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Wednesday, 27 January 2016 20:38

Mitchell VP Predicts Parts Utilization on Average Estimate Will Decrease After Peaking in December; Enterprise Length of Rental Update

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 Mitchell VP Graph

Average Cost per estimate when Parts are Present

Every winter, Greg Horn, Mitchell’s vice president of industry relations, said that he begins monitoring the number of parts used during the average repair estimate. “Notably, the number of parts on the average estimate increases, usually by over 1.5 parts per estimate and total parts spending typically increases by more than $100,” he said during the company’s latest industry update presentation for the fourth quarter of 2015.

Horn noted that parts utilization usually peaks in December and falls off in January onwards due to the increased number of accidents that time. He said it is due to poor road conditions and what he referred to as “drivers’ amnesia” when winter begins.

In addition, Horn said that it is typical for total loss percentages to increase during the early winter and then fall off during more severe weather.

Looking at parts usage during the third quarter of 2015, Horn said there is an overall decrease in the number of new parts used for a repairable car. New OEM parts were down from more than eight parts per estimate in the first quarter of 2012 to 7.33 parts in the third quarter of 2015.

Horn said that none of the alternate parts measured — aftermarket, remanufactured or recycled — increased during the same period. “What we’re seeing is more repair going on from that first quarter to the third quarter,” he said.

He attributed it to parts prices increasing and labor rates staying flat. “You can devote more repair hours per part if the cost is going up and the labor rate is staying flat,” he explained.

Looking ahead to changes in 2016, Horn said that he forecasts the trend will most likely continue.

Overall, there is an increase in the number of aftermarket parts being utilized compared to a year earlier, while fewer remanufactured parts are being used. “We’ve seen a lot of the remanufacturing facilities across the United States close down because it’s not as profitable as it used to be,” said Horn.


Length of Rental Continues to Increase

Part of Mitchell’s industry report included statistics on Enterprise Rent-A-Car’s average Length of Rental (LOR) for repairable vehicles. Frank LaViola, assistant vice president of insurance replacement for Enterprise Rent-A-Car, said the U.S. average LOR increased in the third quarter of 2015 to 11.4 days overall. This is an increase of .4 days over the same time period the year before.

“We continue to see a rise in such factors as claims frequency, miles driven and registered vehicles per licensed drivers,” said LaViola.

Horn added that the overall severity and number of parts per estimate were stable in Q3 2015 compared to 2014. “This suggests that the increase in total loss frequency for the quarter is driving length of rental,” said Horn.


In the western part of the United States, the largest increases in LOR were in California with 11.5 days, and Utah with 10.4 days, both up .7 days.

Arizona was up .4 days at 10.5. Nevada did not show an increase in LOR, staying the same at 11.6 days.


In the southwest area of the United States, Texas and Oklahoma both showed an increase in LOR of .7 days from the third quarter of 2014. Texas had 12.9 days and Oklahoma had 12.2 days. New Mexico did not show any increase, saying at 11.6 days. Louisiana had the highest LOR, up .8 days to 13.4.


In the midwest area of the United States, LOR stayed the same (10.3 days) compared to the third quarter of 2014. LaViola said the majority of states had a mild summer, which helped keep LOR down.

The largest increase in LOR was in Missouri, up .6 days to 10.4. He said this was due to hail in the area, which increased the number of claims.

Kentucky had the highest LOR in the area with 12 days and Ohio came in at 10.8 days.

Nebraska at 9.4 days and Michigan with 10.7 days both declined by .8 days. Other declining states were South Dakota, down .7 days to 9.9, Iowa at 9 days, Illinois at 10.2 days and Indiana at 10.4.

Kansas came in at 10.3 days and Wisconsin was 8.6. The two states with the lowest LOR in the country were Minnesota and North Dakota, both at 8.6 days.


In the southeast area of the United States, Georgia was up one day at 11.8 and Tennessee and Alabama were both at 11.3 days, with Tennessee up .8 days and Alabama .1 days. North Carolina came in at 10.6 and Mississippi was 11.5. Virginia had an increase of .4 days to 9.9. LaViola said Virginia has stayed below the 10-day mark for the third quarter over the past five years. South Carolina was down .5 days to 11.0.


In the northeast area of the United States, Pennsylvania and Delaware both had a declining number of days (.9) with Pennsylvania at 10.7 days and Delaware at 11.2.

Maryland was up .6 days to 11.2. New York grew .3 days to 12.3, New Jersey came in at 11.6 and Connecticut decreased .4 days to 11.6.

Rhode Island has the longest LOR at 15.5 days with an increase of 1.1 days. Massachusetts followed with 14.3 days, the second highest in the country, up .5 days.

 

In terms of DRP repairs, La Viola noted that the difference between DRP and non-DRP repairs is continuing to grow with DRP repairs dropping by 2.65 days. “This is due to processes in the DRP model that allow collision repair shops to begin repairs quicker than non-DRP shops,” he said.

 

The full quarterly industry report can be accessed online: http://www.mitchell.com/thought-leadership.

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