By John Wolford, Director of Vendor and Client Services, CEI
If you seem to notice that collision repairs are costing more than they used to, you’re right. According to CCC Information Systems, a source of data for the auto insurance industry, since the end of 2008 the average cost to repair a damaged vehicle rose more than 13%, from $2,399 to $2,766 in 2015.
But what’s troubling is that over the last two years the rate of increase has been higher than the general rate of inflation. In 2014, the Consumer Price Index (CPI) rose 1.6%, but the cost to repair a damaged vehicle, according to CCC, went up 3.4%, or more than double the rate of inflation. And last year, repair costs rose a slightly more modest 3.0%, but that was 30 times the general rate of inflation, which was recorded by the U.S. Department of Labor at 0.1% for all of 2015.
What’s the cause? Greg Horn, a vice president at Mitchell International, another provider of auto insurance claims data, attributes most of the increase to the rising cost of parts. “Even when adjusted for inflation,” Horn wrote in Mitchell’s latest report, “we found that new, popular passenger cars do cost more to repair than they did five years ago. Despite multiple variables, including the cost of…service hours, parts has had the highest impact on collision repair costs overall.”
Horn cites one example: the rising demand for trendy and more expensive headlights, “like LED ‘halo’ lighting.” But he might as well have mentioned almost any number of other kinds of parts, from air bags to sensors that feed data to the dozens of computers in the typical late model car and truck that control such things as engine timing and emissions, passenger restraint systems, cruise control, and backup cameras and warning systems.
In fact, Mitchell reported late last year that its Collision Parts Price Index reflected an increase of 2.7% in prices for all kinds of parts – including OEM, aftermarket and used parts. But that came after a spike of 5.9% in parts prices from 2013 through 2014.
One of the ways that fleets as well as consumers have turned to reduce repair costs has been to use aftermarket parts and LKQ/used parts, which are generally less expensive than parts made the by the original manufacturer. But Mitchell noted that last year prices for aftermarket parts rose more than the overall average. Horn said the index reflects the parts actually used in repairs, and that more of the aftermarket parts used were “premium” quality. (By the way, at CEI, as a safety consideration we only recommend certified aftermarket parts.)
In addition to the higher prices of parts, CCC attributes the rising cost of collision repairs to an ever-increasing number of parts that are replaced instead of repaired. As we’ve noted here before, the increasing use of non-traditional materials – like plastics, carbon fibers, steel alloys and aluminum – and the added computers and electronics required to run safety-related options, have required more and more expensive parts to be replaced over the years. Since 2008, CCC says the average number of replaced parts rose from 7.8 per vehicle repair to 9.2, an increase of nearly 18%.
These trends make it all the more important that fleets seek ways to reduce repair costs — without sacrificing safety — and help offset those costs by effective loss recovery and improved salvage receipts, and improve the safety performance of their drivers.