CONSUMER WATCH | Write-off registry will bring peace of mind to used car purchases

Last week an interesting listing appeared on the website of a well-known salvage vehicle auctioneer. It was a 2021 Volkswagen Golf 8 GTI with less than 10,000km on the odometer, with damage that most would describe as severe.    

The front right of the vehicle clearly bore the brunt of significant impact and the interior images revealed the front airbags had been deployed. When I checked on Sunday, bidding had reached more than R500,000. Near-new examples on the digital classifieds start from upwards of R765,000.    

Obviously, because of where the car ended up, it was deemed a write-off by the insurer. “Uneconomical to repair” is the more euphemistic term — one enshrouded in its own terms and conditions, depending on who you ask.    

However, according to the advertisement, the Volkswagen retained its Code 2 title, putting it in the same category as any used vehicle on sale in the country.    

For reference, the four codes, according to the National Administration Traffic Information System (NaTIS) are: Code 1 (new vehicles); Code 2 (used vehicles); Code 3 (a vehicle suffering damage that requires substantial rebuilding) and Code 4 (destroyed to the extent the vehicle cannot be made roadworthy).    

My initial response was that it would only be a matter of time before this particular Golf GTI made its way back onto the market, most likely at a small non-franchise dealer, after cheap repairs had been carried out. Would the seller disclose the origins of the vehicle to the interested buyer? It would be surprising if that were the case. This is a scenario that happens more often than one believes, and is a storyline we have seen in Consumer Watch features in this publication.    

Blame in entirety cannot be apportioned to the salvage houses. Anyone who purchases a vehicle directly through such outlets knows what they are signing up for.    

From the perspective of consumers, the problem lies firstly with the classification of a vehicle that has been written-off: surely it should be slapped with a title higher on the scale, rather than Code 2 and what that implies?    

Secondly, there is an obvious lack of transparency on the part of dealerships reselling vehicles acquired from salvage firms, repaired and passed off as quality pre-owned stock.  

In time, consumers may be afforded an extra layer of confidence with the establishment of a public vehicle salvage database (VSD).    

This comes after the SA Insurance Association (Saia) announced discussions were underway towards making information available to consumers.    

In an interview with Sowetan Motoring, Pamela Ramagaga, general manager of insurance risks, confirmed engagements with the Retail Motor Industry Organisation (RMI), SA Motor Body Repairers Association (Sambra), the Road Traffic Management Corporation (RTMC) and other members had been ongoing to discuss solutions aimed at benefitting the consumer.    

“As you have seen in previous media, there is a problem in SA in terms of quality repair, with cars that have been repaired that should not have been repaired, or cars that have been repaired and could be repaired, but not correctly,” she said.   

“At the heart of that is the question of the insurance industry selling salvage, and that salvage then being a source of cars that go to be repaired,” explained Ramagaga.  

She said previous hesitation in making the VSD public had been because the database was primarily created for the purposes of combatting crime.    

Zakes Sondiyazi, insurance risks manager at Saia, said the database served to assist in cases of accident staging, where damaged vehicles were cloned. According to Sondiyazi, of the 12m cars registered in the country, as many as 5m are insured.    

He said the terms of the VSD are yet to be finalised.

A meeting is set to be held on March 10 to discuss its rollout and formation.

Sondiyazi also disputed the claim that insurers were reluctant to give written-off vehicles a Code 3 classification because it would impact salvage values.    

“It is a perception. There is a narrative driven by different parties for an end goal. There are Code 2 cars that have been not been repaired to specification. These taint the reputation of vehicles repaired to correct standard,” he said.    

Ramagaga said: “The broader issue [of write-offs re-entering the market] is one that insurers do not have control over. Our buck stops when we sell it as salvage. In the value chain, there need to be stops and checks which will protect the consumer.”

Clarifying terminology, Ramagaga said "uneconomical to repair" from an insurance perspective talks to the cost of repair versus the sum insured.

She said the VSD will be a not-for-profit undertaking and an act of responsible corporate citizenship. 

“At the moment we are looking at a cost-free solution. If there is a cost, we are trying to keep it as minimal as possible.”

Richard Green, national director of Sambra, has been a long-standing advocate and lobbyist for the public VSD.    

“Give the public what they deserve, which is information to help them make informed decisions,” he said.

In a previous interview with Sowetan Motoring, Green discussed the commercial interests of insurers in cases of vehicle write-offs.   

“It starts with the insurer . The policy document you never read, that gives them the power to write-off a vehicle. They then have a salvage contract which guarantees them a percentage calculated, based on trade and retail values. It differs from vehicle to vehicle.”   

“They will write off a vehicle based on the commercial elements for them: if they know there is a high value in the salvage yard, they will write it off. Damage can vary from a true wreck to damage you or I may not consider to be a write-off. They consider the potential of unseen damages.”   

Green believes a different code would affect values down the chain, all the way to the salvage market and the insurer because they will probably write-off fewer vehicles, or be forced to fix more.    

“[Code 2 write-offs] are used for two things: to register stolen cars using the documents of the salvaged vehicle. The second one: people will buy them and fix them poorly. An airbag module, for example, would not be restored. Unfortunately this is only found when the vehicle has had a second accident and it is discovered there were horrific prior repairs.”   

According to Green, if it is uneconomical to repair a vehicle to original state, it must be scrapped or salvaged for parts.

There is only one way to repair an accident damaged car and that is properly.”   

Green welcomed the progress towards the formation of the public VSD and was involved in the initial meetings with Saia at which updated salvage code descriptions had also been discussed.    

He said June would be a reasonable timeframe by which to expect operation, provided there were no interruptions.    

Kriben Reddy, vice president of auto information solutions for TransUnion Africa, said his company would be expanding its offerings around vehicle history checks.  

“We’re constantly looking at ways to source and share data more effectively with all users across the industry to make sure there’s transparency around vehicles involved in accidents and salvaged,” he said.

“We will go live in the next quarter with data from one partner, but that’s not a full representation of the market,” said Reddy.  

“The only way the issue will go away is when every player in the ecosystem – including dealers, panel shops and insurers – works together to share their data on a single platform that can be accessed by consumers and the industry alike.”   

“As TransUnion, we engage with all industry bodies such as the RMI, Sambra and Saia regularly. Until then, the best way consumers can protect themselves is to insist on a Dekra, or other accredited physical inspection on the vehicle.”