Car manufacturers and the iPhone generation

604 More

Earning the right to be successful

587 More

Knowledge is power

681 More

Selling cars – it’s all about timing

967 More

Truemag

  • Home
  • About
  • Advertise
  • Archives
  • Contact
  • Subscribe

Parts prices and poor residuals leading to soaring write-offs…

AutoWired has a very interesting article regarding the increasing number of write-offs and dangerous repairs due to poor residual values:

The cost of safety related parts such as air bags, combined with poor residual values is leading to a rapid rise in the number of late model vehicles being written off, according to research findings revealed at the recent RISC Conference. Speaking at the Conference, Bodyshop Magazine publisher and industry expert Chris Mann said that this trend is "neither economically or environmentally sustainable". Using data gathered for the parts survey: Parts: pricing models, usage & availability – which is due to be published by Plenham Limited in July – Chris Mann highlighted the extent of the problem. "The inexorable rise in write-off numbers has appalling implications for the environment, is bad for the vehicle manufacturers who typically depend upon after market parts sales for more than fifty percent of their total profits and, of course, it’s bad for the repair industry and motorists. Of even greater concern, though, is the fact that many of these written off vehicles are being bought as salvage, repaired as cheaply as possible by unscrupulous traders who have no regard for the structural integrity of the vehicle, and sold on for maximum profit.

These poorly repaired vehicles are a structural time bomb which, according to ex Cheshire Chief Constable John Dwyer, are putting the lives of both drivers and passengers at risk. Urgent action needs to be taken if unnecessary deaths and injuries are to be avoided".

Using the "typical family car" example of the Ford Mondeo 1.8 LX (one of ten volume models assessed for the RISC Report) Chris Mann pointed out that, when new, in 1996 the retail price of this model was £12,825. Safety related items such as air bags were not then included in the basic specification. The 2006 Mondeo 1.8 LX cost £15,587 but the specification now included all of these previously "extra" items as standard. After two years, the residual value of the 1996 Mondeo was £7,450 (58% of the original price) whilst in 2008 the residual value of the 2006 Mondeo was £6675 or 43% of its purchase price "We took a typical three-quarter front end impact, assuming exactly the same level of damage for both the 1996 and 2006 cars. If one ignores the safety related items that were not fitted to the 1996 model the cost of parts and the labour time required to complete the repair are similar (£3865 for the 1996 model, £4082 for the 2006 variant).

The difference in relative residual values, however, means that the repair cost for the 2006 car represents 61% of the vehicle’s residual value, compared to 52% for its 1996 predecessor and on that basis both cars are likely to be repaired. This, though, does not take account of all of the additional safety related parts fitted as standard on the 2006 vehicle, which, plus the labour time (a mere 2 hours at £25 per hour) required to fit them, adds an additional £1692 to the repair cost. Thus the overall cost of repair which, in 1998, accounted for 52% of the two-year old Mondeo’s residual value, today represents 88% percent of the 2006 Mondeo’s value – making the newer vehicle an economic write-off".

Chris Mann went on to call upon all of the mainstream vehicle manufacturers to re-examine their aftermarket parts policies and review their margins on core safety related parts. "This would benefit them as – even if margins were to be squeezed on these items – the profit they would make on all the other parts required for the repair would more than offset this, and safeguard their crucially important aftermarket sales revenue. There would be environmental gains from such a policy and the risk of motorists unknowingly driving dangerous vehicles would be radically reduced. We, as an industry have a clear responsibility to the consumer and we need to live up to this".

 

 

May 12, 2008In51der
  • Suspension arms top list of parts most likely to wear out
  • HPI warn used car buyers to be wary of Category B insurance write-offs
  • New EU legislation means a shake-up for car servicing
  • Used Car Prices
  • Poor customer service – some dealers not getting the message
  • Is that car a write-off?
  • Tesco: Car choice determined by geographySecret tax adds £200 to cost of running family cars
    Comments: 1
    1. Harry
      13 years ago

      Hi,
      Nice article!! Good information. Manufactures should examin their parts.

    In51der

    Motor Trade Insider - Bridging the gap between the customer and the Motor Trade

    14 years ago Consumercar parts canada, economy, profit, recession138
    Most viewed
    Top 100 UK Dealer Groups
    39,531 views
    The car sales process and the “9 point plan”
    11,562 views
    webuyanycar review – They will buy any car but beware of the asterisk
    6,046 views
    Most commented
    Car sales and the power of silence…
    25 Comments
    Car dealers still not prepared to play the “we buy any car” game
    23 Comments
    A Traders Tale – Part Four
    22 Comments
    Win a pre-loaded Ipod Shuffle!
    19 Comments
    Bargain of the Week – StreetKa 1.6i Luxury
    14 Comments
    Bridal Hair Berkshire
    Fox Body to 2018 Mustang Parts
    and Accessories
    About MTI

    Motor Trade Insider
    is written by people working actively in the motor trade for people on the inside and people on the outside.

    Our aims
    Build a bridge between consumers and the trade, create Interesting and informative content, break down barriers and create better understanding, expose bad practices and rip-offs and promote outstanding products and service.
    Have something to say?
    We are always looking for experienced writers who can write good original quality posts on motor-trade-insider.com. Please contact us if you would like us to consider you. Make sure you give us details of your own blog or a link to some articles you have written.
    2017 © Motor Trade Insider
    Truemag theme by StrictThemes