The things you may not know about insurance accident write-offs
It’s your daughter’s 18th birthday. You’ve taken her to choose her first car. She’s looking at the colour, the music player and the fluffy steering wheel, while you look at the airbags, the braking system and the cost of insurance.
But where has that car come from? What is its history and how has it come to be for sale? It’s not a trick question. Many second hand cars are trade-ins from people upgrading or from other private owners who have had some change in circumstances. But some will have been insurance accident write-offs.
Every year, thousands of cars written off by insurance companies as “Category D’s” are sold to garages, repaired and offered for sale as second-hand. Not that there’s anything illegal or wrong with this. A Category D write-off is a car that is classified as having minor damage, which would cost less to repair than the value of the car. In many cases, an ex-write off can be an excellently repaired bargain of a car, knocking hundreds off of the asking price.
But the Office of Fair Trading is not entirely happy. In fact, the OFT have recently completed a report into the sale of insurance accident Category D write-offs and the used car trade. The study has concluded that a “high level of consumer complaints” are reported in respect of these cars. This would indicate that although some customers are picking up a bargain, others are picking up a lemon.
So why are insurance accident write-offs being sold on?
Category D insurance accident write-offs still have value in them. The insurance company could, theoretically, repair them for less than the write-off amount they pay to their customer. But why would they pay out a cheque to their customer if they could repair it for less? Surprisingly, this is actually the cheapest option for the insurance company.
The insurance company has to look at the whole picture. Option one involves simply paying an insurance accident write-off cheque to the customer – job done. Option two is to repair the vehicle. For the insurer, this could involve arranging for the vehicle to be transported to their approved garage for repair. There may be storage costs and the expense of having the car assessed. While the repairs take place, the insurer may have to provide a hire car. And some very minor damage can be very expensive to put right. Airbags, for example can cost several hundred pounds to replace or reset.
So the easy, efficient option is to sell the insurance accident vehicle to an independent dealer who will repair it without the large overheads and sell it as a used car for a profit. This type of sale can offer the insurer well over half of the cars value, which can be the cheapest way to resolve the claim.
Is this an honest and decent way to do business?
Well, it has its good and bad points, but if this were not a common practice, insurance premiums would be even higher than they currently are. Category D insurance accident write-offs can be a bargain to people who know what they are paying for. And it shouldn’t be hidden for you when you buy a car. Your dealer is obliged to declare any significant damage in the car’s history to you when you buy it. And the history of these cars is well recorded on the Motor Insurance Anti-Fraud and Theft Register, so your dealer will be fully aware of it.
But the downside is that some of the same insurance companies that are selling these insurance accident write-offs are then refusing to insure them when they are resold. If you were thinking of purchasing a Category D car, you would be wise to get your insurance in place before a sale is agreed.
As with anything, it’s worth doing your homework before you commit to purchasing a car. Remember that a cheap car is always cheap for a reason – it’s more likely that you are missing a trick than your dealer.
Call Accident Advice Helpline free on 0800 689 0500 or 0333 500 0993 from a mobile phone for free, no obligation advice about making a claim.