The acting head of salvage at Manheim Auctions, Josh Cohen, told GoAutoNews Premium that prices have been increasing in the salvage world for probably close to 18 months; since the start of the pandemic began impacting manufacturing in overseas car plants.

“A lot of that is driven by OEM part manufacturers not being able to supply new parts into the country. So a lot of repairers are having to rely on dismantlers-driven parts to continue to fill operations in their workshops,” he said. “That shortage of second hand parts to the industry is driving up salvage prices.” 

“The second thing is that with the shortage of cars available in the used car market a lot of people are looking at different alternatives to fill a market space where the demand cannot be met.

“So a lot of people are turning to accident-damaged vehicles, repairing that vehicle and putting it back on the road for either to fill that used car need or filling the need of people avoiding public transport and buying a cheaper secondhand car to avoid that.”

Another driver for price increases is fewer vehicles being offered at auctions with numbers of written-off down by about 20 per cent.

“So there are fewer vehicles in that market space and you’ve got more people coming in,” he said.

Mr Cohen said that with the average price of used cars up by $8000 people are seeing an opportunity.

“Suddenly the returns of buying and repairing a car that has been written off are improving.

“Whereas it used to be very much a dismantler world or an export world for us, we’re finding that a lot more private purchasers have come into our space – especially in what we call our premium auction stream. We have seen a very big spike in private consumers buying those vehicles themselves as well.”

Mr Cohen said there had also been increased interest in buying cars that have been stolen and recovered but not showing any apparent damage. If the vehicle is recovered and the insurance has already been settled, that vehicle will then be auctioned on behalf of an insurance company through a salvage auction.

“In normal circumstances you can get these vehicle generally cheaper than what you can for the equivalent used car. But that gap is very, very quickly closing just due to the fact that that is another entry point for people trying to fill the void in that used car market.”

Mr Cohen said that anything with a diesel engine (Ford Ranger, Toyota Hilux or diesel SUVs) have only seen nominal increases because “they have always been in high demand and they have always attracted strong values. So it’s probably not as evident as the increase in the rest of the marketplace”.

“Prices of standard petrol cars, like a Toyota Camry, Corolla or a Hyundai i30 for example, as well as salvaged hybrids, have really spiked in the last 12 months. And it’s just due to demand. There are just not enough vehicles to supply the marketplace,” Mr Cohen said.

By John Mellor