According to the recently published  Industry Trends Report  by Mitchell International, Summer 2006 edition, the number of total loss claims continues to rise each year despite the fact that accident frequency is declining.  However, it appears the salvage industry is not capitalizing on the increased volume of cars in its inventory since the same study shows a downward trend in total used parts dollars written per estimate. 

What’s Driving the  Increase in Total Losses?

Simply put, the number of total losses has increased because prices for parts and labor have gone up, just as they have in nearly every other market segment.  But, there is also an increase in the number of parts needed to make repairs on today’s technologically advanced autos, as well as an increase in the need to use specialized technicians on an increasing number of complex repairs driving the trend.

Newer vehicles have complicated safety systems that integrate together through the use of computers and other electronics to help drivers avoid accidents and to save lives when the inevitable happens.  Replacement of airbags and restraint systems are perhaps the best examples of integrated parts causing repair costs to rise.

Not more than a handful of years ago there was a need to replace seatbelt retractors on occupied seats and maybe one or two airbags at most after an accident.  Today, five or six air bags are common in a vehicle, and some cars have as many as ten!  Deployment of driver and passenger airbags in combination with deployment of knee airbags is a particularly common scenario that racks up some hefty bucks.  In fact, some manufacturers require that seatbelts also be replaced after an accident, because like airbags they, too, deploy to grip an occupant planting them firmly into the seat during impact. 

In a growing number of  states replacement of deployed airbags is not optional, it’s the law.  Before a vehicle can be tagged and driven it must pass a safety inspection.  

Even costlier to repair than airbags that deploy with one powerful force, a new breed of restraint system is being phased into manufacturers' product lines known as advanced frontal airbags or 3rd generation systems.  These airbags deploy with varying intensity based on the weight of an occupant in a seat.  As one might guess, these systems are increasingly complex, requiring additional seat sensors and special calibration to make certain that the computer deploys the airbag as designed, matching the intensity with an occupant’s mass. 

High Skilled Technicians are in Short Supply

Not every technician that can repair a ding can program such a complicated system with accuracy and confidence.  Thus, the need for specialized technicians.  Usually, these technicians are factory trained and captively employed by well-tooled dealership service facilities where some of the highest hourly rates and hefty diagnostic fees are charged. Technicians with this level of skill and training can often name their price and get it, but still there are too few to go around.

Recognizing the rising complexity in repairs and the increasing demand for high-tech tooling among aftermarket repair facilities, manufactures have tried to dummy down the processes to make it possible for a larger number of lower skill technicians to perform the work.  As a result, there is a trend among most manufacturers to move toward less individual parts replacement and more replacement of complete assemblies and subassemblies.  Not only is the work easier and faster for technicians to perform in this manner, it’s a means by which manufacturers can boost profits by selling parts in combinations or assemblies rather than individually.  Here is an example of how this plays out in the repair of a damaged auto:

When a vehicle is hit in the side requiring replacement of a quarter panel some manufacturers will only service the damaged part as a complete integrated body side unit consisting of the quarter panel, inner and outer rocker panel, B and C pillars and roof rail.  Manufacturers argue that replacement of this entire side unit is necessary to achieve a structurally sound repair because panels are fabricated and stamped from dissimilar materials laser-welded together, sporting heavy gauge materials where necessary and lighter, thinner materials where feasible. 

The average shop would have neither the tooling nor training to duplicate panel replacement as intricate as this if assemblies and subassemblies were not available.  Moreover, because of the use of the lighter, thinner materials needed to save weight and boost fuel mileage, damage often travels long distances away from the point of impact even in crashes where, on the surface, damages appear moderate.

Windshields and glass are also being used as structural energy-absorbing components.  Thus, even though the price of glass, according to the Mitchel report, is at an all-time low, it breaks upon impact with greater frequency than ever before, and often requires replacement of moldings and clips that are available only through original equipment dealers.

Individually, replacement of the particular modules and parts we’ve mentioned wouldn’t likely push a vehicle beyond the total loss threshold if it weren’t already dangling from the edge.  But more and more, crashes require not just one of these unit replacements, but all of them to come into play. For instance, a car gets hit requiring replacement of a side assembly; seatbelt pretensioners detonate and the airbags spring from the dash banking off the windshield causing it to crack.  The end result can be thousands of dollars added to the cost of repairs causing a car to total even though damage to sheetmetal appears relatively minor.

Insurers Occasionally Total Cars When Consumers Demand Payment for DV

In conclusion, one additional factor is said to be contributing to the frequency of total losses - a growing number of consumers pushing for payment of diminished value (DV).  Cars often total when damages reach 70-75% of a car’s preloss value.  However, when consumers express an interest in hiring a post repair inspector upon completion of repairs to assess a repaired car’s true condition and value, insurers and their partnering shops anticipate trouble. And, rightly so since statistics show that cars are improperly repaired more often than not.  In these situations it’s not uncommon for these units to be considered candidates for salvage when damages are at 50% or less of the preloss actual cash value. 

Why do insurers fear DV?  With DRP use at an all-time high, insurers fear that limits they place on partnering shops will ultimately cause trouble for them.  Thus, totaling a vehicle to be rid of the problem seems a simple, inexpensive solution to please picky customers when compared to a trip to the courthouse where all of the insurer’s tactics could fall prey to scrutiny and the public’s opinion of them could suffer decline.

There’s no question that the increasing cost of repairs is causing concern for insurers and body shops that are losing work as cars total.  Fleet companies are also feeling the pressure to obtain safe, cost effective repairs that don’t compromise occupant safety, yet there’s an increasing trend toward more total losses in that industry as well.

Lee Petersen, training marketing manager for Chief AutomotiveTechnologies, cited actual numbers in the Northwest Automotive Journal’s September 2006 publication that go back more than a decade.  Petersen said, “the percentage of [totals] has increased from about 4 percent in 1980 to 9.5 percent in 2000, and to between 18 and 21 percent in 2005.”  Mitchell says the current frequency with which cars cross the total threshold making them candidates to be junked is between 18 and 23% or about one of every four or five estimated.  Petersen adds, "Based on our analysis, it would not surprise us if we were pushing toward 30 percent totals within two to three years."

While some consumers want to buy their totaled vehicle back to have minimal repairs performed and keep it on the road, we have not found that to be a wise or profitable decision for them unless they have the ability to perform the work in a skillful manner themselves. While some do-it-yourselfers may think the repair of a wrecked car looks easy to perform, it requires tremendous skill and risk that even a growing number of repair shops are unwilling to take.  When all factors are considered, we’ve found it more beneficial for consumers, especially in a buyers market, to take the insurance proceeds and invest in a car that has never been damaged rather than spending money to keep junk on the road.

content & design 2002-2008 David Williams and SafeCollisionRepairs.com

About Safe Collision Repairs

For more than ten years, David Williams of Wheelersburg, Ohio's Safe Collision Repairs has worked with consumers and attorneys in the tri-states of Ohio, Kentucky and West Virginia to expose unsafe auto repairs and maximize recovery on auto insurance claims. Some of the company's services include Post-Repair Inspections, Prepurchase Inspections, Auto Damage Assessments, Lemon Law Investigations, Expert Court Testimony and Diminished Value Calculations using an advanced version of Network Information Communication's WreckCheck program.

Inquiries can be directed to: Safe Collision Repairs David A. Williams Post Office Box 70 Wheelersburg, Ohio 45694 (740) 456-1111 (740) 355-4056

Disclaimer

The content expressed on this website and in the article above represents the opinions of David A. Williams. Williams is neither an attorney nor public insurance adjuster, but is an expert, consultant, and writer specializing in the field of automotive collision repair and valuations. The information provided herein is not intended to be a substitute for legal or insurance advice. Because collision repair is a continually evolving science, any text, materials or links found herein are provided without claim or guarantee to their accuracy or completeness.