What’s Ahead For Vehicle Repair & Total Loss Costs
Vehicle repair and total loss costs have been on the rise. Surging new and used vehicle prices, the growing complexity of the cars themselves, and supply chain disruptions driving inflation in the cost of replacement parts are widely attributed to the jump.
Here’s a deeper look at some of the market forces behind the shift:
Inflation rose a whopping 7 percent in 2021 – the largest 12-month gain since June 1982. What were the biggest contributors to this surge in inflation? Shelter and Used Vehicles.
In June 2021 alone, the CPI for used cars and trucks registered an increase of 45.2 percent versus June 2020.
What that meant for our industry was record increases in total loss vehicle values also not seen in many years, with the exception of the jump in values that occurred with Superstorm Sandy (Dec’12) and Hurricane Harvey (Oct’17), when the mix of vehicles totaled skewed newer and more expensive.
Supply Chain Challenges
The increases in 2021 in both new and used vehicle prices were caused by major disruptions in the global supply chains – specifically shortage of semi-conductor chips.
With fewer new vehicles available for sale, and with those that were significantly more costly, buyers moved to the used vehicle market.
The result? Already tight used vehicle supply fell further driving up prices further; with inventory shortages hitting the most affordable used vehicles (under $10K) most.
Not surprisingly total loss vehicle values increased most in 2021 for vehicles aged 7-years plus.
Wholesale used vehicle values were still rising in early January 2022, and analysts are forecasting prices may rise even further during tax return season this spring.
Despite some improvement in supply of semiconductor chips in the second half of 2022, new vehicle production levels are expected to improve slowly.
With elevated demand and continued tight supply of new and used vehicles, our industry may experience elevated total loss vehicle costs for some time.
The information and opinions in this publication are for general information only, are subject to change and are not intended to provide specific recommendations for any individual or entity. Although information contained herein has been obtained from sources believed to be reliable, CCC does not guarantee its accuracy and it may be incomplete or condensed. CCC is not liable for any typographical errors, incorrect data and/or any actions taken in reliance on the information and opinions contained in this publication. Note: Where CCC Intelligent Solutions Inc. is cited as source, the data provided is an aggregation of industry data related to electronic appraisals communicated via CCC’s electronic network or from total loss valuations processed by CCC.