The Total Cost of Total Loss

by Ken Miller, AASP/NJ President

As the costs of repairs continue to climb, coupled with persistent challenges in parts procurement and the values for salvage vehicles remaining near all-time highs, the industry is witnessing a growing number of repairable vehicles being totaled by insurers.

This scenario presents a significant challenge for repairers, as a substantial investment in time and resources may have already been expended before repairs are halted due to the vehicle being declared a total loss.

Consider, for a moment, the myriad activities that might have occurred up to this point: vehicle check-in, administrative efforts, supplements, customer communications, insurer communications, writing the estimate, repair planning, researching OEM mandates and requirements, dismantling the vehicle, parts handling (inspecting, cataloging, protecting and storing both good and bad components), storing the vehicle, protecting the vehicle (crash wrap, sealing open wire connectors, etc.) and potentially much more.

Often, some of these activities are labeled as “costs of doing business.” In the normal repair process, it’s assumed that certain activities would be accounted for when proper compensation for the repair of the vehicle is received. Unfortunately, when a vehicle is deemed a total loss, the profit that could have been earned from the repair evaporates. This swiftly transforms the costs of doing business into the costs of going out of business.

Repairers are also encountering more resistance than ever before in receiving payment for total loss charges. Yet, most shops are undertaking more administrative work than ever. It is crucial for all shops to meticulously track the efforts expended and the time spent during a normal total loss claim and seek fair reimbursement for those efforts.

I encourage repair shops to explain these charges to their customers and seek appropriate compensation for the extensive work undertaken. Ensuring that these costs are communicated clearly can help mitigate the financial strain that total loss declarations impose on repair businesses. By advocating for fair compensation, shops can better navigate the financial challenges presented by the increasing frequency of total loss vehicles.

Want more? Check out the August 2024 issue of New Jersey Automotive!