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Friday, 03 August 2018 21:19

What Is the Future for New, Used Car Sales Claims?

Written by Susanna Gotsch, Property Casualty 360

Index

 

 

The U.S. is still working to determine whether it will impose tariffs on other countries, based on whether imports are threats to national security. About half of parts and vehicle imports come from Canada and Mexico, so any tariffs put on those countries could have severe impacts on U.S. auto sales.

 

If prices on new cars are raised, more consumers might shift to the used market (annually only about 17M new vehicles are sold in the U.S.; in 2018 the U.S. is on track to sell 39.4M used vehicles)---where prices are already up due to more light trucks in the overall volume of lease returns into the used market.

 

While analysts believe increases in new vehicle prices from tariffs won’t necessarily lead to an increase in used vehicle prices immediately, the tariffs would likely lead to lower depreciation rates for used vehicles, a factor that would lead to higher total loss vehicle values over time.

 

Total loss vehicle values remain elevated so far in 2018, as the shift toward a newer, more expensive total loss vehicle population continues.

 

Non-comprehensive total loss vehicle values are up over 3 percent for the four quarters ending Q2 2018 versus a year prior, and vehicles ages 0--6 years now account for 34 percent of total loss volume versus 29 percent in the four quarters ending Q2 2014.

 

Total loss frequency also continues to rise, as the percent of total losses that were older than 15 years of age remains elevated at 15.4 percent, and among vehicle appraisals, total loss frequency increased across all vehicle ages.

 

Impact on Vehicle Repairs

 

Vehicle repair costs also rose 3 percent in the four quarters ending Q2 2018, with the largest increases occurring among the newest vehicles. Growth in the number of labor hours per claim, the average hourly labor rate, the average number of parts replaced per claim and the average price paid per part are all contributing to higher repair costs overall.

 

Volume share growth in segments like light trucks, European vehicles and newer model year vehicles where repair costs are higher are also contributing to higher cost overall.

 

Yet while both repair costs and total loss costs continue to rise, the industry has begun to see a leveling off in claim frequency.


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