgis 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.

A lot of the things that towing companies do are not reasonable even if the person deserved to be towed in the first place. Teresa Murray is the director of the consumer watchdog program at US Public Interest Research Group. She's researched a variety of shady business practices, from flimsy airline refund policies to robo calls. In a recent report, she honed in on the world of towing, and she didn't like what she found. I mean, we believe absolutely that if you park in properly 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. Marie focused on a side of the industry called predatory towing. predatory towing. 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. Predatory towing can take a lot of forms. Sometimes it's policies that make it harder for you to pick up your car.

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 5 PM or not open on weekends. In other cases, it could be just towing people for frivolous reasons. 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. 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. Max Karimi of H&M 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. 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 and 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. 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. 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. Teresa Murray says that some tow truck operators even strike kickback deals with restaurants or apartment complexes. 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. 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 and storage. And 40%

don't require signs on private property warning that cars parked there might be towed. 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. 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 Georgias understands the need to eliminate bad actors. There are some abuses in our industry, we know that, and so there's going to be some changes coming in. We're working with the legislature and the state to make it both appropriate for the toer, 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. 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. You can almost pick a vehicle and I can tell you what their most common problem is off

what we run into. Like BMWs, you couldn't pay me to own one with the amount of electrical issues they have.