Friday, 05 September 2008 03:05

Audatex forecasts an increase in total losses

Analysts at Audatex predict that rising costs of raw materials, a decline in wholesale used vehicle prices, and an older insured vehicle population will result in more vehicle being declared total losses during 2008 and 2009. In the most recent issue of the Audatex Directions collision repair industry trends publication, Michael T. Anderson and Brian Grainger note that since 2004 there has been a steady decline in the frequency of total losses.

They expect that downward trend to end this year. Anderson and Grainger report that global increases in the price of raw materials will likely result in higher prices for parts, which will, in turn, increase repair costs, "thereby reducing the number of the vehicles that ultimately get repaired as opposed to totaled." In addition, wholesale prices for used vehicles have been dropping in the early months of 2008. "Traditionally, wholesale prices tend to be a leading indicator of retail used vehicle prices and these retail prices are used in establishing actual cash values," the authors explain.

They conclude that these factors, plus the aging vehicle fleet, will likely narrow the gap between repair costs and the total loss threshold, resulting in more total losses in 2008 and 2009.
The complete Audatex Directions report is available at www.audatex.us/audatexdirections.