I just read your column regarding driving under the influence and the terrible accident that happened to your girlfriend and daughter. Looking at the A4 convertible, a lovely car by the way, I am struck by the damage caused by the collision. Given the high cost of repairs and also the accompanying worries related to unseen damage, how would you determine the point at which the car is a total loss and, in that case, what happens to the written-off car? Is it disassembled and sold piece by piece or is it simply recycled?
On a more pragmatic note, is a repair possible and could the car be returned to a near new condition. In other words, what are the limits of being fixable?
Thanks for such a fun and informative column in The Globe and Mail. – Claude L.
I repeatedly use the line – anything can be fixed, but is it worth it? My destroyed Audi A4 Cabriolet in question was a gorgeous example and I, at first, wanted it to be repaired. However, the damage was too extensive, and my insurance company immediately determined the cost to repair was more than its value. I could have bought it back from the insurance company and fixed it myself, but I too couldn’t justify the time and expense, so I let it go.
All insurance companies have contracts with scrap/salvage yards for them to buy their destroyed vehicles or they have arrangements with a salvage auto auction. But most of the time the vehicle is retrieved by the contracted scrap yard from wherever the damaged vehicle is resting and it is towed to their yard for assessment. Either it will be broken up for parts or sold as a complete vehicle to someone who thinks they can beat the clock and repair it in a timely, profitable manner. Unsellable, leftover parts are recycled when it remains at the salvage yard.
Actual Cash Value (ACV) of the vehicle is a term used by the insurance industry and it is the appraiser’s job to determine the ACV at the same time that they are estimating repair costs.
In the case of my Audi, the repair costs easily exceeded the vehicle’s ACV, so it was a no-brainer, the car was immediately declared a total loss. When the repair cost is at and around 70 – 80 per cent of the ACV then it becomes more confusing. They refer to this as the trigger point as it triggers a total-loss decision based on several factors.
As a simplified example, if a vehicle has $7,000 worth of damage and its ACV is $10,000, the insurance company will then additionally factor in the vehicle’s salvage value and rental car costs if the insured has loss of use coverage. The question becomes, is it more economical for the insurance company to pay the owner out and then sell the car for salvage to recoup some funds. I am not in the salvage industry, but I have been told that a salvage company may be contracted to pay anywhere between 5 to 25 per cent of the ACV to the insurance company to obtain the vehicle. Regardless of the actual percentage, the key takeaway is that there are added in factors in determining whether your vehicle is a total loss than just accident repair costs when the ratio is around 70 per cent. Desirable, newer vehicles obviously have a higher salvage percentage buyout value than old clunkers that no one wants any more.
If the repair estimate is between 60 and 70 per cent of the ACV, the appraiser will closely look at pre-accident over all condition and mileage and make the call as to whether it is going to be fixed or declared a total loss.
Generally, vehicles at less than 50 per cent damage to ACV ratio are repaired when they are reasonably current models.
Lou Trottier is owner-operator of All About Imports in Mississauga. Have a question about maintenance and repair? E-mail [email protected], placing “Lou’s Garage” in the subject line.
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