Copart Continues to Ride the Storm of Increased Insurance Sales Amidst Declining Used Vehicle Values
Copart, Inc. has reported a successful conclusion to its fiscal year 2024, with the company's insurance business growing by 6% year-over-year. This growth is attributed to the increasing trend towards totaling vehicles rather than repairing them, driven by rising labor rates and vehicle complexity.
According to Jeff Liaw, CEO of Copart, the recent decline in used vehicle values has led to a higher frequency of total loss claims, with an 8.6% year-over-year decline observed in the Manheim used vehicle Value Index during the fourth fiscal quarter. However, the company's insurance clients have managed to keep pace with these declining values, as reported by Leah Liaw, CFO, who stated that their selling prices outpaced those of the broader used vehicle market.
This trend is expected to continue, as the average number of parts required to repair a vehicle has increased to 21.4% in the second calendar quarter of 2024, a significant 200 basis points higher than the same period last year. As a result, insurance carriers are increasingly incentivized to total vehicles rather than repair them.
To assist its insurance clients with these decisions, Copart offers a range of sophisticated tools, including its Title Express service offering. This integrated solution enables the company to obtain original titles from policyholders and lenders, streamlining the title procurement process and providing a more efficient service for its clients.
The success of this service is reflected in the fact that Copart is approaching a run rate of 1 million titles obtained per year on behalf of its insurance clients. This testament to their trust in the company's ability to provide excellent service not only to them but also to their own customers.
Furthermore, the recent storm season has had a significant impact on the insurance industry, with Hurricane [Barrel] causing widespread damage across Texas, Louisiana, and neighboring states. The early start of this storm season is expected to lead to increased insurance sales for Copart, as its clients respond to the growing demand for vehicle total losses.
