Quicken Totaled-Vehicle Payoffs

In a typical year, more than five million vehicles are declared a total loss in the U.S., according to Insurance Auto Auctions estimates.

Following this designation, many totaled vehicles are destined to run through the salvage auction lane, where they will be sold, then dismantled for parts, rebuilt or recycled.

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Given 2020 is far from a typical year, the volume of total-loss incidents and length of the process will look a lot different from years past.

With more people working from home and consequently driving fewer miles, there may be a lower number of total loss incidents this year.

Given the many factors that can affect the total-loss space, efficiency and profitability are critical.  Officially, half of all U.S. states allow for digital processing of total-loss titles.

Spurred by the national health crisis and the need to social distance, digital adoption allows for a shorter process, shrinking the average 45- to 90-day cycle by nearly half. (Source: IAA 2020 Data)

Shaving as little as a day or two off the cycle is cause for celebration for most players. Even though the process is technically dealership-less, a shorter, more digital cycle creates positive externalities that dealerships can take advantage of and should celebrate, too.

It is estimated that approximately 60 to 70% of total loss vehicles have loans that need to be paid off prior to a clear transfer of title. (Source: Experian)

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Digital processing in effect creates a steady pipeline of unanticipated consumer demand for auto retailers by streamlining the workflow among insurers, lenders and salvage auctions to expedite the time when a consumer is ready to purchase another vehicle.

Ready-to-buy customers are a gift to a dealership in any economic landscape but are an especially welcome opportunity in recovery-mode, where every deal counts more than ever.

In addition to freeing up billions of dollars more quickly, a shorter cycle will also increase the end-value of a vehicle, which could ultimately make insurance costs more affordable to the consumer in the long run.

How? Depreciation and storage costs erode the potential end value of a vehicle every day it is held by the salvage auction waiting for the title to be processed. This cost is immediately incurred by the insurance company, which generally passes the cost on to the consumer through higher premiums.

The less time it takes to process a total loss title, the more that salvage auctions and insurance companies benefit, resulting in potentially lower premiums and faster turnaround for the consumer. That’s good news for everyone involved.

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As consumer sentiment fluctuates unpredictably throughout the course of the pandemic, players across the auto industry are finding new ways to address operational inefficiencies that will not only help them survive the downturn, but also modernize and thrive when COVID-19 is in the rearview mirror.

While it may be less talked about, an increasingly streamlined and digital total-loss process is something dealerships will want to keep an eye on moving forward.

Joey Yates is senior director-business operations for Dealertrack Registration and Title Solutions. Tab Edmundson is vice president-client solutions for Insurance Auto Auctions. He also is president of DDI Technology, an IAA company.