The auction sale/purchase system

Under most insurance policies, if vehicle collision damage exceeds approximately 70% of either the market or insured value, insurers will classify the vehicle as either a ‘repairable’ or ’structural write-off’. These vehicles are then sold through auction houses.

The type of classification given to ‘written off’ vehicles is most important as it reflects on the quantum of losses the insurer can mitigate through the auction process. A repairable write-off will sell at auction for a much higher price than a statutory write-off.

As a statutory write-off the vehicle identification numbers are surrendered to the transport department authorities which further depletes the quantum amount recoverable. The wreck is thereafter sold possibly for second hand parts only.

However as a repairable write-off the wreck is sold for a substantially higher price which is largely attributable to leaving the vehicle identification numbers attached. For instance, the same car as a repairable write-off could sell for $5000 or as low as $500 if it were classified a statutory write- off. 

There is a very good reason why vehicles are classified statutory write-offs and that is because the wreck can no longer comply with safe engineering tolerance standards as imposed by vehicle manufacturers or government authorities.

An important consideration here is that the description of the ‘write-off’ can be influenced by the assessor and on the level of his experience.

In most cases the assessor is employed by the insurer to reduce costs and losses and therefore the responsibility of classifying the write-off needs to be more transparent and independently managed. The current relationship clearly has grave conflicts and allows for far too many damaged collision damaged vehicles being classified as repairable write-offs’ when they clearly should be ‘classified as statutory write-offs’.

The motor vehicle insurance industry represents a large component of business for Auction houses. In addition to the disposal of collision damaged wrecks, insurance companies also wholesale other apparently roadworthy motor vehicles through Auction houses. These vehicles are then purchased by used car dealers or unsuspecting members of the general public.

Thirty percent (30%) of the vehicles sold at auction will have some degree of unreported post collision repaired damage. Approximately one third of those vehicles have sustained structural damage and on our investigations ninety percent (90%) would not pass collision repair crashworthiness, therefore they could not be classified to be in roadworthy condition.

Auction houses do not conduct roadworthy inspections on any vehicles prior to auction and promote all vehicles are sold ‘with all faults if any’. Whilst this may be an inferred disclaimer against liability, it certainly is arguable whether it mitigates the auction house from it's Duty of Care responsibilities particularly when the directors and managers are absolutely aware that insurance companies ‘dump’ all their insurance claim vehicles under the control of auction houses. Contributing negligence becomes a factor for consideration particularly when auction houses do nothing to advise potential buyers of the collision history or current condition of any vehicle they auction for their insurance company clients.

IVIC has indisputable evidence that conventional collision repair methods do not return safe structural integrity into collision damaged vehicles (see The Dangers and The Truths link of this web site) and with the advent of technology, it is now relatively easy to determine if human error or component failure was the cause of motor vehicle related injury or fatality.

If component failure is established, these inferior non crashworthy collision repaired vehicles which are sold through auction houses may become the catalyst of a expensive litigious cycle of contributing negligence suits involving many stakeholders which can include auction houses, their directors and managers.

As Duty of Care and any subsequent Contributing Negligence action might apply to used car dealers, (see Used Car Dealers and Duty of Care link) similar responsibilities do apply to auction houses if they continue to sell vehicles without disclosing all faults of the vehicle to potential buyers.

There is a disturbing number of safety compromised collision repaired wrecks on our roads which were sold through Auction Houses. Subsequently it is envisaged as the motoring public embraces the IVIC ‘Structural Tolerance Report’ it may well be that Auction Houses will become more accountable and also disclose the true condition of vehicles they sell. 

Whilst complete disclosure will certainly adjust the sale price and may not be in the interests of insurers or auction houses; it is however a means of keeping dangerously defective vehicles from returning to our roads. We all should ask what is the real price for personal safety?