Recession Wrecks Auto Repair Shops
The auto body repair business is considered recession-proof: When the economy is bad and people don't have money to buy a new car, they repair their old one.
Yet during this economic slowdown, some auto body businesses say revenue drops are forcing them out of business.
James Matthews, who owns a Greenfield, Ind., shop, said he will have to close it this month. The culprit, he said, is the economy. Here's why:
Auto parts suppliers, also struggling to survive, have raised the prices on car parts. A fender that used to cost $250 now may cost $387, Matthews said. This has caused insurance companies to declare more wrecked vehicles total losses.
Auto owners are deciding more frequently to forgo repairs. Worried about their own finances, some are pocketing the insurance money and driving the damaged vehicle, when possible, Matthews said.
Consumers with a $1,000 deductible may end up covering a large part of a repair out-of-pocket, even if they have coverage.
Bargain-hunting consumers may look for shops willing to cut corners, which can lead to fraud or dangerous, shoddy work, said Kevin Cox, president of the Indiana Autobody Association, an industry group with about 65 members.
Some consumers are insisting that a shop cover all or part of their deductible, he added.
"We're getting squeezed on all sorts of different levels and different directions," said Matthews, who plans to close Matthews Precision Collision Center at the end of the month. "You're already working on a very tight profit margin."
Missy Lundberg, a spokeswoman for Illinois-based State Farm Insurance, said her company's agents have been calling customers to make sure they can afford their auto coverage. They could pitch discounts for auto coverage if a policyholder also uses State Farm for other insurance, such as renter's coverage. They could raise a customer's deductible from $500 to $1,000 to reduce premiums.
Aaron Clark, president and co-owner of Indianapolis-based Collision Solutions, reported that his business revenue had dropped from about $12 million a year to $10 million.
Growing numbers of consumers fearful of rate hikes increasingly are opting against filing claims, said Clark, whose business has five Central Indiana locations.
He said the number of his self-pay customers has climbed by 30 percent to 40 percent in the past two years. He's seen customers pay $5,000 out-of-pocket.
Clark said self-pay consumers need to be careful because insurers keep a watchful eye on pricing at auto shops. Individual consumers, he said, have much less ability to realize when they might be overcharged.
Ward Beckham, who has used Matthews' shop three times, said he's sorry to see another independent business close its doors.
"This is a kind of place that you trust because they live in your neighborhood," said Beckham. "Matthews is a place that knows the people; they know who they're dealing with."