Hi there,
Willis Johnson sold his house in 1972 to buy five acres of wrecked cars, then moved his family into a trailer parked on the lot.
The house went first
The land sat in Rancho Cordova, California, and the price was $75,000. Johnson had $5,000 to his name. He borrowed $5,000 from family and friends, sold the house to raise the last $5,000, and paid off the rest over the next five years.
His own explanation, from his book Junk to Gold:
"It never occurred to me that what I was doing might not work."
What he thought he was buying was a parts business. A wrecking yard buys smashed cars, pulls off the pieces that still work, and sells them to repair shops. Johnson decided his yard would stock only Chrysler, Dodge, and Plymouth parts, so anybody hunting for those knew exactly where to go.
Before he narrowed it down, the yard was selling about $4,000 of parts a month. After, it was selling $3,500 a day. The cars were the business, and the land underneath was just somewhere to park them.
Ten years later, that had completely changed.
The year the cars stopped being the product
In 1982 Johnson opened his first Copart yard in Vallejo, California, and started selling something else.
When you crash a car badly enough, your insurance company pays you and keeps the wreck. Now the insurer owns a two-ton object it has no use for, sitting somewhere it is not allowed to stay. Copart offered to take that problem away: tow the car off, park it, photograph it, sort out the paperwork, sell it at auction, and hand over the money minus a fee.
Look at what Copart never owned in that arrangement. It did not own the cars. It owned the parking lot.
That is the whole argument of this issue. The hardest thing for a rival to copy is the thing that nobody wants to own.
Why the drive to the yard ends up in the price
Insurers used to pay Copart separately for the towing, the storage, and the auction. Often a wreck sold for less than those charges, and the insurer lost money overall.
Johnson swapped all of it for one simple arrangement. Copart takes 10 to 20 percent of the sale price and covers the towing and storage costs. (Speedwell Research, 2024)
That handed Copart a fresh problem: distance. Every extra mile a tow truck drove was now Copart's cost. Johnson's answer was to buy more yards, six to ten of them squeezed into the gaps between the ones he already had, so no wreck ever had far to travel.
Why opening a new yard is so difficult
Land is easy to buy. Permission is the tricky part.
Towns decide what each patch of ground can be used for, and a yard full of wrecked cars sits near the bottom of that list, alongside heavy industry. In most places it needs an extra approval on top, called a "conditional use permit," which means a public hearing where the neighbors get to turn up and object.
Wichita's rules allow a wrecking yard only in two industrial zones and require extra approval in both. In Lorain, Ohio, in 2018, the planning commission recommended saying no to a salvage operator's request to rezone a site, and the mayor reported that the council agreed almost unanimously on land that was already surrounded by other salvage yards.
Copart goes through the same thing. In Monroe Township, New Jersey, it chased a 60-acre site for more than a year, got officials to rule in July 2022 that its facility did not count as a junkyard under the local code, and still had to face a public hearing.
Once the paperwork is settled, building the yard takes about ten months: clear the ground, level it, lay four inches of rock so the loaders don't sink, fence it, pave it, and put up a building. The ten months are the easy part. Getting the town to say yes is the part that’s difficult for a competitor.
What Johnson counted when he made an offer
Through the 1990s Copart raced its main rival, Insurance Auto Auctions, to buy up the small family yards scattered across the country. IAA went after busy yards in big cities and worked out what to pay from the profit each yard was already making.
Johnson went the other way. He bought quiet country yards, often ones losing money, and calculated his offers based on what the land was worth and how many cars came through the gate, betting his own systems would sort the rest out. He also bought the ground. IAA rented it.
By 2024, Copart ran more than 250 locations in 11 countries. It sold over 4 million vehicles that year. Charlie Munger, Warren Buffett's late partner, called Johnson a "talented fanatic." (Business Wire, 2024)
What to buy that your competitors would rather not own
As a business enthusiast, here’s what you can learn from Copart:
- Write one sentence naming what stops a rival with ten times your budget from copying you within twelve months. You have passed when that sentence names a permission, a location, or a switching cost and not effort, quality, or care.
- Sort last year's delivery and call-out costs by how far away the customer was, in a spreadsheet. Look for the distance where your margin turns negative, because that number tells you what a physical position nearby is worth paying for.
- List everything you rent, and mark each line as getting cheaper or getting scarcer, with whoever signs the leases in the room. The signal is a scarce line with a lease expiring inside three years, which is the one to buy or lock down now.
- Take one fee you charge and write down what it pays you to do more of, then call the customer who complains about it loudest. It worked when you found a charge rewarding you for something your customer would rather you stopped.
Copart's 2,000 spare acres earn nothing for most of the year. The land a rival would need to answer them is being turned into housing right now, in every city on the map, and it never comes back.
