Salvage parts continue to benefit, divide and confound the repair industry

Dec. 3, 2019
On one hand, salvage parts are an important—sometimes vital—component in a repair since they lower costs and keep many vehicles in shops and on the road instead of being scrapped for parts themselves.

Dave Farmer, owner of DAF Auto Body in Atlanta, Ga., says he still shakes his head when he recalls a “salvage trifecta” a customer and his shop experienced this summer. “This young man loved his car and was very particular how it was being fixed,” says Farmer. “When he saw the insurer wanted to use some salvage parts, he threw a fit.” Farmer says the customer equated salvage with “junk” and couldn’t believe he was paying his insurer steep monthly premiums to put used parts on a new car. After Farmer and the insurer explained how much the salvage parts were saving on the cost of the repair (and that the customer would need to go into his own pocket to pay the difference for new parts), the customer accepted the decision.

The story took a new turn when some of the salvage parts arrived in poorer shape than advertised and needed extensive work, extending the time of the repair. Farmer blames this issue on mistakes by a new salvage yard. When the customer was informed of the delay, he again called into question the use of salvage parts. When the work was completed, he spent two hours with Farmer and another employee going over every inch of the repair.

(Photo courtesy of LKQ) After this wrecked Toyota Yaris arrived at an LKQ facility, employees removed the door. Components that still function will be resold as salvage while the rest is recycled.

Two weeks later, the vehicle was towed back to the shop after the customer’s teenage brother demolished it in an accident. When the customer was informed of the total loss (and why), he took a completely different position on salvage parts. “He thought they could lower the cost enough so the insurer would repair it so he wanted them used throughout, even in areas the manufacturer specified they shouldn’t be,” says Farmer. “When we told him we wouldn’t do that work because of safety concerns, he began calling around to other shops to see if they would but with no luck.”

This story, in a nutshell, illustrates the relationship between the repair community and salvagers. On one hand, salvage parts are an important—sometimes vital—component in a repair since they lower costs and keep many vehicles in shops and on the road instead of being scrapped for parts themselves. On the other, repairers often must navigate a number of issues to get the best use out of them. Here are the five issues that arguably play the biggest part in the battle over salvage.

Issue 1: Your colleagues are split on salvage parts use. “We use salvage parts sometimes, but we try to avoid it. Maybe 10 percent of our repairs use salvage parts,” says Trace Coccimiglio, owner of Valet Auto Body in Draper, Utah and a National Director for the Society of Collision Repair Specialists.

Domenic Nigro, owner of Nigro’s Auto Body in Philadelphia, shares a similar opinion, even going a bit further noting, “I really don’t want to ever use them.” Indeed, much of the industry would prefer to work exclusively with new parts, especially OEM parts.

The issue with salvage products typically is one of quality. Repairers say they are working with an unknown entity since a part could have experienced crash damage that could affect part quality. Also, there’s the matter of additional time needed to repair, prep and refinish these parts. But salvage still has its fans, including Farmer who says he relies on them to lower costs for his working-class customers. Outside of the issue he experienced with one salvage yard, he says he’s worked with others for years and built up trust with them.

Mitchell International reports that salvage parts account for 10-12 percent of parts used in the collision repair market. Financial analyst Tad Blancher argues that level could double if parts costs dropped, but that won’t happen until usage increases.

Such is the puzzle the industry and salvagers are struggling to solve. Repairers need lower-priced option. Their resistance to salvaged parts makes them even less accessible. “Until shops, insurers and salvage companies can come to some sort of understanding on how to make these parts more attractive, we’re going to be stuck with the market we have for quite some time,” says Blancher.   

Issue 2: Insurers are helping to both push and restrict the use of salvage parts. Shops typically order salvage parts when they show up on an estimate. When they do, a battle between the shop and insurers frequently breaks out over financial issues like profit margin.

(Photo courtesy of LKQ) A salvage part is canned either to be inventoried or sent to a customer. The industry remains widely divided on the use of these parts.

“Generally, the shop’s margin is a key issue in preventing shops from purchasing more recycled parts,” says Terry Fortner, LKQ Vice President Insurance, Sales and Marketing, North American Wholesale. “Historically the margins allowed are lower and therefore this creates an issue.”

Following that issue, Fortner says collision repair facilities may not always be compensated fully for labor times including prepping and installing the recycled part.

Farmer has seen both issues in play for years. “I understand what they’re doing, but they’re [insurers] probably are just adding costs to themselves ultimately. They make it difficult to use cheaper parts alternatives. That can’t be good for anyone.”

About making these parts harder to locate and use, Fortner notes a third issue that may be creating recycled parts from being installed. “Oftentimes the salvage part does not show up in electronic databases or may not show in an accurate and useable manner,” he says.  One solution to this issue is better and more effective interchange and mapping, the process of electronically mapping and communicating estimating data, specifically the correct parts information of the damaged vehicle on to the collision damage appraisal. He says information providers can assist by placing more focus and resources to address the problem. He encourages shops to reach out to LKQ for parts options. “If they will call, oftentimes we will have those components that do not show in the estimating databases. Our 1800 highly qualified sales people are there to assist the insurance estimator and the collision repair facility,” he says.

Issue 3: OEMs continue to limit salvage use. Manufacturers like GM, Honda and Hyundai have issued statements rejecting the use of salvage parts to repair their vehicles. The language in GM’s statement is typical of others: “General Motors does not support the use of salvage or recycled parts due to the sensitive nature of the safety and performance of General Motors vehicles” Further, the statement declares salvage parts pose potential risks such as:

• Compromised crush zones from previous repairs

• Additional layers of refinish materials affecting long term durability and appearance of repair

• More complex repairs due to variations in how the assembly was stored, processed and shipped

• Exposure to use and storage conditions that have never been considered by the manufacturer.

Repairers like Nigro always check these statements and follow their recommendations. He says there are a number of salvage parts that should never be used, including any structural parts, reinforcements, roofs, quarter panels and suspensions. He also says many newer bumpers featuring crash and radar sensors can’t be used because and sanding or DA work alters the tolerance, which means the sensors and critical systems like the SRS may not function as they should.

“We’re also seeing a lot more windshields that can’t be replaced with salvage because they’re becoming structural parts,” Nigro adds.

Issue 4: Salvage companies are standing behind their products strongly. While some salvagers agree that some salvage parts may not be a repair option, Fortner says in his opinion, OEM position statements against the use of alternate parts are often generally driven by self-serving financial gain.

“How can a part be perfectly fine, as a car is being driven down the road, and two seconds later after an accident be unacceptable for use? Fortner asks.

If there are questions over parts quality, Fortner points to the confidence LKQ has in its products. “We warranty sheet metal crash part for as long as the customer owns the vehicle.”  

Fortner adds, “We’re the only distributor including the OE manufacturer that offers an expanded level of protection. Please review our Promise of Protection and Promise of Calibration for our indemnification commitment to the collision repair industry.”

Issue 5: Salvage parts have a place in repairs, for now. Despite his preference to not use salvage parts, Nigro does at times and says they can have a place in the repair market. “Certain parts like hoods make sense,” he says. “Use the salvage parts that you can use that make sense and don’t change the integrity of the vehicle.”

(Photo courtesy of LKQ) Do salvage parts have a future in the collision repair industry? Some analysts say the futures of both are tied together.

His main concern is customer safety, and he worries that in the rush to save money insurers and shops may be turning to solutions that endanger customers. “What is more important? Profitability? Making insurer happy? What matters most for us is protecting the customer,” Nigro says.

Fortner remains firm that LKQ’s salvage options do just that. Moreover, he says LKQ is “bullish” on salvage parts and says competition is an added benefit that helps both the collision repair industry and its customers.

While this part of the salvage debate continues, Blancher says there are other forces aligning that could spell doom for much of the repair industry, including salvagers, or that could save both. As vehicles become more technologically sophisticated, with sensors and other critical, fragile electronics in increasing numbers of parts, fewer parts may be available for salvage use.

At the same time, the cost saving provided by salvage are also critical for the industry. Mixed in with all this is the fact that vehicles are quickly approaching a point where many are simply are going to be too expensive to repair. “Who is going to pay $30,000 - $40,000 for a new vehicle that can’t be repaired? That makes no sense for manufacturers, repairers, insurers or salvagers,” says Blancher.

Blancher says the different groups must someday soon come together and work out a solution. “Either they’re all going to win together or everyone will lose,” he says.

The question is whether the industry will have any better luck finding a solution than Farmer’s hard luck customer.

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