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
Aside from extreme examples, a 30k car that’s totalled out would still likely sell for 10k+. So they pay the 30k settlement, then take possession of the car and sell it at the auction for 10k and mitigate 33%of their loses. The bmws and Mercedes with their 3k headlight for a 5k car means many of those get totalled as a technicality. Those otherwise decent shape sell for damn near fair market value, which means the insurance company mitigates the loss nearly entirely. Don’t forget all those sweet premium checks you send every month. 100 bucks a month for 4 years is 4800 dollars they got paid. Then they total out your Benz and cut you a 5k check. They sell that Benz at auction for 3k. Now they are up 2800 dollars plus the money they made investing the 4800 in premiums. Never feel bad for insurance companies. They will take every dollar from you they can and deny any claim they can.
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