The global pandemic has interrupted many aspects of our lives and created a strain on the supply chain for goods and service we all rely on. The automobile industry is not immune to the supply chain issues with current shortages on replacement parts and rental vehicles. A problem that began soon after the start of the pandemic in early 2020, it is especially hitting hard in the last year with delays becoming the norm.
The Staebler Blog recently talked to our insurer partner Northbridge Insurance about what they have experienced from a claims’ perspective.
“It has definitely made it more challenging for our insureds to replace vehicles,” said Joanne Arena, Director of Claims at Northbridge. “Low stock, inflated prices, higher salvage values make the total loss process more difficult for both the insured and Northbridge.”
PARTS DELAYS AND SHORTAGES
Beginning soon after the start of the COVID-19 pandemic in 2020, Northbridge’s claims team began noticing a slight slowdown of much needed parts coming from abroad.
“The continued shortage of parts is creating delays in the repair industry, not just collision repairs but also mechanical, service work, and tires,” said Henry Verrydt, a Total Loss Specialist at Northbridge Insurance.
Most of the issues are a result of microchip shortages, supply chain challenges, specifically shipping and receiving delays.
“Used parts and aftermarket new parts are in higher demand with lower inventory driving up some prices. With a shortage of computer chips for new vehicles, it has put a strain on the used vehicle market,” Verrydt added.
NEW CAR SHORTAGES
Auto dealerships are feeling the pinch. Demand for new vehicles is up, yet inventory levels remains low. It’s not only personal vehicles as commercial trucks and trailers are also seeing a shortage.
“Higher truck and trailer prices will mean higher costs to run and higher costs to ship,” said Verrydt.
He explained that are some dealers that are trying to take advantage of the situation with price-increasing tactics and adding pressure to shoppers with warnings such as “buy today because it will be gone tomorrow.”
Used vehicles are also seeing a jump in prices, due to low supply and high demand: “The values of used vehicles at the start of this pandemic were 5% to 8% higher than prior years, now we are seeing 25% to 35 % higher values,” noted Verrydt.
INCREASED RENTAL LENGTHS
One way that insurance companies tracks how long collision repairs take is by recording the length a client needs the use of a rental car. Across the board the average length of a rental has increased in the last two years, however, Canada remains slightly above average but notably lower than that of our American neighbours.
In Canada the average rental length has become one day longer than in 2020. The United States by comparison increased by nearly four days to an average rental length of over two weeks. This signals a clear delay in getting parts in and repairs completed.
This is not only a Canadian issue and car buyers are looking elsewhere, including more auction hunters searching from the United States. They’re bidding on auctions and then having the vehicles shipped across the border. This adds even more pressure to the tight inventory.
Northbridge expects that this market disruption will continue for some time. Verrydyt forecasts that normalcy may return sometime in 2024, when the market settles.
The good news for Staebler clients is that we have a robust list of partners that can help contribute to solving auto shortages when it comes to an auto claim. From industry resources to our preferred auto repair vendor, CARSTAR, we have you covered.
Arenas confirmed: “Fortunately enough, we have not experienced issues finding replacement vehicles as a result of these delays. Our vendor partner has a broad fleet ensuring our customers’ needs are met when they present a claim.”
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Be Wise. Staebler Insurance is a general insurance broker specializing in auto insurance, home insurance, small business, and commercial insurance. Staebler brokers proudly serve Kitchener, Waterloo, Cambridge, Guelph, Stratford, Listowel, Fergus, Elora, Wellington County, Perth County, Waterloo Region and southern Ontario. Get started with a free quote today.