Although the tough times shops are experiencing in some markets aren’t over, the summer has brought some sunnier trends for the industry.
Here is a collection of some potential good news for collision repairers.
Rebound in used vehicle values means fewer totals
Given the link between used vehicle pricing and the percentage of collision-damaged vehicles declared total losses rather than repairable, collision repairers tracking the fluctuation in second-hand vehicle values this year have to feel like they’ve been on a wild roller coaster ride.
Vehicles are generally declared total losses when the cost of repairs exceeds some percentage of the vehicle’s value prior to the accident. When used vehicle prices drop, it takes less damage for repair costs to hit that total loss threshold.
And drop they did this spring. Wholesale used vehicle prices in the first 15 days of April decreased 11.8% compared to a month earlier, according to Manheim. The used vehicle auction company reported its mid-month “Used Vehicle Value Index” fell to 125.2 points, a 9.6% decrease from the same period a year ago. The prior record for decline in any month was 5.5% in November 2008.
Manheim also pointed out, however, that when its used vehicle value index fell 10.5% over two months in the fall of 2008 at the start of the Great Recession, the horizon looked bleak then as well, yet vehicle values fully recovered seven months later.
Sure enough, this year there was a strong---nearly 9%---rebound in May, Manheim reported, bringing pricing to within 1.9% of what it was a year earlier. The index then jumped another 6.6% in the first half of June, erasing much of the spring decline and reaching a level that is actually 4% higher than last June.
Admittedly, there are still factors that could lead to a lot of instability in used vehicle pricing in the coming months.
Rental car companies continue to send significant numbers of used vehicles to the auctions as they reduce their fleets in response to the drop in travel.
Repossessions are also picking up, and while automakers delayed some turn-back dates on leases this spring during the worst of the COVID-19 impact, more of those vehicles also are expected to join the parade of used vehicles hitting the market.
Still, the fact that the large decline in the spring didn’t hold should come as welcome news to collision repairers.
Traffic levels are getting closer to 'normal'
Traffic analyst firm INRIX at the end of June halted the weekly reports it was producing on traffic levels around the country given that by its system of measurement---a comparison to weekly traffic in February---personal vehicle traffic on a rolling seven-day national basis was back to 100% as of June 25.
As July began, more than 34 states had traffic levels higher than in February, according to INRIX, and only three states had declines exceeding 10%: Hawaii (still down 43%), California (down 12%) and Arizona (down 11%). Forty-two of the 98 metropolitan areas INRIX tracks in the U.S. had traffic at or exceeding February levels.
That’s a fairly sharp recovery, given that in early April, traffic had fallen to nearly half of what it had been just six weeks earlier.
It should be noted that the INRIX data paints a little brighter picture of traffic around the country than it would if it compared traffic in June to what it was a year earlier. Because traffic tends to rise in the spring and summer, reaching February levels in late June still represents about a 16% decline compared to a year earlier.
But 16% off is significantly better than the 47% decline in April. And analysis of traffic camera data in some cities and states indicates even more of a full recovery in some markets. Using that measurement, statewide traffic in Florida and Indiana during the third week of June, for example, was down by just 4% or less compared to the same week in 2019, and down by less than 10% in Arizona, Ohio and Michigan.
Looking at vehicle counts tracked on state highways in some cities also points to at least a near return to normal in some cities. Traffic on I-465 in Indianapolis in early July, for example, was actually 6% higher this year when measured against the same week last year. And traffic camera data for that week indicates just a 10% decline on state Route 315 in Columbus, OH, and only a 6% decline on I-85 in Charlotte, NC.
Demand for gasoline, as measured by how much was being delivered to retail stations around the country, also has rebounded to close to “normal.” Back in April, according to the U.S. Energy Information Administration, gas deliveries had tumbled by 47% compared a year earlier. But by the last two weeks of June, the amount of gasoline being delivered was just 10% below what it was during the same period last year.
Some shops point to help from insurers
A poll of shops in the second half of June asked shops if they have been offered any assistance from insurance companies to help their business during the pandemic. A large majority said no.
“Just the opposite. Most insurers are auditing more files and becoming very nitpicky,” a shop owner in Hawaii said.
“They just want you to cover rental even when the pandemic caused parts delays,” a shop in Northern California commented.
But at least one in four shops said they could point to something helpful insurers were doing. Those included shops saying they were being paid for the added labor for “COVID-19 cleaning” of vehicles.
Shops on Progressive’s direct repair program also said the company has followed through on its pledge in mid-April to share with those shops more than $2 million of the money the company was saving from the drop in claims Progressive and other insurers were experiencing.
“Progressive gave us $1,000 to help with the reduction in work,” one Florida shop reported, a dollar figure that was confirmed by more than a half-dozen other Progressive direct repair shops.
A shop owner in Hawaii said GEICO had increased shop labor rates, and shops on USAA’s direct repair program in Oregon and Illinois reported the insurer suspended the performance-based bottom line discount the shops are required to give that insurer.
John Yoswick