Or why auto insurance has gotten so ridiculously expensive — after used vehicles have gotten so ridiculously expensive.
I’m going to lay out some crazy shocking numbers relating to used car prices, cost of repairs, insurance, and rental cars. This isn’t data, but it’s one incident that illustrates what we’ve discussed here for the past two years, the craziness of what has happened in terms of inflation – and just how far the purchasing power of the dollar has plunged with regard to used vehicles, repair costs, insurance, and rental cars.
And the most shocking part is that it isn’t even shocking anymore, it just makes you feel crappy, and we griped and grumbled, but paid, spending money like drunken sailors, as inflation has taken root in its insidious ways, thereby confirming what Powell had said, that consumers “hate inflation, hate it,” and that they’re in a foul mood, but keep spending.
Our 2018 Ford Fusion Hybrid, with 75,000 miles on the odometer, got rear-ended. My wife, who was driving it back from work, was not injured. The driver-side airbags deployed. The rear was fairly symmetrically crushed. The front left corner, which got shoved into the vehicle in front, got bent up, and the headlight assembly was destroyed.
We had bought the vehicle from a rental car company in February 2020 with 35,000 miles on it for about $15,000, before used-vehicle prices began to spike in the craziest manner never before even thought possible.
The insurance adjuster looked at the vehicle for 10 minutes and totaled it – meaning that he estimated that it would cost at least 80% of the vehicle’s replacement cost to fix it. It was apparently such a clear-cut case that he didn’t even bother to have the vehicle taken to a body shop where the damaged panels could be removed to get a look at the damage underneath, check for damage of the suspension parts, etc.
Stunning item #1: The insurance company offered us nearly $18,000 for the vehicle that we’d bought for $15,000 three-and-a-half years and 40,000 miles earlier. Normally, that vehicle might have been worth $10,000. Obviously, this isn’t some kind of collector’s car that might gain value, but a run-of-the-mill former rental car; what changed is the purchasing power of the dollar that, with regards to used vehicles, has essentially collapsed over a three-year period.
Stunning item #2: Repair costs, so parts, labor, paint, and supplies. Even a less-than-exhaustive look by the adjuster determined that it would cost at least 80% of nearly $18,000 to fix the vehicle, so at least $14,000 in repair costs. If the suspension parts turned out to be damaged, it would cost more on top of that. No telling what the ultimate repair cost would have been.
So bye-bye. An auction company picked it up. It’s common that such vehicles are purchased to be exported to a cheap-labor country, often in Central Asia, to be repaired with cheap but highly skilled labor and cheap parts, and for this then creampuff to be sold for a nice price in one of the Gulf states or elsewhere in that part of the world. This is a big trade and part of the dynamics behind the thriving used-vehicle exports…..
Image Credit: Pixabay
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