What I have learned about economists is that they are better at looking in the rear-view mirror than they are at predicting the future.
We are all well aware of the aging repairable fleet. The experts tell us that for the first time the fleet average age is over 12 years old in the U.S. market. Amateur prophets tell us that the repair industry should like this aging automobile trend, but I can assure you it is not good for collision repair shops and especially dealer-affiliated shops.
On the surface one might reason that older cars mean more repairs. That may be true for certain mechanical repair specialty shops, but it spells the opposite for collision repair.
Collision Repairers Need Newer, Not Older Cars
The number one reason why a less aged fleet is preferable is insurance. People tend to drop their collision coverage on older cars and maintain only minimum legal coverages like liability. Newer cars are usually financed and as such there is a requirement to keep them insured for physical damage.
Let’s face it, collision repair is too expensive for most out-of-pocket payers.
The number two reason is that older cars become total losses very quickly. So, for the older cars and trucks that actually have collision coverage, many if not most are declared total losses by the insurance company. It doesn’t take much to total an older vehicle that has one or more air bags deployed.
The number three reason is emphasis on safety. The insurance industry has finally begun to awaken to the thought of “safely” repairing cars. With pre- and post-scanning becoming mandatory on most vehicles, the costs go up along with the discovery of previously unascertained damage. For safety reasons, appropriate protocols need to be understood and followed. Hence more total losses.
The number four reason is simply that standard dent and touch-up repair is not very profitable. If you have read my articles in the past, you know how important parts sales are to overall body shop profitability. If you don’t do a good job selling parts, your body shop isn’t very profitable. Gross profit per hour can double when appropriate parts are sold. Body shops lose money on labor alone.
The Future
My article is not all doom and gloom. For the well-positioned dealer, this could be your ticket to success. With the popular Advanced Driver Assistance Systems (ADAS), the world could be your oyster.
Since the dealer network has control of certain information that is difficult to obtain elsewhere, you may be able to capitalize on the car owner’s concern over safety. So many vehicles are repaired without proper pre- and post-scanning as well as recalibration of critical features related to safety. I predict many large shops will have a full-time person who is nothing but a scan and recalibration specialist.
I own and operate two large shops in Illinois and we already employ such a full-time individual. One shop is dealer affiliated and one is straight independent. I often wonder how other shops are getting by without such a skill set. As I have said in the past: You either need to get in or get out of the collision business. In the past my advice centered around profit and branding. I am telling you now it’s about doing it right with no exceptions. Many shops are one mistake away from a massive lawsuit due to improperly repaired cars.
I suggest you pick up a copy of Frank Terlip’s book: Auto Industry Disruption: Who and What is Being Disrupted and What to Do About It! If you’ve got any hair, it will make you gray. It is not doom and gloom, but it is eye opening. Get on board and you can prosper in your collision shops.
