By Kyle D. Krumlauf, Director - Industry Analytics
You may not know me by name, but you likely know one of my core responsibilities at CCC – our quarterly Crash Course report. Before joining CCC, I was in the insurance industry for over 20 years and have seen a LOT of change happen both with carriers and repair shops.
I've been spending a lot of time looking at current and future trends. 2024 has been a year of opposites. On the one hand, supply chains, backlogs, and cycle times have shown steady improvement. In contrast, we've also seen unpredictable repair volumes, increasing repair complexity, and general economic concerns that continue to cast a wide shadow. What does this mean as we look forward to 2025? One word: inflation.
Digging deeper into inflation, we expect the biggest impact will be felt mostly around vehicle value. Both new and used vehicle values have gone up since the pandemic and are largely staying elevated. This means higher prices for consumers purchasing vehicles, as well as impacts to financing and costs to insure them.
The result? People are changing how long they keep their current vehicle. This means there will be fewer new vehicles on the road and/or people will change their driving habits due to economic factors. (Figure 1)
According to Experian, vehicles in operation increased to 291.1 million as of Q2 2024 (up from 287.5 million in Q2 2023). Over 66% are vehicles seven years or older; 27.5% of vehicles are from model years2015-2019, while model year vehicles 2020 or newer only represent 22.8%.
But with challenge comes opportunity. Here are three areas collision shops can focus on to combat the headwinds going into 2025:
Consumers are filing fewer claims, especially for aesthetic damages or ones that do not significantly impair vehicle operation. CCC's data reveals that repairs under $2,000 represent 26% of claims through Q3 (a decline from 2019). (Figure 2)
Even though drivers may avoid filing claims for small damages – whether it's because they worry about their insurance rates going up, have a high deductible, or don’t have full coverage – the damage is still there, and so is the opportunity to fix it.
These smaller, potentially out-of-pocket jobs are a great way to fill your shop's pipeline, especially if larger jobs are dormant due to supply chain issues. They can also build goodwill and trust among your customer base to come back when a larger repair is needed.
As shop backlogs return to pre-pandemic levels and volumes remain manageable, now is the time to identify ways to maximize repair efficiency. Labor hours for both driveable and non-drivable repairs still have not returned to pre-pandemic levels, but there are still can be backlogs of vehicles at a shop. The key to understanding this contrast is to understand your shop's production. (Figure 3)
While aesthetic damage is the most obvious, it's what lies beneath the surface that is most concerning. As many of the ADAS technologies stand to almost double over the next five years, the need for scanning, calibrations, repairs, and replacements – because of crashes and general maintenance – seems certain to increase. (Figure 4)
But just like how affordability issues are affecting claim volumes and out-of-pocket repairs, vehicle maintenance is also taking a hit. According to MarketWatch, over 66% of customers surveyed said the reason they don't take better care of their vehicle is due to lack of funds to pay for regular car care.
An un-maintained, older car parc does not sound like a safe or sustainable combination. Many underlying vehicle issues unrelated to a collision could be uncovered once a car is in the shop. I encourage you to have a plan not only to ensure your scans and calibrations are captured for every vehicle that comes through your shop, but also how you plan to handle those unforeseen issues to get your customers back on the road safely.
The automotive repair industry is in a state of transformation, driven by changes in consumer behavior, vehicle technology, and economic conditions. Shops that can adapt to the complexities of newer vehicle systems, invest in their teams, and optimize their processes will be better positioned to meet the challenges ahead.
If you're looking for amore in-depth analysis of current and future trends impacting the collision repair industry, take some time to read our latest Crash Course report.
