Settling total loss values must account for short lag times between escalating gas prices and increased value of fuel-efficient cars: Mitchell

The short lag time between escalating gas prices and the increased value of fuel-efficient cars points to the importance of a true market survey method for evaluating a total loss, Mitchell International says in its Q3 2011 Industry Trends Report.
In his article, ‘Timing is Everything: Total Loss Values and Gas Prices,’ author Greg Horn looked at three different categories of cars to see how their value correlates to volatile gas prices.
Using Mitchell International’s total loss data warehouse, Horn looked at the relationship between spiking gas prices and the values of the Toyota Corolla (categorized as ‘fuel efficient’), the Prius (a ‘hybrid’) and Ford Expedition (‘gas guzzler’).
“What are we to conclude from this data?” Horn asked. “Fuel efficient vehicles [such as the Corolla and Prius] tend to rise more quickly and reliably in value during periods of high gas prices than gas guzzlers, which fall in value.”
Perhaps more important for insurers and the collision repair industries, however, is the short lag time between the gas price increases and the rise or fall in the total loss values of the vehicles.
The data show a market lag time of approximately three weeks between increased gas prices and the total loss values for fuel-efficient cars going up (and conversely, the total loss value of gas-guzzling vehicles going down).
“During fuel price volatility, the reaction tie in total loss values is less than a month, which points to the importance of the accuracy of a true market survey method for evaluating a total loss,” Horn writes.
He notes that in a traditional book value approach, the lag time for aggregating data from gathering sources, calculating and then publishing the data can take longer than the short lag time that exists between increased gas prices and the increasing value of fuel-efficient cars.
“In settling total loss values, accuracy and validity of value is the key, and the most up-to-date values reflect the true actual cash value.”