1. Cycle time and "touch times" are improving. Trying to get an idea of where you might stand in terms of cycle time? Stats obtained from one multi-state shop chain showed an average cycle time of 8.1 days, keys-to-keys. Overall, the shops averaged 2.64 labor hours per-day per-job ("touch time"). But even within that chain, cycle time performance varied. The top 25 percent of these shops, for example, had touch times of 3.75 to 7.6 hours per day, and cycle times between 3 and 5.5 days.
Stats covering vehicles processed through the direct repair program (DRP) of a top 10 insurer, show that cycle time is improving. For drivable vehicles, cycle times for a six-month period averaged 3.9 days, down from 4.1 days for the preceding 12 months and 4.2 days for the year before that.
Improvement was even more dramatic for non-drivable vehicles. Cycle time for these jobs stood at 10.4 days, compared to 11.2 and 12.3 days in the two years prior.
A consultant who works with dozens of shop operations around the country said the "best of the best" are achieving touch times of nearly 7 hours per day on non-drivable vehicles and a whopping 12 hours per day on drivable vehicles (or about 6 hours per day when all vehicles are taken into account). But, he said, 3.7 to 4 hours of touch-time per day is about average, and 4 to 6 hours per day – which is what many insurance companies expect – puts a shop near the top 25 percent of the industry.
2. Average total cost of repairs is on the upswing. Your shop's average ticket is probably on the rebound after a couple of down years. According to CCC Information Services, the average total cost of repairs fell significantly in 2009 to $2,404 from $2,441 the preceding year. Since then, the average has crept back up, to $2,426 in 2010 and to $2,457 in the first three-quarters of 2011. So while that number had risen steadily from 2001 to 2008, it's only now back to what it was in 2008.
3. Labor rates growing only modestly. One reason that repair costs aren't growing faster is that the national average for body and paint labor rates has increased only modestly year-over-year since 2006. According to figures from CCC, the average body labor rate rose from $41.42 in 2006 to $45.04 last fall, up an average of just 1.7 percent per year (paint labor rates rose similarly).
The national average hourly rate for paint materials increased slightly faster, from $22.26 in 2006 to $25.66 in 3Q 2011, an average increase of about 3 percent per year.
A 12-month period ending last fall is a good example of how the cost of autobody work isn't keeping up with overall inflation. According to the U.S. Bureau of Labor Statistics, the Consumer Price Index (CPI) for all items (200 categories) was 3.5 percent last fall compared to a year earlier. During that same period, the cost of bodywork was up just 2.05 percent.
4. Growth in DRPs varies by type of shop. CCC data indicates that the average number of DRPs that shops participated in per-location grew steadily from 2001 through 2007, but multi-shop operations (MSOs) have seen more growth in DRP numbers since then than have other shops.
Independent shops averaged 1.9 DRPs in 2000, and three in 2010; dealership shops went from an average of 2.4 DRPs in 2000 to just shy of five in 2010. In both cases, the 2010 numbers are about the same as they were in each of the three preceding years.
But regional and national MSOs outpaced these other collision repairers in DRP growth, particularly in recent years. MSOs averaged 2.5 DRPs in 2000; by 2010, regional MSOs averaged 6.5 DRPs and national MSOs averaged 7.7 DRPs.
5. Claims count also shifting toward MSOs. In the past decade, the percentage of claims handled by dealership and single-location independent body shops has declined, while the percentage handled by MSOs has doubled. In 2000, according to CCC, independent shops processed about 85 percent of claims. Dealership shops and "regional MSOs" (those with shops only in one state) each handled about 4 percent of claims, and "national MSOs" (those with shops in multiple states) processed 5.8 percent of all claims. By 2010, independents processed 78.6 percent of claims and dealership shops just 3.2 percent; regional MSOs had grown to 7.4 percent and national MSOs to 10.6 percent.
6. The vehicle fleet is aging. One factor in the rise of total losses over the last decade is that, overall, vehicles on the road today are older than they were a decade ago. In 1991, the average passenger car was 9.1 years old (8.8 years old when light trucks were added to the mix). In 2011, that average had risen to just shy of 11 years old.
You likely can see that aging fleet in the mix of vehicles you're repairing. In 2007, only 31.5 percent of claims involved vehicles 7 years or older. In 2011, 40.5 percent did.
7. Drivers have less insurance. According to CCC, 43 percent of collision losses in 2003 involved a deductible of $250 or less. Just over half involved deductibles of $251 to $500. That percentage of low deductibles has fallen steadily. In 2011, only about a third of claims involved a deductible under $500, and about 60 percent involve a deductible between $500 and $750.
Research firm Quality Planning is reporting that drivers are cutting back on their insurance coverage in other ways as well. In 2006, 53 percent of older vehicles were not covered by collision or comprehensive insurance; by 2010, this had increased to 63 percent.
The type of auto insurance people buy also could affect accident rates. One recent study found that pay-as-you-drive insurance, in which drivers' insurance rates are based on their actual mileage tracked by the insurer, could reduce driving and accidents. The study estimated that switching all Massachusetts drivers to a per-mile auto insurance pricing would reduce mileage, accident costs and fuel consumption by about 9.5 percent. Progressive Insurance offers pay-as-you-drive insurance policies in more than 40 states, and other insurers are beginning to do so.
8. The age demographics of drivers is changing. The fact that there are more inexperienced teens eligible to drive (8 percent more than a decade ago) should be good news for collision repair shops. But the increase in states requiring restricted or graduated licenses for teens tempers this shift; the Allstate Foundation and others, in fact, are pressing the federal government to require all states to use graduated licensing.
Another shift: Today's teens aren't rushing to get their licenses like they did in previous generations. Only 75 percent of 19-year-old Americans have licenses, compared to 83 percent of 19-year-olds in 1983. This and longer life spans is shifting the average age of American drivers upward. About 40 percent of drivers are age 65 or older – up from about 35 percent a decade ago. Ten percent are age 70 or older.
These older drivers are staying licensed longer than in the past. Ninety-five percent of those 50-69 have licenses (up from 84 percent in 1983). The jump is even more dramatic with the older portion of this segment; 94 percent of those ages 65-69 are licensed, up from just 55 percent in 1983.
But don't count on the stereotype of the bad, older driver to keep busy. According to the U.S. Census Bureau, the accident rate declines steadily among older populations. (See chart on page 10).
9. Parts usage is shifting. Mitchell International reports that in 2007, 74.4 percent of collision parts dollars was spent on new OEM parts. By 2011, this had dipped to 66 percent. Non-OEM had jumped from 10.5 percent of parts dollars up to 12.8 percent, and used parts gained even more ground (13.4 percent in 2010 compared to 10.4 percent in 2007).
Shops also are buying fewer parts per job. CCC reports that in 2007 there was an average of 8.2 replaced parts of all kinds per claim; that fell to 7.7 in 2011, (one fewer part for every two cars repaired).
10. A shift in repair vs. replace. Audatex reported that whereas nearly 80 percent of parts were replaced rather than repaired in 2008, that had dropped more recently to about 76 percent – perhaps in part as work-starved shops tried to save vehicles from totaling out.
CCC looks at "repair" as a percentage of all labor; repair of parts hovered around the 40 to 41 percent mark from 2008 to 2010, but jumped to 43 percent of all labor in the first nine months of 2011.
11. Total losses decline slightly. CCC, Mitchell and Audatex all measure total losses a little differently, so it's best when looking for trends to track any one of the companies' numbers over time.
Mitchell, for example, shows the percentage of vehicles being declared total losses drifting downward from 17.3 percent in 2007, to just shy of 16 percent in 2008 and 2009, to 14.5 percent in 2010, and 13.1 percent for the first half of 2011.
12. The number of crashes is down. (See chart, page 12). The National Highway Traffic Safety Administration tracks the number of police-reported accidents. The 5.4 million police-reported accidents in 2010 were 900,000 fewer than in 2003, a drop of 14.3 percent.
In 2010, there was one crash for every 554,500 vehicle miles traveled (VMT); that compares to only 456,735 VMT between crashes in 2003. VMT would have had to risen 21 percent since 2003 to have the same number of crashes; it rose only 4 percent.
The decline in paid collision insurance claims over that time period hasn't been anywhere nearly as severe. According to the Insurance Information Institute, paid collision claims peaked in 2007 and has declined ever since, but the 5.3 million paid claims in 2010 was down only 1.6 percent since 2003.
13. Used vehicle prices stay strong. Weighed down by SUVs, used vehicle pricing plummeted in 2008, reducing how much repair work could be done before reaching the total loss threshold based on the value of the vehicle. Fortunately, used vehicle pricing has rebounded strongly since early 2009, to well above pre-recession values.
Manheim Consulting tracks used vehicle pricing using an index pegged at 100 in January of 1995. It hit peaks above 115 in 2001, 2006 and 2007 – before plummeting to below 100 in late 2008. It has climbed fairly steadily since then, peaking above 127 early last year, before dipping back to just below 125 late last year – still a historically very high level.
Most analysts predict used vehicle values will remain strong in 2012 – good news for collision repairers.
Keeping an eye on numbers – some driven by your shop, others by trends outside the industry – can show how you're doing and provide clarity for what's ahead.
