Recycling - Collision Repair Magazine

Home

Volume 6

Issue 1

Recycling

Written by David Gold

Thursday, 26 July 2007

Financial Incentive

Without it, why should repairers bother with used parts?

Recyclers should have the sole responsibility for handling irreparable and end-of-life vehicles.>

Last month at our annual Ontario Auto Recycling Convention in Mississauga, I had the opportunity to discuss key issues facing the auto recycling industry. Having the opportunity to discuss industry issues with collision repairers and insurers is a real treat, and I am hopeful that this format will continue at future OARA conventions.

The issues I detailed were:

1) Availability of salvage

2) Repairer compensation

3) Communication

The lengths many recyclers have to go to acquire inventory is not much short of astounding. Damaged vehicles have become so sought after as salvage pieces by so many groups other than recyclers that the result has been to diminish the value of all legitimate stakeholders. For various reasons the existing situation favours the underground economy.

Thieves and money launderers have a detrimental effect on our community in that auto parts are bought and sold for cash, depriving the government of much needed tax revenue. Legitimate recyclers do not compete on a level playing field with these other participants.

Also, the auction buying public is not licensed. There is no license to purchase salvage and no regulatory body watching over this area. As a result, cars are sometimes bought for illegal purposes.

Branded Irreparable vehicles can be bought by anyone and shipped overseas. Branding has not helped recyclers purchase salvage.

Legitimate recyclers are unable to compete, especially with those competitors who ship their vehicles to countries where government regulations are non-existent.

The net result of all of this is that recyclers should have sole responsibility for handling irreparable and end-of-life vehicles--to remove the threat of chop shops or the general public purchasing compromised salvage from auctions, rebuilding structurally unsafe vehicles and selling them to the unsuspecting consumer.

It is time a collective effort is made to highlight our benefit to society and to denounce those outsiders: the unlicensed, unregulated and unfair competitors we face every day.

The result of salvage being sold outside of our industry is a decrease in the amount of available parts for the insurance industry. An abundance of used OEM auto parts would create a platform for more affordable repairing of vehicles. This would result in fewer insurance writeoffs. The collision repair industry would have more work and the benefit would be more cars being repaired.

There is one very important factor that undermines the entire initiative. That is the current pay structure for using used OEM auto parts. (no new para)If a repairer stands to make more money on a new part, as compared to a used part, how can we expect them to embrace what we have to offer?

I would implore the insurance companies to take a hard look at a proposed solution that states that repairers should be allowed to charge 80% of new retail price for any recycled part they incorporate into the repair, thus saving the insurance company 20% of the cost of the part.

Incentive

The insurance estimators wouldn’t have to spend their time looking for recycled parts because the repairer would have a financial incentive to do that.

Compensating collision repairers adequately is an issue that must be addressed. We need a sustainable solution here that will foster the most economically feasible collision repair, while at the same time ensuring that all interests are recognized.

Recyclers are not content with the very small piece of the pie for our used OEM auto parts and nor should the insurance and repair industries be satisfied. We can all do better.

Communicating this to both the insurers and collision repairers in this open format has hopefully showed our resolve to persevere to help insurers save money and to promote the repairing of vehicles to our most important customers: the professional collision repairer.

To help further legitimize our efforts we also need to educate the consumer. We need consumers to understand the benefits of the used OEM part, and then they will be in a better position to make a decision.

Comments

Add New