How to Start a Tow Truck Business: An Owner-Operator's Guide
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TL;DR: Decide what kind of calls you want before you buy a truck. Form a business entity, get your EIN, check whether you need a USDOT number, and line up insurance quotes early because insurance is usually the biggest recurring bill. Buy a truck that fits your calls, keep a cash cushion of a few months, set up dispatch and billing from day one, and build relationships with the shops, lots and clubs that send steady work.
Most people who start a towing company already know how to hook a car. The hard part is everything around the hook: paperwork, insurance, cash flow, getting the phone to ring, and keeping track of every call so you actually get paid. This guide walks through those pieces in the order an owner-operator tends to hit them.
One note before we start: towing rules differ a lot from state to state and even city to city. Treat everything below as a general checklist, and confirm the details with your state DMV or transportation department, your city or county, and a local attorney or accountant.
Step 1: Pick the calls you want to run
"Towing" covers very different businesses, and each one changes what truck you need, what insurance costs and who your customers are. Common lanes include:
Light-duty and roadside: cars, SUVs and pickups, plus jump starts, lockouts, tire changes and fuel delivery. Lowest equipment cost and the most common starting point.
Medium and heavy-duty: box trucks, buses and tractor-trailers. Much higher truck and insurance costs, and often a CDL.
Private property and impound: removing vehicles from lots for property owners, then storing and releasing them. Needs a secure storage yard and careful paperwork.
Police and municipal rotation: taking calls from law enforcement on a rotation list. Usually has requirements for insurance, response times, storage and availability.
Motor club and dealer work: contracted calls from roadside programs, dealerships, body shops and auctions.
A simple way to choose: spend a week listening to your local market. Call a few shops and ask who they use and why. Look at competitors' reviews and notice the complaints (slow arrival, surprise fees, no one answering at night). The gaps you hear about are your opening. Many owners start with light-duty and roadside, then add impound or rotation work once the basics run smoothly.
Step 2: Set up the business on paper
Get the business set up properly before the first paid tow. A typical order:
Choose a structure. Many towing owners form an LLC or corporation to keep business liability separate from personal assets. The SBA's guide to business structures explains the trade-offs, and an accountant can help you pick.
Register with your state and claim your business name.
Get an EIN. An Employer Identification Number from the IRS is free, and you'll need it for banking, payroll and many permits.
Open a business bank account and keep every dollar of business money in it. It makes taxes, loans and insurance audits much easier.
Check local licenses. Many cities and counties need a general business license, and some need a separate towing permit, a storage lot permit or posted rate approvals.
Step 3: Sort out federal and state registration
This is the part new owners most often get wrong, so take it slowly.
USDOT number. The FMCSA says companies running commercial vehicles in interstate commerce need a USDOT number if a vehicle has a gross vehicle or combination weight rating of 10,001 pounds or more. Most tow trucks are above that. Many states also require a USDOT number for trucks that only operate inside the state. Use the FMCSA's "Do I need a USDOT number?" tool to check your case.
Operating authority (MC number). Whether you also need interstate operating authority depends on what you haul and where. Towing has some special cases under federal rules, so check the FMCSA registration pages or call them before you assume either way.
CDL. Under federal rules, a commercial driver's license is generally needed for vehicles with a gross rating of 26,001 pounds or more, or combinations above certain weights. Most light-duty wreckers and rollbacks fall under that line. Heavy wreckers and rotators usually don't. Your state's licensing office has the final word.
State towing licenses. Some states license tow companies, drivers or both, and some require background checks, training or bonds. Search your state's DMV, public utilities commission or department of public safety site, and ask your city about any local towing ordinance.
Step 4: Get insurance quotes before you buy the truck
Insurance is usually the largest recurring cost in towing, and quotes can change your whole plan. Get them before you sign for a truck. Coverage owners commonly carry includes:
Commercial auto liability for the truck itself.
On-hook (or cargo) coverage for damage to the vehicle you're towing.
Garagekeepers coverage for vehicles stored in your lot.
General liability for incidents that aren't tied to driving.
Workers' compensation once you have employees, as your state requires.
Premiums swing widely based on your state, city, driving record, truck type and the work you do. An urban heavy-duty operation can pay several times what a rural light-duty owner pays. Motor clubs, property managers and police rotation lists often set minimum coverage amounts, so ask what they require before you buy a policy. Talk to an agent who writes towing policies regularly, since they know which carriers want the business.
Step 5: Choose your truck and gear
Match the truck to the calls you picked in Step 1.
Wheel-lift (self-loader): quick on-scene times and good for lot clearing and repossession-style work. Usually the cheapest way in.
Flatbed / rollback: the most versatile light-duty choice. Handles AWD vehicles, damaged cars, exotics and equipment with less risk of damage.
Integrated wreckers and rotators: for heavy-duty recovery. A big investment, so most owners add them later.
New or used? A good used truck keeps your payment lower while you build volume. Have a mechanic who knows towing equipment inspect the bed, hydraulics, cables and frame before you buy. Prices vary by region, age and condition. As a rough guide, used light-duty trucks commonly sell in the tens of thousands of dollars, new flatbeds often run higher, and heavy-duty units can cost several hundred thousand. Get real quotes from local dealers to build your budget.
Gear to carry: chains, straps and J-hooks, wheel dollies or skates, a jump pack, lockout tools, a floor jack, traction aids, wheel chocks, cones and flares, reflective vests, a fire extinguisher, a first-aid kit, and a basic tool bag. Add a lightbar and clear, legal lettering with your company name and phone number.
Step 6: Build a realistic startup budget
Costs depend heavily on your state, your truck and your credit, so build your own budget from real quotes. Most first-year budgets include these lines:
Budget line | What to plan for |
|---|---|
Truck | Down payment or full price, plus taxes and registration |
Insurance | Down payment on the policy, then monthly premiums |
Licenses and permits | State, city and federal filings |
Gear and safety equipment | One-time setup, then replacements |
Fuel and maintenance | Ongoing, and it rises with every call |
Software and phone | Dispatch, billing and a phone line that's always answered |
Marketing | Truck lettering, a website and basic local listings |
Cash reserve | Several months of fixed bills while calls build up |
The cash reserve is the line people skip, and it's the one that saves the business. Payouts from motor clubs, insurers and commercial accounts can take weeks. Having a few months of truck payments, insurance and fuel set aside keeps one slow month from ending the business.
Funding options: personal savings, equipment financing through a dealer or lender, a bank loan, or an SBA-backed loan. The SBA's 7(a) loan program can be used for equipment and working capital, and its microloan program offers smaller loans of up to $50,000 through local lenders. Compare the total cost of each option, not just the monthly payment.
Step 7: Set your rates and how you'll get paid
Before your first call, write down your rate card: hook-up fee, per-mile rate, after-hours and weekend charges, winching, dollies, storage per day and any gate fees. Some cities and states cap or regulate non-consent tow and storage rates, so check before you print anything. For a full walkthrough, see our guide on how to price towing services with rate cards.
Decide how customers will pay at the scene: card, tap-to-pay, cash or a payment link. Motorists in a breakdown want it fast and simple. Commercial accounts will expect invoices and terms. Our post on towing invoicing and getting paid faster covers how to keep payments from slipping.
Step 8: Set up your software before the first call
Plenty of new owners start with a notebook and a cell phone. It works for about a week. Then calls overlap, a driver forgets a photo, an invoice never goes out, and a stored car's fees aren't tracked. Setting up a system on day one costs less than cleaning up a mess later. Our software checklist for starting a towing company goes deeper, but here's what to cover:
Dispatch: take calls, assign drivers and see every job's status in one place. RelayTow's tow dispatch software is built for this, whether you run one truck or many.
Driver app: RelayTow's tow truck driver app for iOS and Android sends jobs to drivers' phones, lets them update status from the road and capture the details of each tow.
Impound management: if you store vehicles, track what's on the lot, storage days and releases. RelayTow includes impound management for exactly that.
Billing and invoicing: RelayTow creates invoices from the job itself and connects with Square, RoadSync and QuickBooks, so payments and bookkeeping line up.
Reports: see calls, revenue and driver activity so you know which work is actually paying. See towing business reports and analytics.
Website and customer tools: RelayTow's website builder gives you a professional site, and its customer-facing tools help keep the people you tow informed.
You can see what's included and pick a plan on the RelayTow pricing page.
Step 9: Get your first customers
Your first calls usually come from people, not ads. Ways to get started:
Visit repair shops, body shops and tire stores in person. Bring a card, explain your hours and response area, and follow up.
Talk to property managers about private property towing if you plan to offer it, following your local rules for signs and notices.
Apply to motor clubs and roadside programs. Expect to provide insurance certificates, driver checks and truck details.
Ask about police rotation lists with your city, county and state patrol once you meet their requirements.
Set up a Google Business Profile with your real hours, service area, photos and phone number, and ask every happy customer for a review.
Letter your truck clearly. Your phone number on the door is advertising every time you drive.
For more ideas, see our list of towing company marketing ideas.
Step 10: Grow without losing control
Signs it's time to add a truck or a driver: you're turning down calls, response times are slipping, or you're working every night and weekend just to keep up. Before you add capacity, make sure your numbers support it: average revenue per call, cost per mile, and how long it takes to get paid. Hire carefully, check driving records, and train every driver on safe hookups and scene safety. Our guides on managing tow truck drivers and towing KPIs to track can help you grow without getting overwhelmed.
FAQs
How much does it cost to start a tow truck business? It depends on your state, your truck and whether you buy new or used. The biggest pieces are the truck, insurance, licensing and a cash reserve. Build your budget from local quotes rather than national averages.
Do I need a USDOT number for a tow truck? Often, yes. The FMCSA requires one for interstate commercial vehicles rated at 10,001 pounds or more, and many states require one for intrastate trucks too. Check the FMCSA's online tool and your state's rules.
Do I need a CDL to drive a tow truck? Federally, a CDL is generally required for vehicles rated at 26,001 pounds or more. Most light-duty tow trucks are under that, but heavy-duty wreckers usually aren't. Confirm with your state's licensing office.
What insurance does a towing company need? Most carry commercial auto liability, on-hook coverage, garagekeepers coverage if they store vehicles, general liability, and workers' comp once they have employees. Customers and rotation lists may set minimums.
Can I start a towing business with one truck? Yes. Many towing companies start with one owner and one truck. Keep overhead low, focus on a clear service area, and use software from the start so you can grow without rebuilding your process.
What software does a new towing company need? At minimum, dispatch, a driver app, invoicing and payments. If you store vehicles, add impound tracking. RelayTow covers all of these in one place, with plans on our pricing page.
Ready to run your first call the right way? Set up dispatch, your driver app, impound tracking and invoicing in one place. See RelayTow plans.
