Totaled vehicles are a pain. They’re a pain for your shop when they take up valuable real estate and don’t generate money, and they’re a pain for your customers.
Jason Mundy, owner of Mundy’s Collision Center in Georgia, and Dustin Davis, general manager of Mundy’s, have been in business for 17 years and have dealt with their fair share of total loss vehicles. Through that time, they’ve found several ways to help make dealing with those vehicles less of a hassle.
“Total losses are an important part of any collision business,” Mundy says. “Obviously, we're not getting rich off them, but they do affect your bottom line.”
The Problem
The biggest problem with total losses boils down to two factors. The first, Mundy says, is having total loss vehicles taking up a chunk of the limited amount of space shops have.
“The vehicles are sitting too long. That's the biggest thing,” Mundy says. “Everyone has limited space, and we don't want a total loss taking up space. Most of the time, we disassemble vehicles, and we have to store those parts.”
The second is making the decision to total the vehicle in the first place. Insurance companies will act in their best interest first, Davis says, and will do their best to make sure that they’re making as much money – or losing as little money – as possible.
“Let’s say fair-market value on a car that’s been totaled is $15,000. Oftentimes, insurers are offering a customer $10,000,” Davis says. “The customer is going to dispute those charges. They're paying incredibly high premiums – they need to be made whole.”
Not only are lowball offers unfair to customers, but they also drag out the process. Bottom line, those decisions need to be made faster.
The Solution
The best way to handle total losses is to be as thorough as possible. Davis says that oftentimes, shops aren’t charging everything they should be when billing for total loss vehicles that have been in their shops for several days.
“Bill according to what you're doing. My total loss bill might be 25 lines, whereas most others are admin, storage and teardown, and that's really it,” Davis says. “We calculate the check-in of the vehicle, the photo documentation, opening office files, figuring out the damages and how many supplements are involved, preparing the total loss charges, and cataloging and storing parts.”
Mundy says he’s noticed shops that are part of a DRP often tend to not be as thorough and, in some instances, actually be a little more lenient with some of their charges because they think the volume an insurance company is sending them is making up for not charging itemized lines.
“But if you really run the numbers, it doesn’t work out that way,” he says. “You need to be charging for calculating damages, you need to be charging for full disassembly, you need to be charging for writing the estimate and the storage bill. I would highly encourage people to itemize their invoices.”
Davis says his team itemizes every single action that they perform when going over a total loss, and there’s an associated cost with each of those actions. Obviously, he says, don’t charge for something that you’re not doing, but otherwise, you should be earning money for your work.
“If you can justify those operations that you’re doing on each line item, absolutely charge for them,” he says. “If you disconnect a battery, you should charge for that. Most people aren't going to do that on a total loss. If I'm doing a full disassembly and putting parts on a cart, I'm charging for that.”
Another way to help push cars off your lot is to implement excessive storage fees. Letting insurance companies know that they’re going to have to pony up extra once a car has been at your shop for 30 days or however long your shop decides can provide a good incentive for those insurers to make decisions more quickly.
The Aftermath
Mundy and Davis say that the solutions that have worked for them aren’t necessarily a one-size-fits-all, particularly when it comes to DRPs. In those agreements, shops may not have as much wiggle room to adjust storage fees or other revenues of bringing in money and getting total losses off their lot.
“Just from our experience, storage fees are often negotiated to zero in a DRP,” Davis says. “These guys that are DRP-heavy are not going to get storage money and can't implement excessive storage fees, so that makes it a little tougher.”
Despite that, billing appropriately for your services is essential. Equally important is getting your customer on your side and in a position where they can advocate for themselves. Customers most of the time aren’t educated about this process, and they’re also probably dealing with the emotional and mental stress of dealing with an accident and a totaled vehicle.
Mundy says it's your job to educate them enough to make smart decisions when dealing with the insurance company.
“So frequently, we see customers come in who just kind of sit by and think the insurance company is going to pay for everything and take care of everything that needs to be done on the vehicle. Those days are long gone,” Mundy says. “Insurance companies should be doing a lot better job of communicating with the insured and what the insured wants to do, but it's all a money game to them. The customer's choice should play more into the equation than what it does right now. Insurance companies are going to be doing what's best for them.”
The Takeaway
Total losses are never going to be a profit-driver for your shop. However, Mundy says they don’t have to be a burden and, with a little work, can become less of a headache for everyone involved.
“The biggest thing when it comes to total losses is being honest and transparent with what you're doing and what you're billing,” Mundy says. “We're not trying to pull one over on anyone. We just want to be paid for the work that we've done on a vehicle.”
