Navigating the Rise in Total Losses: Strategies for Repair Shops to Reverse the Trend

Repairers have seen a gradual increase in vehicles being declared a total loss from 10-14% just 10 short years ago, to 24-30% in 2025. What has changed — and what could repairers consider — to reverse this trend?  

Further background: 

The industry has just emerged from an unusual phase post-COVID, where repairs postponed had to be completed, gas prices declined, miles driven were up, and nearly every repairer had a backlog of several weeks. This led to record profits, and the technician shortage was less of an immediate concern. 

Interestingly, many shops’ sales grew, but not based on the additional volume of vehicles repaired. Instead, the average RO $ went from $3,200 to nearly $5,000 due to the ADAS system pre and post scans, vehicle calibration, and test drives. This also added to the repair cycle time, as these additional ADAS repairs often occurred after the repairs were completed. So, cycle times and length of rental spiked to nearly 15 days on average, further adding to the cost of the repair. 

Underlying this trend was most new vehicles being packed with new accident-avoidance technology to stop rear-end accidents, adaptive cruise and emergency braking, side mirrors marking vehicles in the blind spot, lane-keeping, backup cameras, and so much more technology. As a result, the number of repairable claims per registered vehicle have declined dramatically. Some experts say the various systems reduce types of damage 17-32%! As the car parc of vehicles with this technology grows every year, we have seen fewer and fewer repairable claims. 

Expansion of total losses of claims 

During the explosion of volume post-COVID, when parts were again more readily available, repairers got into a bit of a parts replacement frenzy and stopped repairing parts. The repair vs. replace ratios went from 60:40 to 40:60, and this drove up the average RO $ cost and drove down the repair labor hours per RO. During this period, used and salvage values soared to all-time levels. Repairers, faced with this seemingly limitless supply of repairs, got a bit lazy and stopped selling and started merely processing claims. And when a vehicle with significant damage was towed in, they merely disassembled it for the teardown fee, charged administrative fees for writing the estimate, and then the vehicle was sent to the salvage yard. The phrase, “Let that one go” was heard all too often, to the point that now we have 24-28% of vehicles being declared a “total loss.” 

Having managed various 20 groups over the years, we have seen this trend played out in a few key indicators, such as labor hours per RO and most poignantly in the frame/ structural sales mix, which was 3-5% and is now as low as .2 - .5%. Ultimately, this means we don’t use the expensive frame machine and computer measuring system as often as we used to. We currently see the frame machine being used primarily on vehicles one to three years old, and rarely on vehicles over five years old. 

Common total loss scenario 

Case: seven-year-old vehicle worth $22,000. With a total loss threshold of 75%, it should total when the estimate exceeds $16,500.  

Estimated Repair Cost: $12K based on an AI estimate or an initial assessment.   It's probably $15,000 (or more) after you repair plan/repair the vehicle. The insurer thinks they can sell it as salvage for $14,500, so they are compelled to reduce their risk and total the vehicle. 

Potential Gross Profit on Repair: On a $15,000 repair, assuming a 45% gross profit (more repair than replace), you could earn $6,750 (45% of $15,000) on that repair. If labor represents 40% of the repair with 75 labor hours at $80 per hour, that’s roughly $6,000 in labor.

Often, that initial estimate-to-vehicle value of 60-65% now triggers the insurer to total the vehicle without much thought. Therefore, technicians don’t get the opportunity to flag up to 75 labor hours, and the shop forgos $6,750 in gross profit. Therefore, the frame machine, rivet guns, and welders required for OEM programs rarely get used, tying up cash in the equipment and space in the shop. 

Break-even with profit matters 

With traffic declining, it’s important to know your shop's financial break-even point considering cash flow (principal on loan or capital leases). 

Overhead Expenses $: $100,000 and $15,000 profit = $115,000 

Divided by Gross Profit Percentage: 45% 

Break-even plus profit sales: $255,555 

So, if your shop is projecting to be shy of this number, it makes sense to evaluate whether you can prevent a total and add gross profit dollars to cover the overhead expenses and profit target. If a single heavy hit adds $6,750 (see example above), then it would take preventing two to three jobs from being considered a total loss to go from break-even to making a solid profit! Let’s look at ways to reduce the cost of repair to prevent a total. 

How do we “prevent totals?” 

Underlying assumption: Whatever we do, we ALWAYS provide a safe and proper repair following industry-approved resources such as I-CAR and OEM recommendations and procedures, never taking shortcuts. 

Labor: 

1. Repair all the parts you can safely repair: sheet metal, nonstructural, plastics (plastic welding and repair techniques), refinishing wheels, etc. 
2. Consider having a second body labor rate for a specific insurer to prevent totals and then pay your flat rate using the same percentage as the normal rate. Example: Door rate $80 and flat rate of 36%, or $28.80, and the “preventing a total” rate might be as low as $65 at a flat rate of 40% (higher due to the skill level required); the techs would make $26 per hour on those jobs.  
3. You might be able to discount the paint labor rate in the same proportion as the body tech. 

NOTE: Savings of 70 body and paint hours * $15 per hour = $1,050 

How do we get technicians on board with this? The good news is technicians can work at 165-250 percent efficiency, so if they work efficiently on these repairs, they can make up for the slightly lower rate. Not producing these hours means there are not enough hours to achieve their financial goals, so this gives them a chance to produce 42 body and 28 paint hours for this single RO. Even at a lower flat rate, this contributes to achieving their weekly pay goal.  

Parts: 

1. If a $16,000 repair has 40% parts, then the parts sales will be $6,400. At a 30% margin, that would be $1,920 in parts. 
2. If you profit-match to salvage or aftermarket, then the parts costs can be reduced, and the OEM dealer can supply parts for their costs plus the parts margin of the salvage or OE part. In some cases, dealers with an older low-turn part might be compelled to sell the part for even less to help you prevent the total. 

Note: Savings of $1,920 * 20% = $384 

P & M: 

Since we are not reducing paint labor hours, this would remain constant. Body materials and Paint materials could be discounted if your business is currently profitable in this category. Some paint companies offer a discounted paint system that could be used to reduce the base and clear costs to attempt to save money on these repairs: 

Note: Savings $100 discount 

Sublet: 

Talk to your ADAS vendor and tell them you need to have them pre and post and calibrate for $75 less to prevent this from being a total, and they may be willing to discount their services for the incremental work. 

Note: Savings of $100 due to the additional discount 

Why are the thresholds being lowered? 

With the average vehicle age being nearly 14 years and designed to last beyond 200,000 miles, there is a huge demand for used engines, transmissions, and main drivetrain components as they fail. And the vehicle itself is still quite useful. This, along with a very lucrative salvage market, means the salvage values of vehicles remain high. As a result, insurers are dropping their thresholds to 55% of the vehicle’s value to declare a total loss. Repairers are losing out on these high-cost repairs where they can use the skills of their staff and the tooling investment they have made.  

A call for legislative action 

The salvage value has been bid up on total-loss vehicles by offshore buyers, so the insurers claim it’s economically better for them to total the vehicle. One proposal is for CIC, SCRS, ASA, and state associations to call for an “export tax” for the total loss vehicles purchased by offshore buyers. If that tax were added to drive up the price paid per vehicle, the demand by these offshore buyers would then decline. Salvage values would decline, and it would again be economical to repair these vehicles here in the USA, protecting jobs of estimators, technicians, parts coordinators, and more. This is a long shot, so what can we do now? 

Meet with the insurer to prevent a total 

So, meeting with the insurer and saying, "If we discounted $1,600 ($1,050+$384+$100+ $100) to $13,400, would you allow us to repair the vehicle and prevent it from being a total loss?" 

Besides the repair cost, why would the insurer be willing to choose to have the vehicle repaired? 

1. Their policyholder may want to keep the vehicle. They perceive they have taken good care of the vehicle, they like it, they have invested in recent repairs/new tires, etc.  
2. The repair center offers them a lifetime warranty and a promise to fix it right! 
3. Evaluate damage and assess whether the damage is not safety or drivability-related. Would they allow the customer to accept appearance allowances on wheel scuffs or other non-safety-related items to save the deductible, when the policyholder prefers that? 
4. Agree to repair all parts that can be safely repaired, especially plastics (getting customer acceptance) 
5. Even more extreme, to mitigate the insurers’ risk, you might consider capping the total cost and agreeing to forgo revenue beyond that amount. Given vehicle complexity, this is a risk if the vehicle has unforeseen damage. 

How might repairers convince a customer to allow you to prevent a total loss?

1. To offset part of their deductible (with insurer approval), you could select items that are appearance-related (for an appearance allowance) that they could live with (e.g. a scratch on a rim or trim piece, not safety-related). 
2. You may want to buy a few loaners to let the consumer drive for free while you’re completing the repair (up to a limit on the number of days). This eliminates the costs of a rental and provides a customer convenience. 
3. In your glove box kits or brochures where you describe “What to do in case of an accident,” discourage customers from allowing Copart or another salvage pool to take the vehicle directly to their lot. Suggest they have it towed to a collision repair shop for assessment to keep control in their hands. Heck, just getting their personal effects and removing customizations is a lot easier. 
4. Review the benefits of both possibilities, preventing a total vs. allowing it to total. 

The benefits to customers for preventing a total: 

1. If the vehicle is well maintained, why would they want to lose control of this vehicle they like? 
2. No shopping for a new car 
3. No transfer for insurance or license 
4. No loss of the accessories they added without adding them to their coverage. 
5. The cost of a new vehicle means higher license and insurance costs. 
6. No need for a down payment on a new car and possibly a higher payment 

Final option: repairables 

I hate to go here, but shops could start to buy back total loss vehicles, repair them properly, get them inspected, and sell them. If the vehicle was totaled without a lot of damage, then the shop would make money on the repairs. The repairer’s vehicle sales division could also make a margin on the sale of the vehicle as an additional way to make money. 

Conclusion 

The trends in industry toward more ADAS equipment have led to a reduced number of vehicles in reported claims. On top of that, we have noted the increase in total losses reducing the number of available repair jobs. With repairers seeing a decline in volume of 8-18%, some repairers may need additional volume to keep their staff and cash flow possible. Therefore, shops may want to consider some of the ideas we shared to try to prevent these total losses from being towed away. After they review the financial benefits to the shop, insurer, and consumer for preventing totals, they may consider these strategies. Ultimately, it’s up to you — the business owner — to decide if you are willing to discount (a bit of a slippery slope) to prevent totals and keep larger heavy hits coming to your repair center to achieve the sales targets to make a profit in the tough months we may face.