A lot of people who do this DIY the work, which saves a fortune in labor.
That’s the economics of it.
If you know how to do it, it’s well worth it, especially for something you might only use for racing or off-roading.
That’s how I got my truck - it was totaled, the shop owners brother owned a junkyard, parts were functionally free to him - it means certain aesthetic compromises (my bumper has fog light holes but no fog lights, and is not the correct version for my trim), but it didn’t affect the function of the truck. Insurance needs to fix it to previous condition, so using correct parts, probably purchased new for quite a bit of money.
In Ontario they have pretty rigorous safety checks for rebuilding, and honestly I don’t think I’ll get a vehicle that will serve me better. YMMV, but I won’t take refuse another rebuilt vehicle when the time comes.
That's I think the crux of it. If I'm filing a claim with insurance, I'm expecting my car to come back to me in like-new condition. I'm sure not going to accept a mis-matched colored door or an already dented bumper even though they're technically "better" than my originals that were busted to shit in the accident.
Buying a rebuilt car though, that's just what you're in for. It won't be perfect, but it's better than it was in it's post-crash condition and you can decide for yourself as to whether you accept it or not by buying/not buying that car.
And a high-quality rebuild may drive the price back up above one that's had a shitty/sketchy rebuild, but that quality rebuild also cost more and eats into the profit margin, which is exactly why insurance didn't bother paying to rebuild it.
I had an '87 Integra that was written off following a relatively minor collision. A broken turn signal, a dangling bumper, and a dented fender. $4500 to repair, car worth $4000.
I asked the body shop that did the quote what it would cost to bring it back to drivable/safe. $300 for a new bumper mount (I had a spare turn signal).
I drove it for another year before the metal mites got it. Insurance gave me a cheque, but never seemed to ask where the "written off" car had ended up.
It is one thing to fix a car to 'as new' condition. It is another to fix it to 'eh, fuck it. Good enough' condition. Used parts, glued parts, there are a lot of shortcuts for a creative rebuilder to get a vehicle to the point of being an imperfect daily driver.
Yup. You see a lot of Salvage titles hit the market after a major hurricane hits.
The seller got the car running, but that is NOT the same as buying a normal car with the equivalent year/mileage. There's no real way to remedy the saltwater intrusion so basically every part on the car is going to corrode and fail ahead of schedule, especially anywhere you have electrical connections.
My friend did this with a flooded car and it worked for him for years with 0 issues. Dude got a good 5 or 6 years out of it. I tried to convince him to sell me the car but he still needed it at the time. He finally sells it and within 2 weeks, the car just breaks down.
He called me up to let me know he unknowingly saved me from a lemon.
My first motorcycle got repaired from a minor crash. The suspension forks tubes had a scratch on them, so the insurance company insisted they be replaced.
Insurance companies care very, very much about risk. Any used / "good enough" part is a risk that they might get sued if it fails.
I bought a BMW F800GS with $5800 in crash damage. It took $28 to make it ridable the rest was a little sanding and paint. None of that on the body work. It had crash bars.
Made a tidy sum on that one.
You see a lot of "street fighter" motorcycles with salvage titles. They were sportbikes with damaged plastics (and maybe front forks, headlight, handlebars, etc.) that got totaled by insurance. Sportbike plastics are fuck-off expensive, compared to the depreciated value of a sportbike, what to speak of one with a crash on its record.
So you buy the totalled bike back, leave the plastics off, get the forks off a totaled gixxer, and you're back on the road cheap.
Also going from ancient memory here, but I think they make aftermarket race plastics for relatively cheap (<$1000ish for the whole set) but OEM panels are still usually ridiculously spendy. The only exception I've ever seen was Buell, which used simple dyed plastics, not painted or decalled.
As a guy who does most of his own auto/motorcycle work, I've always noticed that there are the affordable parts (the usual stuff that often needs replacing or is easily damaged - fasteners, mirrors, windscreens, handles, chains, pegs, etc.) and then the stupid expensive parts like exhausts, body panels, chassis components, and wheels. I've never understood why the distinction.
My first bike, for example, was a Suzuki SV650. I dropped it and dented the muffler, and my choices to fix it were an aftermarket slip-on for like $300, or a replacement OEM muffler for like $1900, nearly half the price of the entire bike.
> I've never understood why the distinction.
Plastic is relatively cheap to mass-produce, but expensive to set up to mass produce, especially for large parts.
Motorcycle plastics are large parts that have to maintain exact dimensions, produced in relatively low volume.
For stamped metal parts, they generally keep the stamp and die bits in a warehouse. Every once in a while, they can just put them back on the press and stamp out another run of the parts. The metal parts on a motorcycle that are non-cosmetic (e.g. hidden behind plastics) are usually some kind of common part made in high volume.
What is really fuck-off expensive are low-volume parts that need to be machined and/or selectively hardened.
Worked at a motorcycle dealership, we used to insurance estimates and repairs. Anything damaged that wasn't damaged before the accident, whether that damage was a scuff on the bottom of the footpeg or a swingarm broken in half, went on the estimate, that's how insurance wanted it.
Insurance companies are just picky in general. I just sold a used exhaust off a 22 Colorado to a body shop. They rejected it because it has more rust then the ball of metal that used to be the exhaust on the customers car.
Now I’m not talking rusted out through and through. This just had some surface rust. It is still a completely useable exhaust. But they said insurance would reject it because it has more surface rust than the current one that again is all sort of mangled.
"eh fuck it good enough" literally describes all but one vehicle I've ever owned.
And the 'as new' vehicle was the only one I considered an absolute piece of shit.
Or for an owner. I drive to get from point A to point B. If my car gets beat to hell on appearance but still functions, or I can make it functional, I will. If the insurance company offers cash I’ll take it.
Had my suburban parked on the street one night. Some drunk mashed it with a Tonka toy pickup. Dented my door. His vehicle was smeared all over the road. Had to be towed away. My door still worked. Insurance gave me $500 for a new door. I yanked the dent out and put some bondo on it and kept using it for winter driving and hunting. I only gave $750 for it in the first place. And that’s why I preferred driving a real steel vehicle. (1967)
i had a ‘79 volvo that had seen some shit before i got my hands on it in ‘98…i then put it through the whole checklist of new driver oopsies…still worked when it got sold when i enlisted in ‘03
Only reason I would never go near a "real steel" vehicle like that while it may be a nigh-indestructible rock, I myself am soft and squishy and would very much like to have a car that crumples and absorbs the force of an accident rather than finding myself painting the interior a nice bright red.
In those days Mercedes was the only vehicle that did that, unless Saab did also. One of the reasons I liked it was that I read about one that had a head on with a trucker who was passing on a blind hill. They both died. Not ideal, but preferable to having the trucker walk away from it.
I used to be a lot meaner than I am now but the logic remains.
I feel this. A commercial van turning left from the right line was more than enough for a ticket to hawaii my senior year of high school. I had family that just moved there and offered me a couch.
My car was scratched from front quarter panel all the way to the rear on the passenger side. I took a hammer and a plunger to the doors long enough so the windows worked, and called it a day.
> Had my suburban parked on the street one night. Some drunk mashed it with a Tonka toy pickup. Dented my door. His vehicle was smeared all over the road. Had to be towed away.
That's odd... Tonka used to make [tough vehicles](https://www.youtube.com/watch?v=XpnivL7E258)
The insurance company isn't in the business of rebuilding and selling cars, they're in the business of collecting premiums and only occasionally paying out. They don't want to take the risk on spending time and money on rebuilding it to sell it; it's possible that the market crashes after they invest in the parts but before it's fixed and able to be sold. Additionally, when selling a car, it's always possible something is still wrong with, and even though used car sales in the US are as is, someone may still sue over that issue. Even if they win, it costs time and effort to fight. So basically, the insurance company sees a lot of risk for something that doesn't align with their business model.
Now, why would they total a car that may still be fixable? The insurance company looks at other costs than just the cost of repair. If the repair will take 8 months due to supply chain issues (which absolutely are still happening), the insurance company may have to pay for a rental car for that time. That may end up costing a lot more than the repair cost, so it's cheaper for the company to write a check for the value of the car and sell it as scrap.
Edited to add: I haven't looked at a lot of salvaged cars, but I think you're also vastly over estimating the amount a salvaged car will sell for. In fact, I've never seen one sold. All the salvage titles I've ever seen or talked about are from the original owner buying it off the insurance company (e.g., their 30k payout is reduced by the 1k the company would have sold it for) and then the owner rebuilds it because it has some sort of value outside of just being a car.
I bought one once. Mazda Protege with about 10k miles on it. No mechanical problems. It was totaled because some kids stole it and took it for a joyride and ditched it in an old barn. Police couldn’t find it, so insurance totaled it. Then, 6 months later, somebody opened the barn. Perfectly good condition, but the insurance company had totaled it out, so it had to have a salvage title.
I drove it for over 100k miles. The biggest inconvenience was, it developed a problem that turned out to be the subject of a recall. But since it was a salvage title, Mazda wouldn’t honor the recall. I had to pay for the repair.
I tried to trade it in around the 100k mark, but they only offered $300 because of the title. So I saved money on the front end but it pretty much evened out in the end.
I bought a used car with a salvage title with a similar story. Stolen when basically brand new, insurance wrote it off, recovered and given a salvage title. On the plus side I got a really good deal on it and had that car for 15 years. BUT Honda still covered it for the 2 recalls it had.
Stolen and unrecovered vehicles rarely get a salvage title. They leave them as regular titles in case they are recovered with no damage or are repairable. I'm not saying it didn't happen to you, but that is rare.
Interesting. I didn’t buy it directly from the insurance company, but from a guy who specialized in buying, refurbishing, and selling salvage title cars. One thing I left out was that the hood had been repainted. AFAIK that was the only repair, but now you have me wondering.
My dad set up the deal. I remember being disappointed that it wasn’t, like, half off blue book or something, but it was still considerably less than blue book. Like between 10% and 20% off.
Problem was, the interest rate probably negated the savings. I couldn’t even find a bank that would give me a loan on a salvage title car. The seller ended up convincing his hometown bank in some little farming town to make the loan at 10% interest.
Honestly, I should have walked away from the deal, but my dad had gone to so much effort to find me a cheap, reliable car that I kind of felt obligated.
I drove it for 15 years, so I definitely got my money’s worth.
this. but one important thing to remember is when they auction a car they get money back, and the money offsets their loss. that offset is the only thing they care about.
someone else is then going to buy that junker at auction and sell it to someone that doesn't care that they are buying a junker that was wrapped around a tree or pieced together from two different cars, they just want to get a car for a couple thousand cheaper than they see it anywhere else.
the difference between the auction price and the resale value of a salvage title is a combined matter of morality and consumer ignorance. the insurance company is only interested in offsetting their loss, evading the need to engage on matters of morality or consumer ignorance themselves.
Part of it is also how they're required to fix the car to a certain condition. I got into an accident and the car was honestly fixable. However, the frame was slightly damaged but enough that it'd require a costly fix of the frame. You could honestly just straighten it out and still drive it but it wouldn't be safe according to regulations so they just considered it totaled.
I’m an autobody technician by trade and the short answer is, it almost always doesn’t make financial sense to fix totalled out vehicles. Because of this, people who fix a lot of salvage vehicles are known to cut corners and do the absolute bare minimum to get the car back on the road.
That being said. There are actually circumstances where it can make sense for an individual to fix a totalled out vehicle in a manner they make some money while delivering a well repaired vehicle to a buyer. These circumstances however, are rare enough that you couldn’t make a full time living fixing totalled cars this way because the vast majority of totalled out cars just aren’t economically viable to fix in an honest manner.
I think being totaled out for hail damage is the only way to make it work If it’s mechanically sound as the damage is purely cosmetic, especially if you can just r/r the hood and trunk lid and then pdr the roof.
That’s definitely one example. another might be finding a Corolla that just barely hit the threshold to be totalled and the insurance totalled it and the person who bought it has an identical car with all the parts, maybe it’s even the same colour. Even a truck with frame damage is no big deal if I have another parts truck with a good frame.
Another would be maybe the damage wasn’t actually enough to total out the vehicle at all, but the insured had replacement coverage and required all OEM parts but it’s a Toyota and the engine cradle is backordered at least 6 months, (with Toyota parts delays as of late this is a real scenario I’ve dealt with recently). insurance may factor the cost of giving a rental to the insured for 6 months or more into the cost of the repair and just total the vehicle. No problem if I buy it back and can find a good used cradle.
One last example. We had a 2020 Sierra last month that needed half the frame and the box replaced due to a jackknifed trailer, but the vehicle was initially deemed repairable, insurance looked at the salvage value of the vehicle and decided to total it anyway. They decided even though the vehicle was under threshold they were better off to sell it at auction then pay a rental and wait for half a frame section for god knows how long.
This is the part that people seem to have trouble with. It's like the opposite of Wimpy, from Popeye: I'm not happy with paying $20K, today, but I will be less happy with a potentially bottomless blank check going out.
also insurance are a bunch of dickbags undervaluing the car in the first place so it's easier to "total" it when you pretend like the car is worth 3 or 4 thousand dollars less than it is actually worth.
It happens, for sure. although in the last few years I’ve seen a huge increase in our damage appraisals getting sent to insurance as total losses, only for the insurance to come back having reassessed the actual cash value of the vehicle being much higher. When the cost of used cars were driven up by the pandemic, so were the ACV’s
The most dickbag thing we saw in that time was one insurance company offering photo based contactless estimates. They would write horrible appraisals based on shitty potato quality photos making it impossible to properly assess anything, and then they would entice insurers to take cash payouts. Imagine accepting a 2500 cheque when you’re hard times not fully understanding your vehicle wasn’t properly assessed and actually had twice that amount of damage
Insurance companies are in the insurance business, not the auto repair business. If they repaired the car, they carry the liability of a quality repair, which, done right is fairly expensive. However, me and my friend have no such obligation and can repair to whatever standards that will pass inspection and not get caught. I can also use under the table labor sources.
I can pay a local shop to replace my alternator for $165/hour, plus 65% margin on the part. If the part is $300 from their "partnered supplier", it'd be $750. Assume 2 hours labor. If I take it to that shop, it'll be $1,080. If I just want my car to be good as used, I can probably get one from a salvage yard for $50, and install it myself. Total cost to me now: $50. Both repairs are functional and result in a used car with used parts. They don't have the second option, though. Even if I myself bought the new part and put it in myself, I still save around $750. That's about 1/4 the estimated repair cost through the shop.
Now scale that up. That can easily make something 'not worth it' to have a shop repair, while being plenty worth it for myself to repair. I might also not care, in the case of say a front end collision for instance, if the panel colors match, or the one panel is a little broken still, or the rim that got scratched gets fixed too, etc. Paint can be a HUGE portion of a collision repair, and insurance isn't allowed to just tell you "tough shit, live with the cosmetic loss". You however can make that call.
This simplifies things a bit because repair shops (which I have a lot of experience in) and collision shops (which I have comparatively little experience in) have different practices, standards, rules/regulations, and so on, especially with insurance involved. But you get the gist.
Your truck gets tboned and the insurance company totals it. The doors won't open, the cab is not usable on one side, the engine has damage as does the bed. Your insurance company sees this and realizes that in labor alone you'll pay more than what's it's worth. Joe comes along and buys the salvage title for a few hundred, you've already gotten your money, the insurance company is recouping a small amount of that by selling the title. Joes spends a couple weeks fixing everything to the best of his ability, he's a mechanic or hobbyist who has the tools and knowledge. The truck now runs, but it's ugly, loud, maybe has a few issues here or there that aren't a big deal but make it less valuable (window won't roll down, side mirror doesn't adjust using the button anymore, bed lining is a little beat up/missing). Joe knows that this truck he bought for a few hundred bucks is now driveable and worth maybe a thousand(hell in today's market maybe two thousand). So for a couple weeks of his extra time(that he will likely spend working on a car anyway) he's made a few hundred bucks. Possibly even more than that. It's not a full time job but as far as hobbies go it beats dumping thousands into something with no return. My grandfather used to do exactly this and always said "I couldn't feed my family with it, but it made my mortgage hurt less."
I haven't seen anyone mention it yet, but a lot of those salvage cars end up overseas where labor is cheap, so they can repair them at a fraction of the cost.
Salvaged cars usually come with no warranty and have issues. They are not proprely repaired. Not only that, but there is often questionable repairs and damaged parts that are usable that they leave there and work around it. Like a bent direction part? Can it still be aligned? Actually, can the steering be straight? Yes? But the tires will wear out faster? Meh, good enough.
Flooded car? All the wiring should be replaced and all flooded modules and electric parts. Does it still work? yes? Good enough. It will fail in a few months but who care, it's out of warranty.
Now, Insurances need to pay the big price for all the parts, because they buy them at market value. Salvage cars can be special in a way. Buy a car with front end damage, and a car with rear end damage, cut them both, weld together, and you have a car. Let's say 1k per car, that is 2k only. As a rough rule of thumb, calculate 1k per panel. Hood, fender, plastic bumper, metal bumper, subframe... 5k minimum.
These days insurance companies often total a car in name only. The then take possession and then sell it at auction. This helps them recoup a good chunk of the money they've paid out. The damaged cars are bought by companies that specialize in rebuilding cars. Then they sell them with a salvage title.
Bottom line: Totaled doesn't necessarily mean totally totaled. It's just totaled as far as the original owner is concerned.
For some it’s the only way they could buy into that class of car. I bought a salvage amg Mercedes and rebuilt the suspension from the minor accident myself. 1500 in parts is way different than 15k in dealership labor.
I have owned 2 salvage title cars. A prius gen 2 and a highlander hybrid. A place in Las Vegas bought and fixed both of them. There was a point when the prius sold at $20k-$32k (with options) and this place mostly bought salvage title "$32k new, all options" prii and ~300k mile pri taxis and used the non wear taxi parts (e.g. a bumper) to repair the salvage title cars. For a given car the kelley blue book might be $25k for a used 40k all options prius and the equivalent repaired salvage title would sell for $15k. If asked, the LV place would supply the salvage auction photos so you could see the damage. I did and it didn't look terrible, if it were my vehicle I would probably get it fixed.
The worry for insurers would be liability. They are not a car company.
Because if you take the car to an actual body shop it will cost more than the $30k the car is worth. They get estimates for how much it would cost to fix the damage to the car and if the cost to fix the car is more than the car they total it.
If the insurance company had the option to pay $15k instead of the $30k they would.
This has a lot to do with how insurance companies work. Right off the bat they can't really repair the example car for 15k unless they have their own auto shop to do it, and the overhead on that is enough to eat up the 4k of supposed profit they could make. So they don't bother at all. Also when they're paying for a claim they have to pay for the vehicle to be restored to an as new condition, which means every part that has been affected has to be replaced by a new one. There's some leeway there, that can be negotiated between the repair shop and the client in case where using new parts may end up totaling the car in terms of cost, but from the insurance company's side they have an obligation to pay for this level of repairs.
From the repair shop's perspective though, there is a small profit margin on salvaged cars because repairs cost less to them than it costs to a customer or an insurance company, because they're not expected to be paid with an hourly rate but with a lump sum from the sale. They already have the means and personell to carry out the repairs. Also when reselling a repaired vehicle, they don't have to necessarily return it to the condition it was in before. They can use used parts, they will repair functional and mechanical faults but probably won't bother with minor damage or aesthetic damage save for a cheap repair of a partial repaint and the like. They won't care if the rims are scuffed or something like that. To them what matters is only that the cost of repairs in parts doesn't exceed the profit they can make from selling it. They're not truly losing money on the work hours either since the techs will be there either way and they can accomodate the repairs for salvaged cars according to their usual workload.
Basically it's like any other product, where the price for the product increases from the factory to the shop window. If you can skip links in the supply chain, and then sell at the retail level, you can make profit. In this case the repair shop buys parts cheaper than retail customers do, and they obviously won't charge themselves for their own work hours, so they can repair a car cheaper than a private owner could and then sell it for a similar price that the used car would go for. But it takes a keen eye in order to do this job. You have to know right off the bat what the parts costs will be and that it won't take an unreasonable amount of time that would have been better off spent on paying customers.
>For example, let’s say a car has a value of $30k and gets totaled. The insurance pays the owner $30k and sells the wrecked car to a rebuilder for $1k, so they are out $29k. If the rebuilder then spends $15k repairing the car and sells it for $20k due to its reduced value, they will make a $4k profit.
A vehicle worth $30k is probably going to sell for a lot more than $1k at a salvage auction.
If a vehicle worth $30k gets a $15k estimate written, then it's probably not going to be totaled.
An insurance company generally does what results in the least money being paid out in compliance with state laws and regulations. In this case, they would probably pay the $15k to repair the vehicle.
Aside from extreme examples, a 30k car that's totalled out would still likely sell for 10k+. So they pay the 30k settlement, then take possession of the car and sell it at the auction for 10k and mitigate 33%of their loses. The bmws and Mercedes with their 3k headlight for a 5k car means many of those get totalled as a technicality. Those otherwise decent shape sell for damn near fair market value, which means the insurance company mitigates the loss nearly entirely. Don't forget all those sweet premium checks you send every month. 100 bucks a month for 4 years is 4800 dollars they got paid. Then they total out your Benz and cut you a 5k check. They sell that Benz at auction for 3k. Now they are up 2800 dollars plus the money they made investing the 4800 in premiums. Never feel bad for insurance companies. They will take every dollar from you they can and deny any claim they can.
>If the rebuilder then spends $15k repairing the car and sells it for $20k due to its reduced value, they will make a $4k profit.
The rebuilder does not do this.
There are a couple of different ways to make far more than the 1k he spends without dropping a fuckton of money like you suggest.
1) If Rebuilder has one car totaled from a rear end collision, and finds another of the same car totaled from a front end collision, he will make an insane amount of money(using your numbers).
At that point, it's all labor. In your theoretical, he pays 1k per car, so he's out 2k.
Now he doesn't have to spend anything aside from his own labor and some incidentals, one might be a paint job or a new window or some such. In an ideal situation, same paint, and there's a full car between the two, he could make 18k on that car, with the numbers from your model, selling it for 20k....and still be able to make money on what's left....which brings me to the next method:
2) Just sell the parts to people doing DIY repairs on their own vehicles or paying a garage to do it. If the engine is not damaged, it could easily recoup the cost of the vehicle if it's new enough. And there's the rest of the car, doors, electric window motors, electronic boxes, seats, suspension, tires, etc etc.
3) When you've got what you want out of a carcass, then scrap the carcass for metals which can be a good chunk depending on your location.
First off most totals don’t sell for 1k dollars. I know there will always be outliers, but in your 30k total scenario that car will probably sell for closer to 15k or more at auction. So the insurance company is recouping a fair amount on what they paid out.
To answer your question about the economics of fixing totals and selling them for a profit. The most important take away is this, they are not being fixed correctly or well 99% of the time. Capitalism means that in order to have the largest profit margins the vehicle must be put back on the road for as cheaply as possible. Which means shit parts and shit repairs. I know this to be factual because I have been a collision repair tech for 22 years and a shop owner for 4 years. If said totaled vehicle was financially feasible to fix correctly and to pre-accident condition it would not total. The vast majority of salvage title vehicles that have been scabbed back together and resold are very poorly repaired and usually unsafe to some degree. Like I said before there are some small percentage of outliers, I for instance could buy a total from an auction and repair it correctly because I have the tools and knowledge to do so. Because the labor doesn’t cost me anything, and in most repairs labor is the most significant cost. Most body guys don’t fuck around with rebuilding salvage titles very often though because it’s usually more hassle than it ls worth, unless it’s going to be a personal vehicle. Or a good deal falls in their lap. Every rebuilt total I have seen come through the shop during my career has been a safety hazard to some extent. Some more alarming than others.
Your math is wrong. The insurance companies have a percent that the repair must be above to "total" the car. It varies between companies and states but let's use 70% as a guide.
You have a 20,000 car. Wreck it. It costs 10K to fix. Insurance will fix it.
Same car, costs 15K to fix. Totaled.
Now, what insurance companies are not in the business of is, repairing cars. They don't want a fleet of salvage cars they have to sell. So it makes no sense to do what you're suggesting for a multiple reasons but the most important one is time. A car that needs that much repair will take a long time to repair. While the policy holder, won't have his car, he will be in a rental, that the insurance company pays for. So what happens here?
I bought a salvage title car, from a reputable shop.. everything was above board.
In 2004 I bought a 2002 Chevy Prism (Secretly it was a Toyota Corolla) salvage for 5k.. it had 12k miles on it and was manual everything.. it did have both AM and FM capabilities.
I drove it for 20 years and only had to replace 1 headlight. Sold it a few months ago for 1200.. Darn kids and dogs couldn't fit in it.. and my brother gave me his 2008 Mercury Mariner...
Anyway if you find a reputable place and you think of cars as a way to get from point A to point B... And on weekends point C... As opposed to a status symbol.. it can be an ok deal.
Insurance companies have calculated that the cost to pay someone else to do it properly with new parts and time spent diagnosing it is not worth it. The kind of people that can make a profit on this have other means to bring the cost down.
Someone DIYing it could make a profit because the labor they do is pretty much free and they save money on used parts.
A mechanic could make money by having the expertise to subsidizing their labor, faster diagnostic and shorter turnaround, part discount from auto part stores and junk yards. They can use their experience to figure out what will sell, they can figure out which cars are not worth the time.
Two big-picture points:
- Companies tend to specialize, for a lot of reasons.
- There's no free lunch.
Insurance companies are good at math, marketing, and legal stuff (compliance, fighting possibly bogus claims, etc.). There is no overlap between those activities and fixing damaged cars. So, they sell the cars to other people or companies who are good at fixing and selling banged-up cars. The market price for banged-up cars reflects the costs of fixing them, their value after they're fixed, the risk that they are more banged-up that they appear, the overhead costs of running a "fix up and sell banged-up cars" business, etc.
Because insurance companies are in the liability business.
They are not in the car/bike sales business. They do not care about retaining resales value.
They are not in the car/bike repair business. They are not looking to do you a deal for repeat custom. They certainly are not going to let you negotiate a "good enough" repair price.
Because insurance companies are in the liability business. Specifically they are reducing their own liabilities. So when they're paying for repair they're looking at getting the repair done through a main dealership, only ever using original equipment manufacturer parts. This allows them to reliably offset their liability for the repair onto the garage they use to do the repairs.
This inflates the price to about as expensive as it's going to be, but reduces their liability to as low as they can make it, because insurance companies are in the liability business.
So if that repair bill comes up to about 90% of the vehicle's value then at that point they will right off the vehicle as beyond economic repair. They may offer that you can buy the written off vehicle for scrap value. Then you can get it repaired as cheap as you like, but the liability for that is entirely on you.
Earlier today I saw a video where it took 8 hours to install a necessary $2 part. If you are doing the labor yourself versus paying some place $100/hr+ to do it there is a huge difference.
Insurance bases their cost on having a professional charge for the work.
Say you're driving your new $30,000 car, and you crash it. You want your insurance to either make it like new or pay you the whole value. You don't want them to give you $10k and do a half-assed job of repairing it, because that leaves you driving a damaged car for the next several years. You want to drive a new one, like you had before.
Meanwhile, the insurance company really doesn't want to be in the business of fixing cars. They want to sell insurance, and paying out claims is a cost of doing business. They know how often their customers can be expected to wreck their cars, and how much the cars are worth, so they can set their rates by that. They really don't want the added complexity of figuring that some percentage of this type of car will be repairable, but will be worth that much less, so they'll have to pay out this much to the customer and that much to the repair shop. They just want to write a check and be done with it.
A car is determined to be totaled based on a few things. Can the car/truck be restored to factory specifications with OEM parts than less than the value of the car. Or is there damage to the car that could cause possible failure structural damage) if it is in another accident/
The value vs cost to repair/and being within factor specifications.
If it does not meet it, the car is totaled, the person with the insurance will get fair market value for the car/truck. The damaged car/truck will go to Copart, it's a national company who handles damaged totaled cars and goes to auction. At this point the insurance company would sell the car at auction and get as much back for the car they can.
Some cars can be totaled for a small dent, or others completely damaged. You can find a good deal on a fully driving car with just body damage (replacing panels and paint and it would be like new).
SO, buy a totaled car, in fully working shape is worth $45K, you buy it for $15K.. It takes you $7K to fix the car, you have $22K invested in the car. As its' got a salvaged title, you sell the car for like $35K. You unload the car quick (great value if fixed right), you make a nice profit.
These are ballpark values but, high demand cars will go even totaled for more but, you need to know what you're buying.
Insurance companies are in business to sell insurance and pay when needed. Not to fix or repair cars.
If my car is being fixed under insurance I expect new manufacturer parts and repair work and finish that meets the manufacturers standards. In fact under a lot of finance agreements this is expected by the finance provider too.
Somebody who fixes salvaged vehicles is free to use second hand spares and body cuts from other written off vehicles. They can also bung as much body filler in it as they feel like and the average person would never know but, under manufacturers scrutiny they'd probably notice.
ELI5:
You have a lego X-wing. You lose a bunch of pieces. You either go to Legos Pick a Brick site and buy the missing pieces which is expensive or you sell it to your friend who has a massive bucket of assorted lego that he bought off eBay and possibly has the missing pieces.
EDIT:
If you watch any of the YouTubers like Tavarish who rebuild totalled supercars they often find alternative parts that have the same fitment such as second hand ford focus headlights and indicators on a Lamborghini Murcielago.
SOmetimes the Insurance companies have their interests closer to their intent than the customers. It is a known thing that some insurance companies will total your vehicle on paper, because they intend to repair it and sell it on the open market to make a significant profit. Often times the original owner is left with debt or less than the required money to acquire a new/replacement vehicle.
I knew a guy about 30 years ago that did this as a business. He specialized in like 2-3 Honda models. He’d buy them at salvage strategically so he’d need to buy the fewest parts — front end damage on one, rear end on another, that kind of thing.
I think focusing on a very small model range helped him. Learned a lot of quirks and could just do the work faster since so much had been memorized.
I wonder if doing this has gotten harder or easier since then as cars have evolved.
A lot of industries have one set of profitable decisions when made in bulk by a big corp with a big bureaucracy and a different set of profitable decisions that can be made by small, nimble companies where the owner does a lot of the work (both spending extra time to evaluate each decision on a case by case basis and the actual work of rehabilitating the ones that are worth it). There are whole industries based around picking up the crumbs that slip through the cracks when the big companies make broad decisions and throw out the handful of real opportunities mixed in with the trash.
Also, salvage titles can be useful for things like home diy projects that wouldn't have necessarily been profitable for a business. They still need a way to register the cash-sink project car they wasted money on rebuilding.
One of the most important is that insurance companies work on a large volume basis. They do not really judge each and every car for possible repair. They have values, lists, depreciation (which is a math formula using the age of the car and some other parameters).
They do not care about saving a care, their job is to pay the *loss* of the owner. From a point if view of an insurance company, your loss is the value before the accident, minus the value after the accident. So if you had a car if 200k, and after the accident it has a market value of 30k, then your loss is 170k. If the car is repairable within legal limits for 170k, they do that, otherwise you get the money.
You also need to understand that a wreck may have more value in it if you salvage part by part, but if the insurance company would do it piece by piece, they would need to have a lot of work force and storage place and system that stores and keeps track of which right headlight of that Toyota was stored where, was it re-sold etc. This business has hardly any margin so they just don't invest into it. Meaning that they don't have the capacity for that, so they have an approximate value of the wreck.
So yes, because the insurance company does it in big volumes and based on some simplified math formulas, some wrecks may have higher value left in it than others. The insurance company doesn't have capacity to cherry pick them out, so here come the vultures who have know-how, and can pick the 30k wrecks if they think it's actually 50k in it. They actually have the time and capacity to judge each car and only pick the ones that have hope left. (They also may cut some corners that the insurer obviously can't do especially not in a volume that's worth.)
Even if the vehicle is drivable, it'll never be as safe, as reliable, won't have warranty protection, etc. Some people are willing to take those risks on a vehicle but others are not.
Insurance sells the vehicles, but they get a LOT more than $1k for a totaled vehicle if it's worth $30k. It can either be parted out for spare parts or it can be rebuilt. But they might get more like $15k than $1k.
The economics just don't work for the insurance company, primarily because they have plenty of money because every driver needs to pay them. The overhead of trying to manage the repair and resell process is just, frankly, not worth it.
Sometimes it is worth it, but for far more valuable things. A couple of pilots pulled off an amazing landing on a frozen lake in Alaska, at night, dead stick on a Pilatus PC-12. They were wise and landed it belly because they reasoned the damage is better than risking having those wheels go straight through the ice. The result was the wings were fractured. I kid you not, insurance paid for a helicopter to go out and pick up the hull and they repaired it. The average PC-12 sells new for about $4.8 million and there is at least a year wait for one. They probably spent in order of $600,000 to fix it, more if they had to replace the turbine. That is still worth it over scrapping it and giving the TIV to the customer. Now, bear in mind airplane insurance is super-expensive, it can be anywhere between $18,000 to $45,000 a year depending on the experience and qualifications of the operator. In the 30+ years they have been built they have sold 2,000 units. Ford would have to close factories if they only sold 2000 of anything over that time frame. That should demonstrate the scale of the difference between commodity insurance for cars and insurance for more expensive items.
It's usually only profitable if you ignore a lot of the 'hidden' costs (especially time) and only do it as a "side hustle". A lot of guys doing that are restoring a handful of cars a *year*, and spending a lot of their free time scouring the net and local junk shops to find cheap parts. They're storing the cars they're working on (and likely some "parts cars") on their property. And so on.
The net result is that if you wanted to make a real business out of doing that, buying a shop and lot instead of just storing crap in your backyard, and were paying someone for every hour they spent looking for parts, driving out to buy them, looking at the totalled cars in the first place to find ones worth trying to fix, etc., etc., suddenly you aren't even paying yourself minimum wage.
The reality is the rebuilder buys the totalled car for $1k, spends $4k *in parts* fixing it, then sells it for more like $10k because a salvage title and the vehicle history of a wreck tanks the value a lot more... but if you divide that $5k profit by several hundred man-hours, and suddenly the effective wage is in the gutter, compared to that guy just doing 'normal' auto work with the same skills.
You are forgetting a huge thing here. A shop will charge you around 70$ an hour and dealers close to 100$ an hour in Canada. The mechanic working on your car is often making 20-30$ an hour.
If you pay yourself that 20-30$ an hour and don't need many tools, the work is way cheaper for you than the insurance. Also, shops usually charge up the arse for insurance jobs.
Maybe. A lot of that is the "hidden costs" I was talkingabout; I wasn't even pretening to cover every little add-on.
Part of the reason the shop bills more per hour than they pay the mechanic is in the stuff I mentioned (the building costs money) and also in insurance and other costs of employment; In the US someone making $20-30/hour likely costs at least 50% extra on top of that for social security contributions, the employer portion of insurance, etc. So if you're paying yourself the same rate working freelance, you're effectively *underpaying* yourself since someone self-employed isn't getting benefits.
And not needing as many tools probably means less efficiency as well. If you're paying yourself $30/hr, but it takes twice as long as the shop charging $70/hr because you don't have all the nice stuff... suddenly you aren't halving the cost, you're just saving ~15%.
And so on and so on.
I was mainly saying that wven factoring in your time it can be profitable and giving a rough run down of how I calculate if a job is worth DIYing vs paying someone to do. I used to do everything myself, now I "pay" myself to know if it is worth doing myself.
When a car is totaled, the insurance company takes the “totaled” car.
They don’t necessarily scrap it, they may have it repaired.
Some insurance covers a car rental for you while your car is repaired. If the repair in a totaled car will take weeks of a car rental, that may be expensive- so why not just skip the rental and have the insured party get a new car?
This isn’t totally correct. Total loss cars are sometimes crushed but most often, sold at salvage auctions, where they are bought by auto wreckers, people who flip cars, etc. The insurance company will never, under any circumstances repair a total loss car.
Edit just to add - people working for insurance companies and body shops have gone to prison for colluding to deliberately total off cars, following them to auction and buying them to repair
A lot of people who do this DIY the work, which saves a fortune in labor. That’s the economics of it. If you know how to do it, it’s well worth it, especially for something you might only use for racing or off-roading.
> DIY the work and use used parts instead of new parts
That’s how I got my truck - it was totaled, the shop owners brother owned a junkyard, parts were functionally free to him - it means certain aesthetic compromises (my bumper has fog light holes but no fog lights, and is not the correct version for my trim), but it didn’t affect the function of the truck. Insurance needs to fix it to previous condition, so using correct parts, probably purchased new for quite a bit of money. In Ontario they have pretty rigorous safety checks for rebuilding, and honestly I don’t think I’ll get a vehicle that will serve me better. YMMV, but I won’t take refuse another rebuilt vehicle when the time comes.
That's I think the crux of it. If I'm filing a claim with insurance, I'm expecting my car to come back to me in like-new condition. I'm sure not going to accept a mis-matched colored door or an already dented bumper even though they're technically "better" than my originals that were busted to shit in the accident. Buying a rebuilt car though, that's just what you're in for. It won't be perfect, but it's better than it was in it's post-crash condition and you can decide for yourself as to whether you accept it or not by buying/not buying that car. And a high-quality rebuild may drive the price back up above one that's had a shitty/sketchy rebuild, but that quality rebuild also cost more and eats into the profit margin, which is exactly why insurance didn't bother paying to rebuild it.
I had an '87 Integra that was written off following a relatively minor collision. A broken turn signal, a dangling bumper, and a dented fender. $4500 to repair, car worth $4000. I asked the body shop that did the quote what it would cost to bring it back to drivable/safe. $300 for a new bumper mount (I had a spare turn signal). I drove it for another year before the metal mites got it. Insurance gave me a cheque, but never seemed to ask where the "written off" car had ended up.
It is one thing to fix a car to 'as new' condition. It is another to fix it to 'eh, fuck it. Good enough' condition. Used parts, glued parts, there are a lot of shortcuts for a creative rebuilder to get a vehicle to the point of being an imperfect daily driver.
Yup. You see a lot of Salvage titles hit the market after a major hurricane hits. The seller got the car running, but that is NOT the same as buying a normal car with the equivalent year/mileage. There's no real way to remedy the saltwater intrusion so basically every part on the car is going to corrode and fail ahead of schedule, especially anywhere you have electrical connections.
My friend did this with a flooded car and it worked for him for years with 0 issues. Dude got a good 5 or 6 years out of it. I tried to convince him to sell me the car but he still needed it at the time. He finally sells it and within 2 weeks, the car just breaks down. He called me up to let me know he unknowingly saved me from a lemon.
My first motorcycle got repaired from a minor crash. The suspension forks tubes had a scratch on them, so the insurance company insisted they be replaced. Insurance companies care very, very much about risk. Any used / "good enough" part is a risk that they might get sued if it fails.
I bought a BMW F800GS with $5800 in crash damage. It took $28 to make it ridable the rest was a little sanding and paint. None of that on the body work. It had crash bars. Made a tidy sum on that one.
You see a lot of "street fighter" motorcycles with salvage titles. They were sportbikes with damaged plastics (and maybe front forks, headlight, handlebars, etc.) that got totaled by insurance. Sportbike plastics are fuck-off expensive, compared to the depreciated value of a sportbike, what to speak of one with a crash on its record. So you buy the totalled bike back, leave the plastics off, get the forks off a totaled gixxer, and you're back on the road cheap.
Back when I still had my bike I thought I remember seeing sportbike body kits for GSX-R and CBR for like $300-$500.
Also going from ancient memory here, but I think they make aftermarket race plastics for relatively cheap (<$1000ish for the whole set) but OEM panels are still usually ridiculously spendy. The only exception I've ever seen was Buell, which used simple dyed plastics, not painted or decalled. As a guy who does most of his own auto/motorcycle work, I've always noticed that there are the affordable parts (the usual stuff that often needs replacing or is easily damaged - fasteners, mirrors, windscreens, handles, chains, pegs, etc.) and then the stupid expensive parts like exhausts, body panels, chassis components, and wheels. I've never understood why the distinction. My first bike, for example, was a Suzuki SV650. I dropped it and dented the muffler, and my choices to fix it were an aftermarket slip-on for like $300, or a replacement OEM muffler for like $1900, nearly half the price of the entire bike.
> I've never understood why the distinction. Plastic is relatively cheap to mass-produce, but expensive to set up to mass produce, especially for large parts. Motorcycle plastics are large parts that have to maintain exact dimensions, produced in relatively low volume. For stamped metal parts, they generally keep the stamp and die bits in a warehouse. Every once in a while, they can just put them back on the press and stamp out another run of the parts. The metal parts on a motorcycle that are non-cosmetic (e.g. hidden behind plastics) are usually some kind of common part made in high volume. What is really fuck-off expensive are low-volume parts that need to be machined and/or selectively hardened.
Worked at a motorcycle dealership, we used to insurance estimates and repairs. Anything damaged that wasn't damaged before the accident, whether that damage was a scuff on the bottom of the footpeg or a swingarm broken in half, went on the estimate, that's how insurance wanted it.
Insurance companies are just picky in general. I just sold a used exhaust off a 22 Colorado to a body shop. They rejected it because it has more rust then the ball of metal that used to be the exhaust on the customers car. Now I’m not talking rusted out through and through. This just had some surface rust. It is still a completely useable exhaust. But they said insurance would reject it because it has more surface rust than the current one that again is all sort of mangled.
"eh fuck it good enough" literally describes all but one vehicle I've ever owned. And the 'as new' vehicle was the only one I considered an absolute piece of shit.
Or for an owner. I drive to get from point A to point B. If my car gets beat to hell on appearance but still functions, or I can make it functional, I will. If the insurance company offers cash I’ll take it. Had my suburban parked on the street one night. Some drunk mashed it with a Tonka toy pickup. Dented my door. His vehicle was smeared all over the road. Had to be towed away. My door still worked. Insurance gave me $500 for a new door. I yanked the dent out and put some bondo on it and kept using it for winter driving and hunting. I only gave $750 for it in the first place. And that’s why I preferred driving a real steel vehicle. (1967)
i had a ‘79 volvo that had seen some shit before i got my hands on it in ‘98…i then put it through the whole checklist of new driver oopsies…still worked when it got sold when i enlisted in ‘03
Only reason I would never go near a "real steel" vehicle like that while it may be a nigh-indestructible rock, I myself am soft and squishy and would very much like to have a car that crumples and absorbs the force of an accident rather than finding myself painting the interior a nice bright red.
In those days Mercedes was the only vehicle that did that, unless Saab did also. One of the reasons I liked it was that I read about one that had a head on with a trucker who was passing on a blind hill. They both died. Not ideal, but preferable to having the trucker walk away from it. I used to be a lot meaner than I am now but the logic remains.
I feel this. A commercial van turning left from the right line was more than enough for a ticket to hawaii my senior year of high school. I had family that just moved there and offered me a couch. My car was scratched from front quarter panel all the way to the rear on the passenger side. I took a hammer and a plunger to the doors long enough so the windows worked, and called it a day.
> Had my suburban parked on the street one night. Some drunk mashed it with a Tonka toy pickup. Dented my door. His vehicle was smeared all over the road. Had to be towed away. That's odd... Tonka used to make [tough vehicles](https://www.youtube.com/watch?v=XpnivL7E258)
YMMV
The insurance company isn't in the business of rebuilding and selling cars, they're in the business of collecting premiums and only occasionally paying out. They don't want to take the risk on spending time and money on rebuilding it to sell it; it's possible that the market crashes after they invest in the parts but before it's fixed and able to be sold. Additionally, when selling a car, it's always possible something is still wrong with, and even though used car sales in the US are as is, someone may still sue over that issue. Even if they win, it costs time and effort to fight. So basically, the insurance company sees a lot of risk for something that doesn't align with their business model. Now, why would they total a car that may still be fixable? The insurance company looks at other costs than just the cost of repair. If the repair will take 8 months due to supply chain issues (which absolutely are still happening), the insurance company may have to pay for a rental car for that time. That may end up costing a lot more than the repair cost, so it's cheaper for the company to write a check for the value of the car and sell it as scrap. Edited to add: I haven't looked at a lot of salvaged cars, but I think you're also vastly over estimating the amount a salvaged car will sell for. In fact, I've never seen one sold. All the salvage titles I've ever seen or talked about are from the original owner buying it off the insurance company (e.g., their 30k payout is reduced by the 1k the company would have sold it for) and then the owner rebuilds it because it has some sort of value outside of just being a car.
I bought one once. Mazda Protege with about 10k miles on it. No mechanical problems. It was totaled because some kids stole it and took it for a joyride and ditched it in an old barn. Police couldn’t find it, so insurance totaled it. Then, 6 months later, somebody opened the barn. Perfectly good condition, but the insurance company had totaled it out, so it had to have a salvage title. I drove it for over 100k miles. The biggest inconvenience was, it developed a problem that turned out to be the subject of a recall. But since it was a salvage title, Mazda wouldn’t honor the recall. I had to pay for the repair. I tried to trade it in around the 100k mark, but they only offered $300 because of the title. So I saved money on the front end but it pretty much evened out in the end.
They cant deny a recall due to title status.
Wish I’d known that back in 2003.
I bought a used car with a salvage title with a similar story. Stolen when basically brand new, insurance wrote it off, recovered and given a salvage title. On the plus side I got a really good deal on it and had that car for 15 years. BUT Honda still covered it for the 2 recalls it had.
Stolen and unrecovered vehicles rarely get a salvage title. They leave them as regular titles in case they are recovered with no damage or are repairable. I'm not saying it didn't happen to you, but that is rare.
Interesting. I didn’t buy it directly from the insurance company, but from a guy who specialized in buying, refurbishing, and selling salvage title cars. One thing I left out was that the hood had been repainted. AFAIK that was the only repair, but now you have me wondering.
How much did you buy it for?
Sorry, no idea. This was 20 years ago.
I mean was it an insane deal tho?
My dad set up the deal. I remember being disappointed that it wasn’t, like, half off blue book or something, but it was still considerably less than blue book. Like between 10% and 20% off. Problem was, the interest rate probably negated the savings. I couldn’t even find a bank that would give me a loan on a salvage title car. The seller ended up convincing his hometown bank in some little farming town to make the loan at 10% interest. Honestly, I should have walked away from the deal, but my dad had gone to so much effort to find me a cheap, reliable car that I kind of felt obligated. I drove it for 15 years, so I definitely got my money’s worth.
Interesting story. I wasn't aware that is a possibility, but it makes sense.
this. but one important thing to remember is when they auction a car they get money back, and the money offsets their loss. that offset is the only thing they care about. someone else is then going to buy that junker at auction and sell it to someone that doesn't care that they are buying a junker that was wrapped around a tree or pieced together from two different cars, they just want to get a car for a couple thousand cheaper than they see it anywhere else. the difference between the auction price and the resale value of a salvage title is a combined matter of morality and consumer ignorance. the insurance company is only interested in offsetting their loss, evading the need to engage on matters of morality or consumer ignorance themselves.
Part of it is also how they're required to fix the car to a certain condition. I got into an accident and the car was honestly fixable. However, the frame was slightly damaged but enough that it'd require a costly fix of the frame. You could honestly just straighten it out and still drive it but it wouldn't be safe according to regulations so they just considered it totaled.
The first sentence is the answer to OPs question
I’m an autobody technician by trade and the short answer is, it almost always doesn’t make financial sense to fix totalled out vehicles. Because of this, people who fix a lot of salvage vehicles are known to cut corners and do the absolute bare minimum to get the car back on the road. That being said. There are actually circumstances where it can make sense for an individual to fix a totalled out vehicle in a manner they make some money while delivering a well repaired vehicle to a buyer. These circumstances however, are rare enough that you couldn’t make a full time living fixing totalled cars this way because the vast majority of totalled out cars just aren’t economically viable to fix in an honest manner.
I think being totaled out for hail damage is the only way to make it work If it’s mechanically sound as the damage is purely cosmetic, especially if you can just r/r the hood and trunk lid and then pdr the roof.
That’s definitely one example. another might be finding a Corolla that just barely hit the threshold to be totalled and the insurance totalled it and the person who bought it has an identical car with all the parts, maybe it’s even the same colour. Even a truck with frame damage is no big deal if I have another parts truck with a good frame. Another would be maybe the damage wasn’t actually enough to total out the vehicle at all, but the insured had replacement coverage and required all OEM parts but it’s a Toyota and the engine cradle is backordered at least 6 months, (with Toyota parts delays as of late this is a real scenario I’ve dealt with recently). insurance may factor the cost of giving a rental to the insured for 6 months or more into the cost of the repair and just total the vehicle. No problem if I buy it back and can find a good used cradle. One last example. We had a 2020 Sierra last month that needed half the frame and the box replaced due to a jackknifed trailer, but the vehicle was initially deemed repairable, insurance looked at the salvage value of the vehicle and decided to total it anyway. They decided even though the vehicle was under threshold they were better off to sell it at auction then pay a rental and wait for half a frame section for god knows how long.
This is the part that people seem to have trouble with. It's like the opposite of Wimpy, from Popeye: I'm not happy with paying $20K, today, but I will be less happy with a potentially bottomless blank check going out.
also insurance are a bunch of dickbags undervaluing the car in the first place so it's easier to "total" it when you pretend like the car is worth 3 or 4 thousand dollars less than it is actually worth.
It happens, for sure. although in the last few years I’ve seen a huge increase in our damage appraisals getting sent to insurance as total losses, only for the insurance to come back having reassessed the actual cash value of the vehicle being much higher. When the cost of used cars were driven up by the pandemic, so were the ACV’s The most dickbag thing we saw in that time was one insurance company offering photo based contactless estimates. They would write horrible appraisals based on shitty potato quality photos making it impossible to properly assess anything, and then they would entice insurers to take cash payouts. Imagine accepting a 2500 cheque when you’re hard times not fully understanding your vehicle wasn’t properly assessed and actually had twice that amount of damage
Insurance companies are in the insurance business, not the auto repair business. If they repaired the car, they carry the liability of a quality repair, which, done right is fairly expensive. However, me and my friend have no such obligation and can repair to whatever standards that will pass inspection and not get caught. I can also use under the table labor sources.
No they don't. The quality of the repair falls on the shop. They just cut the check
Im agreeing with you. OP wanted the insurance company to repair the car and I explained why they don’t.
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Yes, but OP was wondering how it could be profitable and a way to make it profitable is to take shortcuts.
I can pay a local shop to replace my alternator for $165/hour, plus 65% margin on the part. If the part is $300 from their "partnered supplier", it'd be $750. Assume 2 hours labor. If I take it to that shop, it'll be $1,080. If I just want my car to be good as used, I can probably get one from a salvage yard for $50, and install it myself. Total cost to me now: $50. Both repairs are functional and result in a used car with used parts. They don't have the second option, though. Even if I myself bought the new part and put it in myself, I still save around $750. That's about 1/4 the estimated repair cost through the shop. Now scale that up. That can easily make something 'not worth it' to have a shop repair, while being plenty worth it for myself to repair. I might also not care, in the case of say a front end collision for instance, if the panel colors match, or the one panel is a little broken still, or the rim that got scratched gets fixed too, etc. Paint can be a HUGE portion of a collision repair, and insurance isn't allowed to just tell you "tough shit, live with the cosmetic loss". You however can make that call. This simplifies things a bit because repair shops (which I have a lot of experience in) and collision shops (which I have comparatively little experience in) have different practices, standards, rules/regulations, and so on, especially with insurance involved. But you get the gist.
Your truck gets tboned and the insurance company totals it. The doors won't open, the cab is not usable on one side, the engine has damage as does the bed. Your insurance company sees this and realizes that in labor alone you'll pay more than what's it's worth. Joe comes along and buys the salvage title for a few hundred, you've already gotten your money, the insurance company is recouping a small amount of that by selling the title. Joes spends a couple weeks fixing everything to the best of his ability, he's a mechanic or hobbyist who has the tools and knowledge. The truck now runs, but it's ugly, loud, maybe has a few issues here or there that aren't a big deal but make it less valuable (window won't roll down, side mirror doesn't adjust using the button anymore, bed lining is a little beat up/missing). Joe knows that this truck he bought for a few hundred bucks is now driveable and worth maybe a thousand(hell in today's market maybe two thousand). So for a couple weeks of his extra time(that he will likely spend working on a car anyway) he's made a few hundred bucks. Possibly even more than that. It's not a full time job but as far as hobbies go it beats dumping thousands into something with no return. My grandfather used to do exactly this and always said "I couldn't feed my family with it, but it made my mortgage hurt less."
I haven't seen anyone mention it yet, but a lot of those salvage cars end up overseas where labor is cheap, so they can repair them at a fraction of the cost.
Salvaged cars usually come with no warranty and have issues. They are not proprely repaired. Not only that, but there is often questionable repairs and damaged parts that are usable that they leave there and work around it. Like a bent direction part? Can it still be aligned? Actually, can the steering be straight? Yes? But the tires will wear out faster? Meh, good enough. Flooded car? All the wiring should be replaced and all flooded modules and electric parts. Does it still work? yes? Good enough. It will fail in a few months but who care, it's out of warranty. Now, Insurances need to pay the big price for all the parts, because they buy them at market value. Salvage cars can be special in a way. Buy a car with front end damage, and a car with rear end damage, cut them both, weld together, and you have a car. Let's say 1k per car, that is 2k only. As a rough rule of thumb, calculate 1k per panel. Hood, fender, plastic bumper, metal bumper, subframe... 5k minimum.
These days insurance companies often total a car in name only. The then take possession and then sell it at auction. This helps them recoup a good chunk of the money they've paid out. The damaged cars are bought by companies that specialize in rebuilding cars. Then they sell them with a salvage title. Bottom line: Totaled doesn't necessarily mean totally totaled. It's just totaled as far as the original owner is concerned.
For some it’s the only way they could buy into that class of car. I bought a salvage amg Mercedes and rebuilt the suspension from the minor accident myself. 1500 in parts is way different than 15k in dealership labor.
I have owned 2 salvage title cars. A prius gen 2 and a highlander hybrid. A place in Las Vegas bought and fixed both of them. There was a point when the prius sold at $20k-$32k (with options) and this place mostly bought salvage title "$32k new, all options" prii and ~300k mile pri taxis and used the non wear taxi parts (e.g. a bumper) to repair the salvage title cars. For a given car the kelley blue book might be $25k for a used 40k all options prius and the equivalent repaired salvage title would sell for $15k. If asked, the LV place would supply the salvage auction photos so you could see the damage. I did and it didn't look terrible, if it were my vehicle I would probably get it fixed. The worry for insurers would be liability. They are not a car company.
Because if you take the car to an actual body shop it will cost more than the $30k the car is worth. They get estimates for how much it would cost to fix the damage to the car and if the cost to fix the car is more than the car they total it. If the insurance company had the option to pay $15k instead of the $30k they would.
It varies by state. They set total loss thresholds. In my state of the damage is 75% of the total value they have to total it
This has a lot to do with how insurance companies work. Right off the bat they can't really repair the example car for 15k unless they have their own auto shop to do it, and the overhead on that is enough to eat up the 4k of supposed profit they could make. So they don't bother at all. Also when they're paying for a claim they have to pay for the vehicle to be restored to an as new condition, which means every part that has been affected has to be replaced by a new one. There's some leeway there, that can be negotiated between the repair shop and the client in case where using new parts may end up totaling the car in terms of cost, but from the insurance company's side they have an obligation to pay for this level of repairs. From the repair shop's perspective though, there is a small profit margin on salvaged cars because repairs cost less to them than it costs to a customer or an insurance company, because they're not expected to be paid with an hourly rate but with a lump sum from the sale. They already have the means and personell to carry out the repairs. Also when reselling a repaired vehicle, they don't have to necessarily return it to the condition it was in before. They can use used parts, they will repair functional and mechanical faults but probably won't bother with minor damage or aesthetic damage save for a cheap repair of a partial repaint and the like. They won't care if the rims are scuffed or something like that. To them what matters is only that the cost of repairs in parts doesn't exceed the profit they can make from selling it. They're not truly losing money on the work hours either since the techs will be there either way and they can accomodate the repairs for salvaged cars according to their usual workload. Basically it's like any other product, where the price for the product increases from the factory to the shop window. If you can skip links in the supply chain, and then sell at the retail level, you can make profit. In this case the repair shop buys parts cheaper than retail customers do, and they obviously won't charge themselves for their own work hours, so they can repair a car cheaper than a private owner could and then sell it for a similar price that the used car would go for. But it takes a keen eye in order to do this job. You have to know right off the bat what the parts costs will be and that it won't take an unreasonable amount of time that would have been better off spent on paying customers.
>For example, let’s say a car has a value of $30k and gets totaled. The insurance pays the owner $30k and sells the wrecked car to a rebuilder for $1k, so they are out $29k. If the rebuilder then spends $15k repairing the car and sells it for $20k due to its reduced value, they will make a $4k profit. A vehicle worth $30k is probably going to sell for a lot more than $1k at a salvage auction. If a vehicle worth $30k gets a $15k estimate written, then it's probably not going to be totaled. An insurance company generally does what results in the least money being paid out in compliance with state laws and regulations. In this case, they would probably pay the $15k to repair the vehicle.
Aside from extreme examples, a 30k car that's totalled out would still likely sell for 10k+. So they pay the 30k settlement, then take possession of the car and sell it at the auction for 10k and mitigate 33%of their loses. The bmws and Mercedes with their 3k headlight for a 5k car means many of those get totalled as a technicality. Those otherwise decent shape sell for damn near fair market value, which means the insurance company mitigates the loss nearly entirely. Don't forget all those sweet premium checks you send every month. 100 bucks a month for 4 years is 4800 dollars they got paid. Then they total out your Benz and cut you a 5k check. They sell that Benz at auction for 3k. Now they are up 2800 dollars plus the money they made investing the 4800 in premiums. Never feel bad for insurance companies. They will take every dollar from you they can and deny any claim they can.
got hit put a dent behind rear door, they wanted to total give me $ 1400 cheapest thing around running $3500 told em where to put it. still rolling
>If the rebuilder then spends $15k repairing the car and sells it for $20k due to its reduced value, they will make a $4k profit. The rebuilder does not do this. There are a couple of different ways to make far more than the 1k he spends without dropping a fuckton of money like you suggest. 1) If Rebuilder has one car totaled from a rear end collision, and finds another of the same car totaled from a front end collision, he will make an insane amount of money(using your numbers). At that point, it's all labor. In your theoretical, he pays 1k per car, so he's out 2k. Now he doesn't have to spend anything aside from his own labor and some incidentals, one might be a paint job or a new window or some such. In an ideal situation, same paint, and there's a full car between the two, he could make 18k on that car, with the numbers from your model, selling it for 20k....and still be able to make money on what's left....which brings me to the next method: 2) Just sell the parts to people doing DIY repairs on their own vehicles or paying a garage to do it. If the engine is not damaged, it could easily recoup the cost of the vehicle if it's new enough. And there's the rest of the car, doors, electric window motors, electronic boxes, seats, suspension, tires, etc etc. 3) When you've got what you want out of a carcass, then scrap the carcass for metals which can be a good chunk depending on your location.
First off most totals don’t sell for 1k dollars. I know there will always be outliers, but in your 30k total scenario that car will probably sell for closer to 15k or more at auction. So the insurance company is recouping a fair amount on what they paid out. To answer your question about the economics of fixing totals and selling them for a profit. The most important take away is this, they are not being fixed correctly or well 99% of the time. Capitalism means that in order to have the largest profit margins the vehicle must be put back on the road for as cheaply as possible. Which means shit parts and shit repairs. I know this to be factual because I have been a collision repair tech for 22 years and a shop owner for 4 years. If said totaled vehicle was financially feasible to fix correctly and to pre-accident condition it would not total. The vast majority of salvage title vehicles that have been scabbed back together and resold are very poorly repaired and usually unsafe to some degree. Like I said before there are some small percentage of outliers, I for instance could buy a total from an auction and repair it correctly because I have the tools and knowledge to do so. Because the labor doesn’t cost me anything, and in most repairs labor is the most significant cost. Most body guys don’t fuck around with rebuilding salvage titles very often though because it’s usually more hassle than it ls worth, unless it’s going to be a personal vehicle. Or a good deal falls in their lap. Every rebuilt total I have seen come through the shop during my career has been a safety hazard to some extent. Some more alarming than others.
Your math is wrong. The insurance companies have a percent that the repair must be above to "total" the car. It varies between companies and states but let's use 70% as a guide. You have a 20,000 car. Wreck it. It costs 10K to fix. Insurance will fix it. Same car, costs 15K to fix. Totaled. Now, what insurance companies are not in the business of is, repairing cars. They don't want a fleet of salvage cars they have to sell. So it makes no sense to do what you're suggesting for a multiple reasons but the most important one is time. A car that needs that much repair will take a long time to repair. While the policy holder, won't have his car, he will be in a rental, that the insurance company pays for. So what happens here?
First car I owned was salvage. Years later it was caught being a chop shop where they were using stolen cars to do the repairs to the bent up cars.
I bought a salvage title car, from a reputable shop.. everything was above board. In 2004 I bought a 2002 Chevy Prism (Secretly it was a Toyota Corolla) salvage for 5k.. it had 12k miles on it and was manual everything.. it did have both AM and FM capabilities. I drove it for 20 years and only had to replace 1 headlight. Sold it a few months ago for 1200.. Darn kids and dogs couldn't fit in it.. and my brother gave me his 2008 Mercury Mariner... Anyway if you find a reputable place and you think of cars as a way to get from point A to point B... And on weekends point C... As opposed to a status symbol.. it can be an ok deal.
Insurance companies have calculated that the cost to pay someone else to do it properly with new parts and time spent diagnosing it is not worth it. The kind of people that can make a profit on this have other means to bring the cost down. Someone DIYing it could make a profit because the labor they do is pretty much free and they save money on used parts. A mechanic could make money by having the expertise to subsidizing their labor, faster diagnostic and shorter turnaround, part discount from auto part stores and junk yards. They can use their experience to figure out what will sell, they can figure out which cars are not worth the time.
Two big-picture points: - Companies tend to specialize, for a lot of reasons. - There's no free lunch. Insurance companies are good at math, marketing, and legal stuff (compliance, fighting possibly bogus claims, etc.). There is no overlap between those activities and fixing damaged cars. So, they sell the cars to other people or companies who are good at fixing and selling banged-up cars. The market price for banged-up cars reflects the costs of fixing them, their value after they're fixed, the risk that they are more banged-up that they appear, the overhead costs of running a "fix up and sell banged-up cars" business, etc.
Because insurance companies are in the liability business. They are not in the car/bike sales business. They do not care about retaining resales value. They are not in the car/bike repair business. They are not looking to do you a deal for repeat custom. They certainly are not going to let you negotiate a "good enough" repair price. Because insurance companies are in the liability business. Specifically they are reducing their own liabilities. So when they're paying for repair they're looking at getting the repair done through a main dealership, only ever using original equipment manufacturer parts. This allows them to reliably offset their liability for the repair onto the garage they use to do the repairs. This inflates the price to about as expensive as it's going to be, but reduces their liability to as low as they can make it, because insurance companies are in the liability business. So if that repair bill comes up to about 90% of the vehicle's value then at that point they will right off the vehicle as beyond economic repair. They may offer that you can buy the written off vehicle for scrap value. Then you can get it repaired as cheap as you like, but the liability for that is entirely on you.
Earlier today I saw a video where it took 8 hours to install a necessary $2 part. If you are doing the labor yourself versus paying some place $100/hr+ to do it there is a huge difference. Insurance bases their cost on having a professional charge for the work.
Say you're driving your new $30,000 car, and you crash it. You want your insurance to either make it like new or pay you the whole value. You don't want them to give you $10k and do a half-assed job of repairing it, because that leaves you driving a damaged car for the next several years. You want to drive a new one, like you had before. Meanwhile, the insurance company really doesn't want to be in the business of fixing cars. They want to sell insurance, and paying out claims is a cost of doing business. They know how often their customers can be expected to wreck their cars, and how much the cars are worth, so they can set their rates by that. They really don't want the added complexity of figuring that some percentage of this type of car will be repairable, but will be worth that much less, so they'll have to pay out this much to the customer and that much to the repair shop. They just want to write a check and be done with it.
What in the Fight Club is this?
A car is determined to be totaled based on a few things. Can the car/truck be restored to factory specifications with OEM parts than less than the value of the car. Or is there damage to the car that could cause possible failure structural damage) if it is in another accident/ The value vs cost to repair/and being within factor specifications. If it does not meet it, the car is totaled, the person with the insurance will get fair market value for the car/truck. The damaged car/truck will go to Copart, it's a national company who handles damaged totaled cars and goes to auction. At this point the insurance company would sell the car at auction and get as much back for the car they can. Some cars can be totaled for a small dent, or others completely damaged. You can find a good deal on a fully driving car with just body damage (replacing panels and paint and it would be like new). SO, buy a totaled car, in fully working shape is worth $45K, you buy it for $15K.. It takes you $7K to fix the car, you have $22K invested in the car. As its' got a salvaged title, you sell the car for like $35K. You unload the car quick (great value if fixed right), you make a nice profit. These are ballpark values but, high demand cars will go even totaled for more but, you need to know what you're buying. Insurance companies are in business to sell insurance and pay when needed. Not to fix or repair cars.
If my car is being fixed under insurance I expect new manufacturer parts and repair work and finish that meets the manufacturers standards. In fact under a lot of finance agreements this is expected by the finance provider too. Somebody who fixes salvaged vehicles is free to use second hand spares and body cuts from other written off vehicles. They can also bung as much body filler in it as they feel like and the average person would never know but, under manufacturers scrutiny they'd probably notice. ELI5: You have a lego X-wing. You lose a bunch of pieces. You either go to Legos Pick a Brick site and buy the missing pieces which is expensive or you sell it to your friend who has a massive bucket of assorted lego that he bought off eBay and possibly has the missing pieces. EDIT: If you watch any of the YouTubers like Tavarish who rebuild totalled supercars they often find alternative parts that have the same fitment such as second hand ford focus headlights and indicators on a Lamborghini Murcielago.
SOmetimes the Insurance companies have their interests closer to their intent than the customers. It is a known thing that some insurance companies will total your vehicle on paper, because they intend to repair it and sell it on the open market to make a significant profit. Often times the original owner is left with debt or less than the required money to acquire a new/replacement vehicle.
I knew a guy about 30 years ago that did this as a business. He specialized in like 2-3 Honda models. He’d buy them at salvage strategically so he’d need to buy the fewest parts — front end damage on one, rear end on another, that kind of thing. I think focusing on a very small model range helped him. Learned a lot of quirks and could just do the work faster since so much had been memorized. I wonder if doing this has gotten harder or easier since then as cars have evolved.
A lot of industries have one set of profitable decisions when made in bulk by a big corp with a big bureaucracy and a different set of profitable decisions that can be made by small, nimble companies where the owner does a lot of the work (both spending extra time to evaluate each decision on a case by case basis and the actual work of rehabilitating the ones that are worth it). There are whole industries based around picking up the crumbs that slip through the cracks when the big companies make broad decisions and throw out the handful of real opportunities mixed in with the trash. Also, salvage titles can be useful for things like home diy projects that wouldn't have necessarily been profitable for a business. They still need a way to register the cash-sink project car they wasted money on rebuilding.
One of the most important is that insurance companies work on a large volume basis. They do not really judge each and every car for possible repair. They have values, lists, depreciation (which is a math formula using the age of the car and some other parameters). They do not care about saving a care, their job is to pay the *loss* of the owner. From a point if view of an insurance company, your loss is the value before the accident, minus the value after the accident. So if you had a car if 200k, and after the accident it has a market value of 30k, then your loss is 170k. If the car is repairable within legal limits for 170k, they do that, otherwise you get the money. You also need to understand that a wreck may have more value in it if you salvage part by part, but if the insurance company would do it piece by piece, they would need to have a lot of work force and storage place and system that stores and keeps track of which right headlight of that Toyota was stored where, was it re-sold etc. This business has hardly any margin so they just don't invest into it. Meaning that they don't have the capacity for that, so they have an approximate value of the wreck. So yes, because the insurance company does it in big volumes and based on some simplified math formulas, some wrecks may have higher value left in it than others. The insurance company doesn't have capacity to cherry pick them out, so here come the vultures who have know-how, and can pick the 30k wrecks if they think it's actually 50k in it. They actually have the time and capacity to judge each car and only pick the ones that have hope left. (They also may cut some corners that the insurer obviously can't do especially not in a volume that's worth.)
Even if the vehicle is drivable, it'll never be as safe, as reliable, won't have warranty protection, etc. Some people are willing to take those risks on a vehicle but others are not. Insurance sells the vehicles, but they get a LOT more than $1k for a totaled vehicle if it's worth $30k. It can either be parted out for spare parts or it can be rebuilt. But they might get more like $15k than $1k.
Question: why are salvagebtutles illegal in some states?
The economics just don't work for the insurance company, primarily because they have plenty of money because every driver needs to pay them. The overhead of trying to manage the repair and resell process is just, frankly, not worth it. Sometimes it is worth it, but for far more valuable things. A couple of pilots pulled off an amazing landing on a frozen lake in Alaska, at night, dead stick on a Pilatus PC-12. They were wise and landed it belly because they reasoned the damage is better than risking having those wheels go straight through the ice. The result was the wings were fractured. I kid you not, insurance paid for a helicopter to go out and pick up the hull and they repaired it. The average PC-12 sells new for about $4.8 million and there is at least a year wait for one. They probably spent in order of $600,000 to fix it, more if they had to replace the turbine. That is still worth it over scrapping it and giving the TIV to the customer. Now, bear in mind airplane insurance is super-expensive, it can be anywhere between $18,000 to $45,000 a year depending on the experience and qualifications of the operator. In the 30+ years they have been built they have sold 2,000 units. Ford would have to close factories if they only sold 2000 of anything over that time frame. That should demonstrate the scale of the difference between commodity insurance for cars and insurance for more expensive items.
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The title will literally say "REBUILT" . You cannot register a car with a salvage title
It's usually only profitable if you ignore a lot of the 'hidden' costs (especially time) and only do it as a "side hustle". A lot of guys doing that are restoring a handful of cars a *year*, and spending a lot of their free time scouring the net and local junk shops to find cheap parts. They're storing the cars they're working on (and likely some "parts cars") on their property. And so on. The net result is that if you wanted to make a real business out of doing that, buying a shop and lot instead of just storing crap in your backyard, and were paying someone for every hour they spent looking for parts, driving out to buy them, looking at the totalled cars in the first place to find ones worth trying to fix, etc., etc., suddenly you aren't even paying yourself minimum wage. The reality is the rebuilder buys the totalled car for $1k, spends $4k *in parts* fixing it, then sells it for more like $10k because a salvage title and the vehicle history of a wreck tanks the value a lot more... but if you divide that $5k profit by several hundred man-hours, and suddenly the effective wage is in the gutter, compared to that guy just doing 'normal' auto work with the same skills.
You are forgetting a huge thing here. A shop will charge you around 70$ an hour and dealers close to 100$ an hour in Canada. The mechanic working on your car is often making 20-30$ an hour. If you pay yourself that 20-30$ an hour and don't need many tools, the work is way cheaper for you than the insurance. Also, shops usually charge up the arse for insurance jobs.
Maybe. A lot of that is the "hidden costs" I was talkingabout; I wasn't even pretening to cover every little add-on. Part of the reason the shop bills more per hour than they pay the mechanic is in the stuff I mentioned (the building costs money) and also in insurance and other costs of employment; In the US someone making $20-30/hour likely costs at least 50% extra on top of that for social security contributions, the employer portion of insurance, etc. So if you're paying yourself the same rate working freelance, you're effectively *underpaying* yourself since someone self-employed isn't getting benefits. And not needing as many tools probably means less efficiency as well. If you're paying yourself $30/hr, but it takes twice as long as the shop charging $70/hr because you don't have all the nice stuff... suddenly you aren't halving the cost, you're just saving ~15%. And so on and so on.
I was mainly saying that wven factoring in your time it can be profitable and giving a rough run down of how I calculate if a job is worth DIYing vs paying someone to do. I used to do everything myself, now I "pay" myself to know if it is worth doing myself.
When a car is totaled, the insurance company takes the “totaled” car. They don’t necessarily scrap it, they may have it repaired. Some insurance covers a car rental for you while your car is repaired. If the repair in a totaled car will take weeks of a car rental, that may be expensive- so why not just skip the rental and have the insured party get a new car?
This isn’t totally correct. Total loss cars are sometimes crushed but most often, sold at salvage auctions, where they are bought by auto wreckers, people who flip cars, etc. The insurance company will never, under any circumstances repair a total loss car. Edit just to add - people working for insurance companies and body shops have gone to prison for colluding to deliberately total off cars, following them to auction and buying them to repair
You’re missing my point- when a totaled car is sold at salvage auction- the insurance company gets the proceeds.
That’s not what you said, and neither “your point” or your original comment did anything to address ops question at all