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“Total Loss” Category Causing Unneeded Losses for Fleets

On Carfax and AutoCheck’s vehicle history reports, the category “Total Loss” is often used for vehicles that are satisfactorily repaired. Is that fair?

April 28, 2015, by - Also by this author

Damaged fleet cars that would have been commonly repaired under an insurance claim are now being labeled a “Total Loss” — and it is costing fleet consignors millions.

This is a result of a new category on vehicle history reports issued by Carfax and Experian’s AutoCheck called “Total Loss.” This category is often used for vehicles that have clean titles and were never “totaled” by insurance companies.

The problem, says Michael Towers, the founder and CEO of Hawthorne Estimating, a damage claim, estimating and vehicle disposal firm, is that the category is used when a carrier pays a claim based on the difference between Actual Cash Value (ACV) and the salvaged or damaged condition. While sellers have a legal right to diminished value, it is a distinction of a legal entitlement, not a representation that the vehicle was a “total loss” in loose terminology.

“In other words, when we get a carrier to pay a claim as a ‘total loss’ and the damages are 40% of the Actual Cash Value, they are doing so as a legal entitlement, but clearly the settlement method is not indicative of the condition of the vehicle,” Towers says. “Consumers and auctions buy these reports to find out if the vehicle was involved in an accident. They don’t necessarily care about the underlying claim, how it was processed and what the claimant’s legal rights were to a fair settlement.”

Prior disclosures such as “air bag deployment” and “frame damage” are fine, says Towers, but to now tag a vehicle with the label “Total Loss” — when that car would have been repaired by any insurance company every day — is not only misleading, but it’s also needlessly costly to the seller and presents future problems for the buyer.

When a fleet sells lightly and moderately damaged vehicles, they are often sold in their damaged condition to avoid incurring diminution of value down the road or to avoid having to fix a vehicle when the buyer would rather replace it with one undamaged. As a result, sellers attempt to combine the damage estimate amount with the salvage amount and try to make it meet the payoff amount — which it hardly ever does. Those losses are $1,500 to $2,000 per vehicle. By labeling the vehicle a “Total Loss,” the salvage is now worth less than it should be, hence increasing the loss to seller.

Compounding the matter is the fact that there is no clear definition of total loss; it varies by state. As well, those “Total Loss” tag lines are popping up after the damage claim is settled, even after the car is sold. A new buyer could purchase the vehicle with disclosed prior damage but with a clean title — only to get stuck with “Total Loss” after the claim is settled. This leaves new buyers with a vehicle that banks won’t finance because of the “Total Loss” tag line.

“One of my client’s vehicles had been tagged ‘Total Loss’ because of how the claim got settled months after it was sold,” Towers says. “The buyer had to drive the vehicle during the appeal process to both AutoCheck and Carfax. Both said they would not remove the designation because the insurance carrier settled the claim as a ‘Total Loss.’”

For you fleet consignors out there, have you dealt with a claim that was labeled a “Total Loss” on a vehicle history report, even though the vehicle was repaired by you or sold unrepaired? Speak up!


  1. 1. Jeff [ May 24, 2015 @ 03:03AM ]

    That's good that we know it was a total loss, who knows how the car has been abused, how many oil changes skipped, etc. Im sure if I go to buy a car from Enterprise, Hertz, etc. They will not even give me a history of maintenance.

  2. 2. Michael Towers [ May 28, 2015 @ 07:05AM ]

    Jeff: Labeling a vehicle a total loss when it is not is not good. The phrase "Total Loss" does not tell the consumer if the vehicle had frame damage or if the air bags deployed. Outside of the fact that the term is misleading, the economic impact to a rental agency is enormous and ultimately gets passed along to the consumer. Knowing how a claim was financially settled is not relevant to the vehicles condition which is the real purpose why consumers buy vehicle condition reports.

    Companies like Hertz and Enterprise have very stringent maintenance guidelines and they are programmed into their computer systems. Based upon mileage, things like oil changes occur because the computer puts the vehicle out of service. While they won' have "jiffy Lube" type paperwork to show you, then can tell you how often they change the oil and rotate tires.

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Chris Brown

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Executive Editor

Chris is the executive editor of Business Fleet Magazine and Auto Rental News. He covers all aspects of the fleet world.

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