Cash for Junk Cars

''Cash for cars'' brings on the image of those badly made late night TV ads that show a split screen with an absolute heap of a 1970's car on one side, and a stack of $20 bills on the other. However, enter ''cash for cars'' into one of the major web search engines and you'll see that the marketplace for our junk cars and trucks has gone national, and sometimes global. There are a few simple reasons that national junk car operations can offer people more cash for their junk cars.

First, they have what economists call economies of scale. For example, the local junk car removal company needs to have a tow truck and driver, as well as a phone number and a person to answer the phone. With these two people, you could probably talk to and pick up cars from up to a few dozen customers a day.

On the other hand, a national junk car dealer can hire a small handful of people for a little call center, make agreements with local towing companies in dozens of cities, and pick up hundreds of cars in a day. With dramatically less cost for each junk car they take in, larger companies can simply offer more cash for cars.

Second, the larger regional and national firms can also offer more cash for cars because they aren't limited to local markets where they pick junk cars up. For example, while a local salvage yard values a junk car based on local demand and pricing, national operations can evaluate it based on getting the best price from many different markets. Though a 1995 Buick might only be worth $600 because of low demand in the Chicago market, it's common for those parts to worth twice as much in places where people own more Buicks and drive them longer (Detroit and Florida, for instance).

The little junk car operations will never go away entirely. However, the low marketing costs and reach that the Internet has provided will make it increasingly difficult to compete with the cash offers make by the bigger players in the junk car marketplace.