The Rise of the Disposable Car

Modern cars are equipped with heaps of electronic devices, many of which are designed to reduce the frequency and severity of accidents. But there’s a catch: The high cost of repairing these systems may mean the vehicle is written-off, or totaled, following a crash.

More than one-fifth of vehicles are now declared a write-off by insurers after examining claims; this is close to a record and around five times higher than in 1980, industry participants say. The proportion of totaled cars may increase further as declining used car prices tip the scales in favor of salvage versus repair. Auction firms that re-sell wrecks on behalf of insurers stand to benefit from this trend, whereas car buyers who stretched to finance their vehicles, but scrimped on insurance cover, risk nasty financial shocks.

rise write offs

It’s economically rational for insurers to write off vehicles when the cost of repairs exceeds the value of the car immediately before the crash minus the expected salvage proceeds. Right now, repairing a car is very expensive, which means more are getting totaled.1