The Total Loss Machine Part One of Three: Why Total Losses Are Exploding

by Sean Preston, Coverall Law

This is Part one of a three-part summer series on the rise of total loss claims in Massachusetts and across the country. Part one looks at why total losses are exploding. Part two will explain how Massachusetts law says the process is supposed to work. Part three will focus on how consumers and repair shops can challenge unfair total loss decisions.

A vehicle gets into an accident and goes to a collision repair shop. The owner expects the car to be inspected, repaired and returned safely. But that is not always how the claim begins. Too often, the insurer starts with a quick “visual appraisal.” The estimate is low because no one has taken the car apart yet. The hidden damage is still hidden. The real repair plan has not been written.

Then the shop begins the work. The vehicle is disassembled. More damage is found. The shop sends a supplement. Then another. Then another. One, two, three, sometimes six or seven. Each time, the insurer slowly approves a little more of what the shop already knew was needed from the start. Weeks pass. Sometimes months pass. Parts are delayed. The customer waits. The shop carries the file.

Then, after the repair number finally grows close to reality, the insurer changes course. Suddenly, the vehicle is declared a total loss.

The shop loses the job. The customer loses the vehicle. The insurer closes the file.

That is the total loss machine.

Consumers are told this is all because cars are more expensive to fix. They are told it is because of inflation, parts delays, supply chain problems, interest rates and new vehicle technology. Those things are real. Modern vehicles are harder and more expensive to repair. But that is not the whole story.

The modern total loss system has incentives built into it. Those incentives can benefit insurers, salvage auction giants and downstream buyers. At the same time, they can harm the consumer who loses a paid-off car, the repair shop that loses the work and the local repair industry that depends on fair claims handling to survive.

Massachusetts law and the standard auto policy do provide rules for this process. The policy says the insurer may repair the vehicle, replace parts or declare it a total loss, but it also says payment is limited by actual cash value and that disputes over the amount owed may be handled through the appraisal process.

That means consumers and shops should not treat a total loss decision as the end of the conversation. It may only be the beginning.

To understand the total loss machine, we first need to understand how much the collision world has changed. Total losses were once the exception. Today, they are becoming a major feature of the insurance claim system.

The collision industry once made its living repairing damaged vehicles; today, more and more of its future depends on whether those vehicles are declared total losses instead.

For most of the modern automobile era, a damaged vehicle was expected to be repaired. A collision occurred, an estimate was written, repairs were completed and the vehicle returned to the road. Local body shops stood at the center of that process. Insurance companies paid claims. Repairers repaired cars. Salvage yards handled only the small percentage of vehicles that truly could not be saved.

That world has changed.

Today, total losses occur at record levels. Industry data shows total loss frequency has climbed from roughly 10 to 12 percent in the 1990s to more than 23 percent today. In practical terms, nearly one out of every four damaged vehicles that enters the claims system will ultimately be declared a total loss. What was once the exception is rapidly becoming the rule.

Consumers are often told there is nothing unusual about this trend. The explanation usually sounds reasonable. Vehicles have become more complex. Advanced Driver Assistance Systems (ADAS), cameras, radar sensors, lane-keeping technology and sophisticated electronics have dramatically increased repair costs. Inflation has raised the price of labor and parts. Supply chain disruptions have extended repair times. Older vehicles now remain on the road longer, creating situations where repair costs can exceed a vehicle’s value more quickly than in previous decades.

All of these factors are real.

But they explain only one side of the story.

At the same time repair costs have increased, the salvage market has been transformed into a massive global industry. What was once a local marketplace for damaged vehicles has become an international auction system dominated by two companies: Copart and IAA. Through online auction platforms, salvage vehicles are now marketed to buyers throughout the United States and around the world. Domestic dismantlers compete against exporters. Local rebuilders compete against international buyers. Every damaged vehicle is exposed to a global bidding audience.

That matters because higher salvage values change the economics of total loss decisions.

When a salvage vehicle commands thousands of dollars at auction, the insurer’s financial calculation changes. A vehicle that might once have been repaired can suddenly become a profitable total loss. The stronger the salvage return, the easier it becomes to justify removing the vehicle from the repair stream and sending it into the auction pipeline.

The growth of the salvage industry has been extraordinary. Copart and IAA have evolved from regional auction operators into multi-billion-dollar enterprises. Their earnings reports regularly highlight the same forces driving their success: increasing vehicle complexity, rising repair costs, higher total loss frequency and strong international demand for salvage inventory. In other words, many of the same factors that make repairs harder for collision shops make total losses more profitable for salvage auctions.

This creates an important question. When total loss frequency rises year after year, who benefits?

Certainly not the consumer who loses a paid-off vehicle. Not the repair shop that loses the repair job. Not the local economy that loses the wages, parts purchases and tax revenue associated with a completed repair.

Yet powerful players within the total loss ecosystem often benefit from exactly that outcome.

The collision repair industry was built around restoring vehicles. Increasingly, however, the financial incentives embedded within the modern claims process reward disposal over repair. The result is a system where more vehicles are declared total losses, more vehicles enter salvage auctions and more money flows into a growing secondary market.

The vehicle that enters a collision repair facility today is no longer entering a system primarily designed to determine how it can be repaired. Too often, it is entering a system designed to determine whether repairing it is worth doing at all.

And that distinction changes everything.

When a vehicle is declared a total loss, someone loses a repair – but not everyone loses money.

Insurance companies often explain rising total loss rates the same way. Repair costs are increasing. Vehicle technology is becoming more expensive. Parts are harder to find. Calibrations are required. Modern vehicles simply cost more to repair than they once did.

There is truth in those statements.

A bumper today is not the same bumper it was 20 years ago. Behind the plastic cover may be radar sensors, cameras, parking assist systems, collision avoidance technology and dozens of electronic components. A repair that once required basic body work may now require scanning, programming, calibration and specialized equipment. Repair costs have increased because vehicles have become more complicated.

But if rising repair costs tell only half the story, where should we look for the other half?

The answer is simple: follow the money.

When a vehicle is repaired, the claim remains open. Supplements must be reviewed. Additional damage may be discovered. Rental costs continue. Parts delays create complications. Shops and insurers may disagree about repair procedures, labor operations, OEM requirements or replacement parts. Every one of these issues costs time and money.

When a vehicle is declared a total loss, many of those problems disappear.

There are no more supplements.

There are no more negotiations over repair procedures.

There are no more disputes about calibrations.

There are no more arguments over OEM parts versus aftermarket parts.

There are no more questions about whether a particular operation is necessary.

The file closes.

The vehicle moves to auction.

The insurer moves on.

That does not mean every total loss decision is improper. Far from it. Many vehicles genuinely cannot be repaired economically. Total loss decisions are often appropriate and necessary.

But incentives matter.

When one outcome consistently reduces administrative costs, limits future exposure, shortens claim handling and creates a predictable path to resolution, that outcome becomes attractive. And when a second industry – the salvage auction industry – is simultaneously creating stronger and stronger returns for totaled vehicles, the economic pull becomes even stronger.

Consider what happens when repair costs rise. The public naturally assumes repair shops benefit.

Often, they do not.

Many shops spend months navigating supplement approvals, documenting repairs, negotiating procedures and waiting for parts. The insurer may challenge labor operations, question OEM requirements, reject procedures, or insist on cheaper alternatives. By the time the vehicle is completed, the shop may have invested substantial time and resources simply getting paid for work that should have been approved from the beginning.

Now compare that to a total loss.

The insurer avoids many of those disputes. The salvage vehicle enters a global auction marketplace where buyers from around the world compete to purchase it. Copart and IAA collect fees. The vehicle moves through the system quickly. The claim file closes.

The collision repair shop, meanwhile, loses the repair entirely.

This is why many repairers have become increasingly skeptical when insurers claim rising total loss rates are simply the unavoidable result of modern vehicle technology. The repair industry sees another side of the equation. Shops routinely report vehicles being declared total losses only after months of supplements and negotiations. They report insurers fighting legitimate repair operations one day, only to embrace those same costs later when building a total loss calculation.

That raises an uncomfortable question.

If an insurer spends weeks or months challenging repair costs, but suddenly accepts every operation once a total loss becomes possible, what changed?

The damage did not change.

The repair procedures did not change.

The economics changed.

The purpose of this article is not to suggest that every total loss is wrong. It is not. Nor is it to suggest that insurers should repair vehicles that cannot reasonably be repaired.

The real question is much simpler.

When a system creates financial incentives that favor one outcome over another, should we be surprised when that outcome becomes more common?

In today’s claims environment, that question deserves an honest answer.

Two companies most consumers have never heard of – Copart and IAA – may have done more to shape the modern total loss market than any insurer, regulator or repair shop.

For years, salvage was mostly local. A badly damaged vehicle would be sold to a nearby salvage yard. A local dismantler might buy it for parts. A rebuilder might repair it. A repair shop might purchase it for a project or usable components. The system was not perfect, but it was closer to home.

That world has changed.

Today, two companies dominate the modern salvage market: Copart and IAA. These companies do not simply sell wrecked cars. They operate massive online auction platforms that connect damaged vehicles with buyers across the country and around the world. A vehicle totaled in Massachusetts may be bid on by a dismantler in New England, a rebuilder in another state or an international buyer thousands of miles away.

That global buyer pool matters. The more bidders compete for the same damaged vehicle, the higher the salvage value can rise. And the higher the salvage value rises, the easier it can become for an insurer to justify a total loss.

This is one of the most important parts of the total loss machine.

Under the basic total loss formula, the insurer compares the vehicle’s actual cash value against the repair cost plus the probable salvage value. So salvage value is not just an afterthought. It can be the number that pushes a vehicle over the edge. A car that might be repairable with a lower salvage value may become a total loss once the salvage number increases.

Copart has openly described this trend to investors. In a 2026 earnings call, Copart explained that total loss frequency is tied to rising repair costs, but also to the returns Copart can generate by finding the “highest and best use” for vehicles through its global marketplace. In earlier commentary, Copart CEO Jeff Liaw also described total loss frequency as rising because vehicle repairs are becoming less attractive to insurers while total loss economics become more attractive.

That is a remarkable statement.

It means the salvage market is not just receiving total loss vehicles after insurers make their decisions. The salvage market is helping to shape the math that makes those decisions possible.

Repairers feel this every day. Collision shops are no longer competing only against other local repair shops. They are also competing against a global salvage marketplace. When a vehicle can bring strong money at auction, the repair shop may lose the job before it ever gets a fair chance to repair the car.

This changes the role of the collision shop. The shop is no longer simply the place where the vehicle goes to be fixed. It has become one player in a larger financial contest over whether the vehicle should be fixed at all.

And in that contest, the local shop is often outmatched.

Where the Machine Leads Next

The rise in total losses did not happen by accident. Repair costs increased. Vehicles became more complex. Salvage auctions became global. Insurers found that total losses could close claims faster, avoid repair disputes and move vehicles into a market where damaged cars still bring strong money.

That does not mean every total loss is wrong. Some vehicles should be totaled. Some vehicles cannot be safely or economically repaired.

But when total losses keep rising, and when insurers, salvage auctions and global buyers all benefit from that rise, consumers and repairers should ask harder questions.

The most important question may not be, “Why was this vehicle totaled?”

The better question may be, “Who benefited when it was?”

In Part two next month, we will look at what Massachusetts law actually requires before a vehicle is declared a total loss, including actual cash value, salvage bids, total loss reports and the hidden numbers most consumers never see.

Want more? Check out the July 2026 issue of New England Automotive Report!