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Rapid rise in vehicle write offs linked to parts prices

Tuesday, 06 May 2008 13:27
Residual values are being affected by the amount of safety devices in cars, claims Bodyshop magazine publisher
The rising cost of safety related parts, such as air bags, is leading to a rise in the number of late model vehicles being written off, according to research findings made public at the recent Risc conference.

Bodyshop magazine publisher and industry expert, Chris Mann, stated this trend is "neither economically or environmentally sustainable ... The inexorable rise in write-off numbers has appalling implications for the environment, is bad for the vehicle manufacturers who typically depend upon after market parts sales for more than fifty percent of their total profits and, of course, it’s bad for the repair industry and motorists.

"Of even greater concern, though, is the fact that many of these written off vehicles are being bought as salvage, repaired as cheaply as possible by unscrupulous traders who have no regard for the structural integrity of the vehicle, and sold on for maximum profit.

"These poorly repaired vehicles are a structural time bomb which, according to ex Cheshire Chief Constable John Dwyer, are putting the lives of both drivers and passengers at risk. Urgent action needs to be taken if unnecessary deaths and injuries are to be avoided."

If one takes the typical family car example, Mr Mann maintains that the residual value of the 1996 Mondeo is £7,450. The 2006 model, with numerous extra safety features included as standard, has a residual value of only £6674 (43 per cent of its purchase price).

"We took a typical three-quarter front end impact, assuming exactly the same level of damage for both the 1996 and 2006 cars," argued Mr Mann.

"If one ignores the safety related items that were not fitted to the 1996 model, the cost of parts and the labour time required to complete the repair are similar (£3,865 for the 1996 model, £4,082 for the 2006 variant).

"The difference in relative residual values, however, means that the repair cost for the 2006 car represents 61 per cent of the vehicle’s residual value, compared to 52 per cent for its 1996 predecessor ... on that basis both cars are likely to be repaired.

"This, though, does not take account of all ... the additional safety related parts fitted as standard on the 2006 vehicle, which, plus the labour time (two hours at £25 per hour) required to fit them, adds an additional £1,692 to the repair cost.

"Thus the overall cost of repair which, in 1998, accounted for 52 per cent of the two-year old Mondeo’s residual value, today represents 88 per cent percent of the 2006 Mondeo’s value – making the newer vehicle an economic write-off."

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