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How does a car
become classified as a write-off?
An
Insurer will perform a reasonably precise calculation to ascertain
whether a car should be deemed a 'write off' (we prefer to think
of damaged cars as 'write offs' as opposed to 'total losses' as
Insurers usually make a recovery from a damaged car, if only the
salvage value). The calculation made by the Insurer, or their
engineer is, simplistically as follows:
For
an example: Damaged vehicle with a PAV (Pre Accident Value)
of £10,000.
Repair Costs:
Parts £5,000
Paint £1,000
Sundries £100
Labour £4,000
Total
£10,100
If
the total repair cost for the above vehicle is £10,100 and the
vehicle has a value of £10,000 it makes sense to write it off;
pay £10,000 (less the excess - the first part of any claim the
Insured must pay) and save the extra £100 associated with the
re-building cost. If the repair amounted to £9,900, it may appear
economical to repair the vehicle but is it worth taking the chance?
There are always the 'hidden extras' to consider; the additional
damage that may be discovered once work commences. If you repair
a vehicle, there are other problems that may arise; the owner
may not like the standard of work completed, minor niggles may
arise from problems believed to be associated with the accident.
These factors can make writing a vehicle off more attractive than
undertaking repair - easier to agree a wad of cash for the vehicle
and let the owner replace their vehicle - end of liability (whilst
problems associated with repair may be referred to the repairer
to reconcile, they can reflect badly on the Insurer who approved
the repairer).
But
what about the salvage value. If the car were a 'write off' and
the Insurer decided to pay their Insured £10,000, the salvage
would become the property of the Insurance company and could be
sold. Many Insurers have fixed fee arrangements with salvage agents.
In the above example, if the Insurer has a fixed fee arrangement
with a salvage agent which results in their obtaining, for example,
20% of the P.A.V., the Insurer would receive £2,000 (20% of £10,000,
the PAV) the loss is reduced to £8,100 by recovery against the
salvage - still more reason to write the car off. In this example,
if the repair exceeds £8000, it makes sense (economical) to write
it off. Vehicles can also be written off by adding hire charges
to the equation; the damage may not in itself be sufficient to
write the vehicle off but, take into consideration an Insured
or a Third Party having use of a hire car attracting daily costs
the loss soon mounts up. Courtesy cars can off-set the loss but
are not always available. If the Insurer makes payment to the
Insured (or third party) that person is now in possession of funds
to purchase a vehicle, ending the need for a hire car (with associated
charges). Additionally, vehicles replaced under 'new for old'
schemes (often where the damage exceeds 60% of the PAV) increase
the pool of total losses.
A
vehicle can, as will be realised from the above, undergo a substantial
amount of damage before it is deemed a write-off. If the vehicle
has been deemed a write-off it will appear on a central register,
such as Hpi. An enquiry of the vehicle will reveal the history
and enable a prospective purchaser to undertake an examination
to ascertain the vehicle's condition. You can learn of this history.
What of the vehicle involved in a substantial accident but the
calculation caused the repair cost to fall just below the amount
required for an Insurer to deal with it as a total loss? In theory,
an Insurer arranged repair of the vehicle and (given approved
repairer schemes) the condition of the vehicle should be commensurate
with a vehicle of similar age and mileage. The vehicle will have
been returned to the insured, repaired and put to use. Total loss
vehicles have not been repaired on the authority of an insurer;
they have not been returned to their insured, someone who knew
the vehicle's condition prior to the accident and who subsequently
had use of the vehicle.
An
insurer approved repair will involve bona fide repair facilities
using new parts in a relatively controlled environment. The repairers
are accountable to the insurer and the insured, the acquisition
of parts and the work entailed will be documented, an audit of
the repair can occur if necessary. How has the vehicle been repaired,
if not under the authority or supervision of an insurer? The immediate
concern is that some one, to reduce costs, has cut corners; effected
a cosmetic repair. We are not discussing category B salvage (bent
chassis - heavy damage) in respect of which the DVLA will not
issue a V5. These are vehicles which an Insurer, possibly using
relatively high labour charges and new parts, has calculated to
be too costly to repair. On a vehicle over 3 years old (as an
example), using secondhand or other than the manufacturer's parts
may have a dramatic effect on the costs. Similarly, savings can
be made on labour charges.
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