If you crash your car in the USA, and you have insurance (which is true for about 80% of our drivers), and you file a claim (which happens in less than half of collisions, since most people involved in low-speed “fender benders” tend to settle the issue outside the insurance system), in some cases your insurer will declare your car a “total loss.” In this instance, though things can get complicated especially if loans or leases are involved, the insurer will offer you an ACV (“actual cash value”1) settlement check in the amount of what the car would have been worth if not crashed, minus any deductible you are carrying. If you agree to the settlement, the insurer takes ownership of the car and tries to get some value out of it, most often by selling it (often via auction) for its parts, or sometimes by selling it to a rebuilder who will try to restore it to drivability. The insurer opts for a total loss declaration when it determines that the cost to repair the car exceeds the ACV, such that the company will take less of a hit by buying you out rather than fixing your ride.
Okay, that’s all fine, but where – you will be asking – is the chart? Here it is, from CCC Intelligent Solutions, which knows more about auto insurance than just about anyone.
(Light blue bars: non-comprehensive losses. Dark blue: all loss categories.)
You will not need an advanced math degree to note that the trend is… up. That is, increasingly insurers would rather, in effect, replace your car than repair it. In my experience this is unsettling for many drivers, especially when the damage looks mostly cosmetic. The trend feeds into a variety of anxieties about the modern world, such as “Is everything disposable nowadays?” and “Does no one know how to actually fix anything any more?” and “Isn’t it just a waste to scrap a perfectly drivable car?”2
So what is (pardon the pun) driving this relentless total loss upward march? I am no expert in auto insurance, but industry sources suggest these factors, and there are more:
- The fleet is older, and older vehicles total much more easily. The average age of the car fleet is pushing 13 years, and older cars are more often “totaled:” CCC has said something like three-quarters of totaled cars are 7 or more years old. The market value of these cars is so low it is cheaper to write them off.
- The cost of inputs required to repair a car are rising. Inflation is everywhere and that includes car parts and (especially) repair labor. It is not uncommon to find a qualified master-level body shop paint tech making $100,000 a year now. (Parents of kids about to sign massive college student loans, take note!)
- Modern vehicles are harder and thus costlier to fix, regardless of parts and labor costs. A lot of this is driven by advanced software and sensors and electronics. For example, if one bent a 1985 Chevy, you straighten the frame and the panels and re-align the suspension and you’re good. Bend a 2025 Chevy and you’re going to have to replace a lot of ultrasonic, camera, and radar/lidar sensors, and not only straighten the frame but “straighten” the sensor array, by recalibrating them all. Most crashed modern cars will need such a calibration, which can easily run $500 or more all by itself. Then throw in the added complexity of BEVs and PHEVs and it gets worse.
Keep reading: https://glennmercer.substack.com/p/repair-or-replace
