The Rise in Totaled Cars: What's Driving the Surge?
The share of cars declared totaled hit a record high in 2023. One major factor: the high cost of repairing modern driver assistance systems.
According to LexisNexis Risk Solutions, the share of insurance claims in which a vehicle is declared a complete loss has significantly increased over the last few years. In 2018, only 19% of vehicles were deemed totaled. In 2023, the share rose to 27%. That’s an increase of +8 percentage points. Bloomberg estimates the share is 5x higher than it was in the 1980s.
There are three drivers behind this trend.
Expensive Software: New car models often come equipped with “Advanced Driver Assistance Systems,” like lane assist and auto-braking, which require numerous sensors and cameras. After a crash, these systems need to be reinstalled, calibrated, and extensively tested. These costs are so high that totaling the car often becomes the more economical option.
Supply Chain: During the pandemic, supply chain disruptions hit the auto industry especially hard. With repair shops facing long waits for parts, insurers were forced to cover the cost of loaner cars for extended periods. Once again, insurers found it cheaper to total the car.
Older Cars: Americans are also driving their vehicles for longer. In 2012, the average age of a passenger car and light truck was 11.1 years. By 2024, it had increased by +1.5 years to a record-high 12.6 years. When older vehicles are in accidents, it’s typically cheaper to total the vehicle.
With more cars being totaled, insurers face higher payouts, which are being passed down to consumers. According to Insurify, in 2024, the average auto insurance price rose a whopping +15% YoY.
Younger Americans today do not recall a time when people actually took broken watches and TV sets to a repair shop and paid someone to fix them. A decade or two from now, young people may not recall a time when we still fixed automobiles. Just have someone tow it away to recycle the steel and plastic, and then submit zeros to your insurance and the IRS.