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
I have owned 2 salvage title cars. A prius gen 2 and a highlander hybrid. A place in Las Vegas bought and fixed both of them. There was a point when the prius sold at $20k-$32k (with options) and this place mostly bought salvage title “$32k new, all options” prii and ~300k mile pri taxis and used the non wear taxi parts (e.g. a bumper) to repair the salvage title cars. For a given car the kelley blue book might be $25k for a used 40k all options prius and the equivalent repaired salvage title would sell for $15k. If asked, the LV place would supply the salvage auction photos so you could see the damage. I did and it didn’t look terrible, if it were my vehicle I would probably get it fixed.
The worry for insurers would be liability. They are not a car company.
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