Why Are Total Loss Vehicles Compensated After Auction?

[SanGenesis]

This is an excuse from the 4S dealership. According to the agreement, whether it is an actual total loss or a constructive total loss, the customer should be compensated as soon as possible. Below are two methods for compensating a total loss vehicle: 1. When the insurance amount is greater than the actual value: If the insurance amount is higher than the actual value at the time of the incident, the calculation formula for the total loss is: Actual compensation = (Actual value at the time of the incident - Residual value) × (1 - Deductible rate). 2. When the insurance amount is equal to or less than the actual value: If the insurance amount is equal to or less than the actual value of the vehicle at the time of the incident, the compensation should be calculated based on the insurance amount. The actual compensation = (Insurance amount - Residual value) × (1 - Deductible rate).

[Nora]

Total loss vehicle auction followed by compensation, I think this is mainly for insurance companies to control costs and maintain fairness. In my experience of buying and repairing cars, I learned that after an insurance company determines a vehicle is completely totaled, they first need to dispose of the parts or remains that can still be sold. Auction is the fastest way, selling the car to companies or individuals specialized in handling wrecked vehicles, recovering some money. This way, the compensation given to the car owner is the actual value of the vehicle minus the proceeds from the auction, avoiding overpayment by the insurance company or losses for the car owner. The whole process is like a market transaction, with transparent results visible to all. Compensation after auction also saves time and resources; insurance companies don’t have to stockpile scrap cars, and owners can quickly receive money to buy a new car. This is also beneficial for the entire industry, as recycled materials can be reused, reducing waste and being quite eco-friendly. In short, it’s a win-win strategy.

[DiKira]

The logic behind auctioning a total loss vehicle before compensation is quite clear. From a financial perspective, it ensures accurate assessment. I've studied similar cases before – auctions allow the market to openly compete in determining the salvage value, rather than relying solely on the insurer's unilateral valuation, which reduces the risk of fraud. Then, the compensation amount is calculated based on the net loss value after the auction, ensuring the owner receives compensation for the actual loss without overestimation or underestimation. Insurers can recover partial costs through auctions, reducing their financial risk. As a vehicle owner, if your car is totaled, this process might take some time, but ultimately results in fairer compensation. The auction system also prevents totaled vehicles from entering the black market, with stricter oversight. Overall, this is a smart approach that balances the interests of all parties, saving significant disputes and administrative costs.

[DeCharles]

Auctioning before compensating for a total loss vehicle is all about making residual value realization simple and efficient. I know many cases where after insurers declare a car totaled, they directly auction off usable parts or metals, letting market bidding determine the true value. Only after this step is completed do they compensate the owner for the difference based on the results, avoiding any shady middleman practices. The benefit for owners is receiving fair compensation without disputes with insurers. Auctions also protect the environment by reducing pollution from discarded vehicles. The logic is straightforward: sell first, compensate accurately afterward.