Salvage titles exist because it is obviously profitable for someone to buy totaled cars and rebuild them. But this even existing would imply that in some cases, an insurance company paid out more than the actual cost to repair the vehicle, because otherwise it couldn’t possibly be profitable.
For example, let’s say a car has a value of $30k and gets totaled. The insurance pays the owner $30k and sells the wrecked car to a rebuilder for $1k, so they are out $29k. If the rebuilder then spends $15k repairing the car and sells it for $20k due to its reduced value, they will make a $4k profit.
Thus, why wouldn’t it be better for the insurance company to just spend the $15k themselves to repair the car, write the owner a check for $10k for diminished value, and pocket the $4k while also avoiding whatever overhead it takes to do the transaction to sell the wreck? In addition, one would imagine that insurance companies could achieve much better scale and/or vertical integration by moving this operation in-house vs. small rebuilders.
In: Economics
Insurance companies have calculated that the cost to pay someone else to do it properly with new parts and time spent diagnosing it is not worth it. The kind of people that can make a profit on this have other means to bring the cost down.
Someone DIYing it could make a profit because the labor they do is pretty much free and they save money on used parts.
A mechanic could make money by having the expertise to subsidizing their labor, faster diagnostic and shorter turnaround, part discount from auto part stores and junk yards. They can use their experience to figure out what will sell, they can figure out which cars are not worth the time.
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