Weathering the Storm: Profitability in a Declining Claims Market
by Ken Miller, AASP/NJ President
Across the state and the country, shops are feeling it. The phones are not ringing like they used to, car counts are down, and the waiting lists that once stretched for weeks have evaporated.
This is not an isolated dip in business or a seasonal lull. It is part of a broader, sustained slowdown affecting collision repairers nationwide.
Industry data confirms what we already know. Auto claim frequency has dropped significantly. Fewer cars are on the road due to several contributing factors: lifestyle shifts after COVID, improved crash avoidance technology and rising deductibles. But what is making matters worse for shops – particularly those focused on quality and OEM compliance – is the growing trend by insurers to declare vehicles a total loss at much lower repair-to-value thresholds than ever before. In many cases, we are seeing totals on vehicles with just 40 to 50 percent repair-to-value ratios, especially when salvage values are inflated. That shift does not just hurt consumers, it directly cannibalizes our revenue. These are not high severity collisions we are losing, either. These are repairable vehicles that, in years past, would have brought $10,000 to $15,000 jobs to a shop like yours or mine. Now, they are taken to auction yards before we do anything to them! Never mind the cars that get towed directly to Copart for assessment. So what do we do? We adapt. We stay profitable. Because without profit, we lose the ability to train, invest, attract and retain qualified staff, and most importantly, to repair vehicles safely and properly.
One of the ways many shops are responding is by reassessing the financial structure surrounding total losses. Storage, administration and total loss processing fees have to reflect the true cost of handling these files. These vehicles take up space and tie up resources, and the negotiation process (if you want to call it that) often drags on with minimal cooperation from insurers. These costs are real, and if we are not recouping them, we are subsidizing an industry that is already doing its best to squeeze every penny from us. At the same time, we must remain unapologetic about our labor rates for repairable vehicles. The cost of doing business has increased across every line item including wages, equipment, utilities, certifications and compliance. While insurers attempt to paint labor rate increases as opportunistic or excessive, we know the truth. These rates are a reflection of the real cost of delivering a safe and fully compliant repair. They are not optional. They are essential. This moment requires discipline and resolve. It also requires solidarity. If you are under pressure to discount, compromise or carry losses in the name of relationships, remember this: No one is coming to rescue your bottom line. You are the steward of your business, your employees’ livelihoods and your reputation.
The slowdown is real. But so is our ability to rise to the occasion. Let us continue to support each other, share resources and hold the line on what we know is right. AASP/NJ is here to help, and we are listening.
Want more? Check out the August 2025 issue of New Jersey Automotive!