Hi-tech features and depreciation increase car insurance write-offs

Growing technological sophistication, coupled with increasingly rapid depreciation, means cars involved in relatively minor collisions are more likely to be written off than ever before.

That was the message from industry benchmark used car values specialist CAP and motor repair experts at a conference focusing on increasing accident repair costs.

It means insurers are caught in a pincer movement between spiralling repair costs and a rising number of total loss claim settlements.

Air-bags and air conditioning systems top the list of features which are making even relatively minor collision damage increasingly uneconomical to repair, thanks to the more rapid depreciation of vehicles in today’s market.

CAP Operational Development Manager Mark Norman told the annual Refinish Industry Survey Conference (RISC) that despite their superiority in terms of engineering, performance and overall quality, today’s used cars are worth significantly less in real terms than their equivalent models more than a decade ago.

He said: “A three-year-old Ford Focus 1.6 LX today is worth exactly the same in pound notes as a three-year-old 1600 LX Escort was 12 years ago.

“Even though all the technological features such as ABS, full electric windows, remote central locking, air conditioning, air-bags and generally superior engineering and quality, make it a far superior car, the used car buyer is paying less in today’s market than for the car it replaced.”

Mark Norman’s comments were backed up by conference director Quintin Cornforth, who revealed that typical collision repair costs have risen dramatically, thanks to SRS (Supplementary Restraint System) parts and air conditioning components.

Taking a two-year-old Ford Mondeo 1.8 LX as an example he revealed the extent of increased costs to rectify a relatively minor front corner impact, causing some damage to the nearside front chassis rail.

The repair to a 1996 model year car, without airbags and air conditioning, would cost £3,865 - or 52% of the car’s value. The same work on a 2006 model car totalled £5,856 - or 88% of the car’s value.

Quintin Cornforth told the conference: “Falling residual values are making reparability much less viable and the inevitable result of all of this is increased write-offs.”

Mark Norman added: “Insurers in particular are caught in a pincer movement between today’s lower residual values and the sheer cost of replacing the technologically sophisticated safety and comfort features of modern cars.”