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“Customers are definitely being shocked,” said David Goldsmith, owner of Urban Classics, a repair shop in the Brooklyn borough of New York City.
Repair costs are increasing relative to the general rate of inflation. Motor vehicle maintenance and repair costs increased by 4.1% annually from November 2013 to November 2023. compared to only 2.8% for the general consumer price index.
The increase has been especially pronounced since the pandemic. Before this, repair costs were increasing at an annual rate of about 3.5% to 5%, according to Mitchell, which makes software for the collision repair and auto insurance sectors. But in 2022, the rate jumped to about 10% and hasn’t fallen since.
The problem is mysterious.
“I think what we can say is true is that the cost of collision insurance claims is going up,” said Matt Moore, senior vice president of the Highway Loss Data Institute at the Insurance Institute for Highway Safety. “After that, it’s hard to say why.”
Vehicles could be more expensive to repair. Accidents could also be more serious.
The cars were 33% heavier in 2022 than in 1985 and about twice as powerful, according to HLDI. Meanwhile, speeding and traffic accidents have increased.
Heavier vehicles crashing at higher speeds cause worse accidents.
The data could also be skewed. Low-speed accidents, which tend to be less serious and lower cost, occur less frequently as safety technology improves.
Cars are also packed with more stuff, so more things can go wrong. Almost 20% have turbochargers attached to the engines, extracting more power and improving efficiency. Two-thirds have all-wheel drive systems, a big jump from 10% in the 1980s. All of these adjustments add equipment that can break.
Lightweight materials like aluminum are increasingly popular, but they can be brittle and require replacement. Cars have fewer parts thanks to new manufacturing methods, but the ones they do have are huge and more expensive to replace.
The changes don’t end there.
“Today, a regular car is basically a mobile network of computers,” Goldsmith said.
Auto computerization has developed slowly for decades, but has changed “dramatically” in the last decade, said Ryan Mandell, director of performance consulting at Mitchell.
“You can have the same type of accident you would have 10 years ago,” Mandell said. “But now you have three additional sensors that are in the part of the vehicle that was impacted that you potentially have to replace.”
Meanwhile, auto repair talent is in short supply. The Covid-19 pandemic exacerbated a long-standing shortage.
In 2019, the average labor rate for repairs was less than $50 an hour in the U.S., according to Mitchell. By the end of 2023, it was close to $60. Most of those increases occurred in 2022 and 2023.
As people drove less during the Covid years, demand for repairs dried up. Technicians left the industry in search of other work.
The pandemic also raised the cost of parts. Disruptions in shipping contributed to the increase.
In 2022, the cost of parts obtained from automakers increased by 10% and replacement parts increased by 17%, compared to the usual annual inflation rate of 0% to 4%.
Many in the automotive sector think costs cannot continue to rise at this rate. The industry is making its biggest changes in the last hundred years: from gasoline to electricity and from mechanical to digital.
“If cars are to be affordable, they must be affordable to maintain,” said Alan Amici, president and CEO of the Center for Automotive Research. “And it has to be affordable to repair, or else we’ll have fewer vehicle sales. So I think automakers will be motivated to reduce those costs.”
Watch the video to learn more.