June 20, 2024

Cars just aren’t worth repairing anymore. One in every five cars seen by an insurance adjuster is estimated to cost too much to be repaired and returned to drivable condition. There are a ton of factors to look at here, but with high-tech lighting and sensors at the extremities of every car these days, increased use of exotic materials, and more expensive airbags than ever, it’s not hard to see where a lot of that money is going. This recent report from Bloomberg
breaks down how the modern car market is great for Copart, but not so good for consumers.

From Bloomberg:

More than one-fifth of vehicles are now declared a write-off by insurers after examining claims; this is close to a record and around five times higher than in 1980, industry participants say. The proportion of totaled cars may increase further as declining used car prices tip the scales in favor of salvage versus repair. Auction firms that re-sell wrecks on behalf of insurers stand to benefit from this trend, whereas car buyers who stretched to finance their vehicles, but scrimped on insurance cover, risk nasty financial shocks.

Many Americans are kicking around the roads in older cars than ever, as the price of new cars increases, people are taking advantage of the increased durability developed in the last few decades. The average age of a car on the road now is 12.5 years. Those aged cars are typically highly depreciated and not worth repairing in a crash.

Those cars aren’t just getting scrapped, though. More from Bloomberg:

This sounds wasteful, but nowadays wrecks aren’t just broken up for scrap metal and parts — buyers from emerging markets export, restore and then return totaled vehicles to roads; they can do so profitably because labor costs are lower overseas, which increases the potential vehicle value at auction.

For most of us, especially those of us driving around in decade-plus-old vehicles on a regular basis, a crash that doesn’t involve injury is largely just an inconvenience. A call to the insurance company has us whole as soon as the car is written off. Then we can focus on buying something to replace it, and move on. But recent car pricing booms have more American drivers underwater in their car loans than ever, and a total write-off crash could be financial catastrophe for these overleveraged folks. According to Bloomberg, “Drivers who paid top dollar for a new vehicle during the pandemic are particularly vulnerable.”

With all of these cars written off and insurance companies shelling out for expensive repairs, the cost of insurance has dramatically risen in recent years. Across 2023 the cost of car insurance rose 24 percent, which contributed a big chunk of the inflation we saw last year. Cars are more expensive, insurance is more expensive, boy, it sure is a good thing we built our entire society around the automobile.

Be careful out there, folks. And in the meantime, read the whole thing at Bloomberg.

A version of this article originally appeared on Jalopnik.

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