Total Impact: How Collision Shops Can Survive the Growing Trend of Insurance Write-Offs
Lately, there have been growing whispers in collision shop owner groups about a frustrating new trend. And if you’ve been running a collision shop for a while, you’ve probably realized that this is no mere conspiracy, but a fact: More and more vehicles are being totaled after accidents.
Insurance companies are cutting checks to drivers instead of covering repairs, and customers are taking the money and moving on. This is hitting collision shops hard — fewer cars to repair means less money coming in, even though overhead costs like leases, tools, and employee wages stay the same. Let’s break this down, look at what’s causing the problem and figure out what shops like yours can do about it.
Why Are Cars Getting Totaled More Often?
Insurance companies are totaling vehicles faster than ever, often because of two main factors: repair costs and vehicle value. Some state laws REQUIRE vehicles to be totaled if repairs exceed a set percentage of their value, and this total loss threshold (TLT) can vary dramatically from state to state. For cars with high mileage or older models, even moderate repairs can push the cost close to or above the car’s actual cash value, leading insurers to write them off as total losses. According to many reports, the number of totaled vehicles has been increasing by 2% year over year, on average. The numbers are much higher for vehicles seven years or older.
DRIVE client Wade Wright, owner of Wright Way Collision Repair sums it up well: “If a vehicle has high mileage or the damage is complicated, it totals quickly, especially when the repair time extends beyond the rental car coverage days.”
On top of that, newer cars with advanced technology — like cameras, sensors, and ADAS (advanced driver-assistance systems) — cost more to repair. Electric vehicles (EVs), in particular, cost nearly 50% more to repair on average. The parts are pricier, and the repairs take more time and expertise. Insurance companies sometimes find it cheaper to total the car and sell it at auction than to pay for repairs.
As DRIVE coach Jeremy Blom puts it, “Insurance companies get high premiums for selling totaled vehicles at auction. It’s financially advantageous for them to total cars rather than approve repairs.”
Why Are Customers Taking the Check?
When customers hear they can get a check from the insurance company and move on, many jump at the chance. Why? Because getting a new car seems easier and more appealing than waiting for repairs. “People take the check so they can quickly get something different,” Wright says.
Think about it: if a car was already aging or had other issues, repairing it might not feel worth the hassle. Add in the time it takes to get parts and complete repairs, and the choice to cash out makes even more sense. Unfortunately, this leaves collision shops with fewer cars to work on.
A survey from Insurance News revealed that nearly 40% of policyholders accept the insurance payout for their totaled vehicles instead of opting for repairs. For older vehicles, this number can be even higher.
How Is This Hurting Shops?
For collision shops, fewer repair jobs mean less revenue — but your expenses don’t change. You still have to pay your techs, keep the lights on, and buy materials. Beyond the immediate financial hit, the unpredictability of repairs can make it hard to plan ahead. You can’t rely on a steady stream of work, and that uncertainty can strain your business.
In fact, according to a recent study, collision repair shops are experiencing a decline in repair volumes, with 60% of shops reporting fewer vehicles to work on, especially as more cars are written off.
What Can Shops Do to Adapt?
While the trend of more totaled vehicles is tough to combat, there are ways to adjust and keep your business running strong. Here are some ideas:
Diversify Your Services
Adding new services can help fill the gap when repair jobs slow down. DRIVE coach Jeremy Blom suggests shops consider offering mechanical repairs, detailing, or paint protection film application. These services attract different types of customers and create steady income streams.
Build Relationships with Insurance Adjusters
Working closely with insurance adjusters can help you understand how to get more repair approvals. Ask them to explain what a policy covers and work within those limits. If repairs exceed the insurance coverage, you can work with customers to cover the difference.
Educate Your Customers
Sometimes, customers don’t realize the costs of replacing a totaled car. Higher insurance premiums, additional fees, and the hassle of finding a new vehicle can add up. By explaining these factors and being transparent about repair costs and timelines, you might convince more customers to choose repairs over taking a check.
Invest in Training and Technology
The more skilled and efficient your team is, the better equipped you’ll be to handle complex repairs. Invest in training for your techs, especially for new systems like ADAS and hybrid or electric vehicles. Staying ahead of industry trends can give your shop a competitive edge and open new opportunities.
Streamline Your Operations
Making your shop run more smoothly can help you save time and money. Look at your workflow, inventory management, and customer communication systems. If there are ways to cut down on delays or reduce waste, take advantage of them. Learn to run a lean shop without sacrificing quality.
Moving Forward
This isn’t an easy time for collision shops, but it’s not impossible to navigate. By adapting to the changes, diversifying your services, and staying proactive, you can keep your business strong despite the challenges. With the right adjustments, it’s possible to navigate these changes and come out stronger.
Luckily there is some light on the horizon, with an ongoing push for clarity and uniformity in how insurers calculate total losses. For example, consumer advocates in some states are pressing for better-defined thresholds or requirements for insurers to justify decisions to total vehicles.
By understanding the factors influencing consumer choices and insurance decisions, like total loss formulas and auction-driven incentives, shops can better navigate these challenges and continue to thrive as the tide turns.
