“My Civic is a total? You’re kidding me, right? This can’t be fixed?”
The last thing you expected from the auto body shop when you went in for the estimate was to hear that your car could be a total loss; that it would cost more to fix than it was worth.
Okay, you see that the trunk sticks up a little, the tail lights are shoved in, the trunk floor under the spare tire is kind of accordion-like and the bumper is resting on the muffler.
The barely moving traffic came to a quick stop and the Buick behind you didn’t. He couldn’t have doing more than five or ten miles an hour so you figured the estimate from Center City Collision wasn’t going to be that bad…but a total loss? And my favorite late Uncle Sal left me that car!
There are several factors involved when an insurance company makes the decision to “total” a car. And yes, the “bottom line” is the “bottom line.” They’re looking at what is the most cost-effective way for them to resolve the claim. In other words, how they get out of it the cheapest. Here are some of the factors they consider:
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The estimate amount. The starting point for determining if a car is “totaled” is the original estimate. While estimating the visual damages, computerized estimating systems will often prompt the estimator with a “total loss warning,” meaning that the estimate amount has reached a threshold that is usually around 65-75% of a vehicles market value. This doesn’t mean that the car is necessarily an actual “total loss;” it’s simply a warning that “totaling” it should be considered.
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Possible hidden damage. When an estimate is close to the total loss threshold, the estimator will often have the vehicle “torn down,” that is disassembled, to see all of the possible hidden damages. It all adds to the costs and they certainly want to be very sure before they begin repairs or decide to “total” a car.
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The type of damage. Flood damage, fire damage, rollovers, theft recoveries, extensive or unknown mechanical damage can all be very expensive and very hard to diagnose up-front. You, the shop and the insurance company don’t want to start repairs on a car that may be difficult to warranty when it’s completed, or one that winds up costing far more to repair than originally estimated and takes weeks or months to complete.
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The pre-accident value of the vehicle. Insurance company claim reps do some “homework” to determine how much the vehicle was worth before the accident. They consider the market value, add or deduct for the mileage and the condition, then deduct for what it would cost to repair any previous damage the vehicle may have had. With the market value determined, that tells them how much they can spend repairing the vehicle.
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Salvage value. Part of the “homework” the claim reps do is to contact local salvage yards for bids to buy your wrecked car, as is. If the yards are full of vehicles like yours and the parts demand isn’t high, the salvage won’t be worth much. On the other hand if the car and its parts sell well and are in high demand, the salvage value will be higher. The reason salvage value is important at this stage is that it helps the insurance company partially offset the amount the claim will cost them. Because of that, a high salvage value means less money they’re likely willing to spend on repairs.
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Time to repair. Chances are the insurance company will be paying for a rental car while the repairs are being done. If they determine that repairs will take X amount of weeks, they’ll have a good idea of what a rental car will cost. Just like the amount of the estimate, the rental expense, sometimes thousands of dollars, is part of the overall claim, a number they’re trying to keep as low as possible.
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Diminished value. If your car is repaired, Center City Collision is going to do a great job; don’t worry about that. No one will ever be able to tell that it was in an accident. The auto body shop can fix the damages but they can’t turn back the clock…it was in an accident. Even with perfect repairs, an accident might affect the resell value. A car that’s been in an accident might not be worth as much as one that hasn’t been. The difference in the market value of a previously damaged car versus an undamaged car is called “diminished value.” Knowing that months or even years after a car has been repaired that they might be faced with paying out a “diminished value” settlement, it’s sometimes less “painful” and more cost-effective to total the vehicle, eliminating the possibility of a “diminished value” claim.
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Owner’s desire to repair. When all of the above factors are considered and a vehicle is said to be a “borderline total,” the owner might have a vote on if the car is fixed or not. Claim reps are human too and they will take into consideration the vehicle owner’s desires in the case of a “borderline,” as long as the decision can also be justified up by the dollars. There is a limit though; remember that they have no sentimental attachment to your car and are not likely to authorize $5,000 of repairs on a $2,000 car even if your late Uncle Sal did want you to have it.