Junked-car auctioneer Copart, Inc., or simply Copart, reported earnings this week and said given the stellar growth in new and used car prices this year, wrecked car prices are getting a lot more expensive.
On Thursday, Copart's CEO Jeffrey Liaw told investors on an earnings call that strong used car prices are a driving force behind "the record average selling prices" for wrecked cars.
Copart specializes in auctioning wrecked cars that insurers have totaled. The vehicles go to auction and are frequently bought by companies who part out vehicles.
Selling prices for wrecked cars surged 20.7% in the most recent quarter versus the same period in 2020. That compares with a 48% jump in the three months ending in April and 35% in the quarter before that.
During the question and answers part of the call with investors, the CEO told Jefferies' Bret Jordan that insurers are totaling cars more quickly because technology has gotten so sophisticated that it might be too expensive to replace and recalibrate sensors in a minor fender bender. The rise in prices gives insurers a more significant economic incentive to total and let Copart auction it off than fixing.
"When it comes to the insurance vehicles, yes, more cars are drivable today because a car can be totaled because a rear sensor or front sensor or lane departure warning sensor on the mirror is knocked out and the replacement and calibration is expensive. That yes, there are more run and drive cars as a percentage of the total.
"If you visited some of our yards, you would be astonished by some of the high-value Range Rovers and European vehicles that you would see on the lots that at least on their surface look perfectly good and perfectly functional — and in many cases are," Liaw said.
Another reason for soaring wrecked car prices is that supply-chain woes in the automotive industry have made it more challenging to find new parts, thus boosting demand for used parts. Also, higher metal prices have made wrecked cars more appealing to scrappers.
This is just more evidence that the Federal Reserve's narrative of "transitory" inflation is a whole bunch of nonsense as rising prices rip through the automotive industry.