Too Many Tow Trucks! Rotations and Non-consent Towing

In my state there is a state board that oversees the hospitals. When a hospital wants to purchase new equipment or add more beds (increase service capacity), they have to get approval from the hospital board first called a “certificate of need”. By requiring certificates of need the state ensures that unnecessary costs are avoided, and the price of healthcare isn’t driven up by unneeded expenditures. This is important because when you need medical attention you don’t have time to go shopping around for the best deal; market forces are very limited in the cost of healthcare.

When someone is in an accident or otherwise requires a tow in which they don’t have time or opportunity to shop for the best price, again market forces have little to do with how much that person, or their insurance company, will wind up paying for that service. The towing company sets rates to make a return on their investments, cover their costs, and make a profit.

If the police call just a single company for service in a particular service area, the company can determine how much to charge based on the average number of calls. They then divide their expenses (trucks, fuel, labor) by that number and come up with a price per call. If the police add a second company to the rotation and each company gets half the calls, the cost per call doesn’t decrease because there is now competition, it goes up because each tower has to cover their fixed costs with half the work! While this example is a simplification, it is meant to represent the not-so-obvious relationship between non-consent prices and the number of rotation services on the list. Just like we can’t afford two or three hospitals in every community, the law enforcement community needs to keep in mind that more is not always better when it comes to rotation towing lists.

There are other effects of too many wreckers services on the lists. In reality, there are few services that survive by just doing police towing, that has to be part of a mix with retail towing and other services. If there are too many companies sharing all the police work, that reduces the percentage of income that any of them receive from police referred work, and reduces the incentive to be available and provide the excellent response times usually expected. While wrecker companies try to compete for police work the only way they can, with good service, if too many companies are added to a list, eventually either prices will have to skyrocket, or service levels will have to falter.