“Customers are definitely shocked,” said David Goldsmith, owner of Urban Classics Repair Shop in Brooklyn, New York City.
Repair costs are high compared to the overall rate of inflation. 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 particularly sharp since the pandemic. Before that, repair costs rose 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 has not fallen since.
The problem is ambiguous.
“I think the thing we can say is true is that the cost of collision insurance claims is increasing,” said Matt Moore, senior vice president of the Insurance Institute for Highway Safety's Highway Casualty Data Institute. “After that, it's hard to say why it happened.”
Vehicles can be more expensive to repair. Malfunctions can also be more serious.
Cars are 33% heavier in 2022 than they were in 1985, and about twice as powerful, according to HLDI. At the same time, speeding incidents and traffic accidents increased.
Heavy vehicle collisions at higher speeds mean worse accidents.
Data can also be skewed. Low-speed crashes, which tend to be less serious and less costly, are becoming less frequent as safety technology improves.
Cars are also filled with more stuff, so more can go wrong. Nearly 20% of them have turbochargers attached to the engines, generating more power and improving efficiency. Two-thirds of these companies have four-wheel drive systems – a huge jump from 10% in the 1980s. All of these mods add equipment that can break.
Lightweight materials such as aluminum are increasingly popular but can be brittle and require replacement. Cars have fewer parts thanks to new manufacturing methods, but the parts they do have are bulky and more expensive to replace.
The changes don't stop there.
“Your average regular car now is basically a rolling network of computers,” Goldsmith said.
Automotive computing has been evolving slowly for decades, but has changed “dramatically” in the past decade, said Ryan Mandel, director of performance consulting at Mitchell.
“You can have the same type of accidents you would have had 10 years ago,” Mandel said. “But now you have three additional sensors located in the affected part of the car that you now have to replace.”
Meanwhile, talent in car repair is scarce. The COVID-19 pandemic has exacerbated long-standing shortages.
In 2019, the average labor rate for repairs was less than $50 per hour in the United States, according to Mitchell. At the end of 2023, it was close to $60. Most of these increases came in 2022 and 2023.
As fewer people drove their cars during the Covid years, demand for repairs dried up. Technicians leave the industry in search of other work.
The pandemic has also led to a rise in the cost of spare parts. Shipping disruptions contributed to this increase.
In 2022, the cost of imported parts from automakers rose by 10%, and aftermarket parts rose by 17%, compared to the usual annual inflation rate of 0% to 4%.
Many in the automotive industry believe that costs cannot continue to rise at these rates. The industry is experiencing its biggest transformation in the last 100 years – from gasoline to electricity, from mechanical to digital.
“If we want cars to be affordable, they must be affordable to maintain,” said Alan Amici, president and CEO of the Center for Automotive Research. “And their repair costs have to be affordable, otherwise we'll see a decline in car sales. So I think automakers will have an incentive to reduce those costs.”
Watch the video to learn more.
“Infuriatingly humble alcohol fanatic. Unapologetic beer practitioner. Analyst.”