Uneconomical To Repair: What It Really Means

The decision is not simply repair cost against book value. It is repair cost against what the car will fetch in pieces.

The usual assumption is that insurers decide on the basis of whether repairing a vehicle after an accident will cost more than the vehicle is worth. You hear percentages quoted — 30% of the value, and so on. But in reality, when a car is not repaired it goes to salvage auction, where the people who sell components, breaker yards and dismantlers, will bid to replenish their stock. This is where insurance companies can gain.

When a dismantler values a vehicle at a salvage auction, he is not simply reading off a book price from Glass's Guide or Parkers. He studies what components are still good on the vehicle and adds up the true resaleable value of a stripped car. That figure is very often more than the vehicle would fetch as a working, on-the-road example.

How the write-off decision is made

It is not uncommon for damaged vehicles to sell for a similar figure to a full working model, if there is enough value in the components. The perception that salvage auctions are full of vehicles that can all be cheaply repaired and sold on is simply not true.

So when an insurer decides whether to write a vehicle off, they take into account what it will make at auction, which is often not far short of the book value. They will then of course try to negotiate a lower settlement figure with the policy holder to minimise the loss. Their own costs come in the form of auction, storage and transport fees.

Looking for a salvage project? Where the value is

At a salvage auction, most of the room is breaker yards looking for stock. Some components are in huge demand; with others there is already plenty of stock sitting on shelves. Choosing a vehicle that the yards already have an abundance of will, in most cases, get you the better deal on a project, because they are unlikely to bid high, or at all.

German cars tend not to fall into that category unless they are of a certain age. More common makes — typical Fords and Vauxhalls — are more likely to be cost effective, especially where components are readily available and cheap.

Premium cars are the worst bet

This is bad news for anyone after a premium car, where there are not many around. That normally means components are highly sought after and expensive, so the yards bid hard. At the other end of the scale, popular models where even new components are relatively cheap tend to stay low.

The best approach is research: join as many sales rooms as you can and get a feel for what stock actually sells for. It is not an exact science, as every project has a different amount of damage, mileage and specification. But it is the only way to know a good deal when you see one.

And remember what uneconomical to repair often really means: that the insurer can retain more of the value by selling at auction than by paying a body shop to put it right.