Modern cars are getting safer, smarter, and surprisingly expensive to repair. Sensors, cameras, electronics, labor, and parts can turn an ordinary accident into a total loss. Copart reports Thursday after the close, giving you a fresh look at the enormous business that begins after an insurer decides a damaged car is no longer worth fixing.
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Theme: Auto Insurance, Total Losses, Salvage Auctions, Collision Repair, Replacement Parts, and Used Vehicles
A Totaled Car Does Not Disappear
When an insurer declares a vehicle a total loss, the story is not over.
The insurer still owns something valuable.
The damaged vehicle might contain usable parts. A repair shop overseas might be willing to rebuild it. A dismantler could recycle it. Another buyer may simply value the vehicle differently.
That creates an entire secondary market connecting insurers with dealers, rebuilders, exporters, dismantlers, and parts companies.
Copart sits directly in the middle.
Cars Are Becoming Harder to Fix
The economics behind that market are getting more interesting.
CCC Intelligent Solutions says 23.1% of claims resulted in total losses in 2025, a new industry high.
At the same time, 28.3% of repairable estimates included calibrations, up sharply as cameras, sensors, and advanced driver-assistance systems become more common.
Modern technology can prevent accidents.
When an accident does happen, it can also complicate repairs.
What's Driving It
Copart Is Thursday's Main Catalyst
Copart releases fiscal Q4 results Thursday after 4:00 p.m. ET, followed by its conference call at 5:30 p.m. ET.
The company enters the report after a relatively slow quarter for volumes.
Fiscal Q3 revenue increased 2.1% to $1.24 billion, while gross profit rose 3.7% to $572.6 million.
Average selling prices increased 4.6%, more than offsetting a 2.4% decline in total units sold.
That combination tells us something important.
Copart does not necessarily need more damaged vehicles every quarter if its auction network can generate more value from each one.
Insurance Volumes Have Been Softer
U.S. insurance unit sales declined 4.2% in fiscal Q3.
That reflects another unusual part of the auto market.
Accident frequency can fall as cars become safer, people drive differently, and insurers change their customer mix.
But the accidents that remain can be more expensive.
Copart's long-term opportunity therefore depends on a balancing act:
Fewer accidents can reduce volume, while higher total-loss rates can push more damaged vehicles into salvage auctions.
Thursday should give us a fresh look at which force is winning.
Repair Costs Explain the Bigger Trend
A Small Crash Can Create a Big Bill
CCC estimates the average cost to repair a vehicle reached $4,818 in 2025.
For vehicles six years old or newer, the average was $5,721, roughly 55% higher than for vehicles seven years or older.
That makes intuitive sense when you look at a modern bumper.
It may no longer be a piece of plastic.
It can contain radar sensors, cameras, parking sensors, wiring, and electronics that need recalibration after the repair.
The physical damage might look minor.
The bill may not.
Vehicle Value Sets the Breaking Point
An insurer ultimately compares repair costs with what the vehicle is worth.
If the math gets too close, repairing the car stops making economic sense.
Used-vehicle values therefore matter too.
CarMax's latest quarter showed its average retail selling price increased about 4.5%, or roughly $1,200 per vehicle, while the average wholesale price increased 5.1%.
Higher used-car prices can make more repairs economical.
Lower vehicle values can push the same repair over the total-loss threshold.
That makes salvage volumes sensitive to both sides of the equation.
The Chain Reaction
Cars add more technology → repairs become more complicated
Parts and labor costs rise → collision estimates increase
Repair cost approaches vehicle value → insurer declares a total loss
Damaged vehicle enters auction → buyers compete for remaining value
Higher auction returns → insurers recover more from claims
Parts are reused or vehicles rebuilt → value re-enters the automotive system
What's Working
Insurers Are Making Good Money Again
Progressive's July net premiums written increased 5% to $7.44 billion, while total personal-lines policies grew 7%.
Its companywide combined ratio came in at 86.8.
A combined ratio below 100 means premiums exceeded claims and operating expenses.
Allstate is seeing similar profitability.
Its Q2 auto combined ratio improved to 83.3, while auto policies in force increased 2.8%. Auto underwriting income reached $1.61 billion.
For Copart, healthy insurers matter.
These companies are among the major suppliers of vehicles entering the salvage ecosystem.
Alternative Parts Are Gaining Share
LKQ sits further down the chain.
It supplies aftermarket and recycled vehicle parts used by collision and mechanical repair shops.
Its North American business returned to positive organic growth in Q2, helped by record alternative-parts utilization above 40% and improving repairable claims.
That connects directly back to salvage.
One totaled vehicle can become a source of parts that helps repair another.
The wreck is not necessarily waste.
It is inventory.
What to Watch
Copart's Volume Matters Most
Thursday's headline revenue number will get attention.
Look underneath it.
Watch:
U.S. insurance units
Total assignment volumes
Average selling prices
International volumes
Service revenue
Gross margin
Vehicle inventory
Catastrophe activity
The best setup would be insurance volumes stabilizing while auction values remain strong.
International Buyers Are Important
Copart's marketplace connects approximately 1 million members across more than 185 countries, and the company sold more than four million vehicles over the past year.
That global buyer base is an important advantage.
A damaged vehicle considered uneconomical to repair in the United States may make perfect sense somewhere with lower labor costs or different vehicle economics.
More bidders can mean better recovery values for insurers.
That makes Copart's network increasingly difficult to replicate.
Copart (CPRT)
What it does:
Copart operates online auctions connecting insurers and other vehicle sellers with dismantlers, rebuilders, dealers, exporters, and other buyers.
Why it fits:
This is Thursday's direct catalyst and the purest exposure to rising total-loss activity.
What stands out:
Q3 revenue increased 2.1% and gross profit rose 3.7% even as unit volumes declined, helped by stronger average selling prices.
What to watch:
Insurance volumes, assignments, selling prices, international growth, margins, and inventory.
The Takeaway: Buy this if you want the marketplace sitting directly between insurers and the global salvage economy.
The risk is falling accident frequency keeping vehicle volumes under pressure.
Progressive (PGR)
What it does:
Progressive is one of America's largest auto insurers.
Why it fits:
Insurers make the decision that ultimately determines whether a damaged vehicle gets repaired or enters the salvage market.
What stands out:
July premiums increased 5%, personal-lines policies grew 7%, and the combined ratio remained highly profitable at 86.8.
What to watch:
Auto policy growth, claims severity, pricing, combined ratio, and loss trends.
The Takeaway: Buy this if you want the profitable insurer sitting at the front end of the total-loss decision.
The risk is claims costs eventually rising faster than pricing.
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Allstate (ALL)
What it does:
Allstate provides auto, homeowners, and other insurance products.
Why it fits:
It gives you another major source of auto claims and totaled vehicles.
What stands out:
Q2 auto underwriting income increased 20.7% to $1.61 billion, while the recorded combined ratio improved to 83.3.
What to watch:
Auto policy growth, claim severity, loss costs, pricing, and underwriting margins.
The Takeaway: Buy this if you want another highly profitable insurer benefiting from healthier auto underwriting.
The risk is unexpected claims inflation reversing recent margin improvements.
LKQ (LKQ)
What it does:
LKQ distributes aftermarket, recycled, and specialty automotive parts.
Why it fits:
It captures value from the other side of collision economics by supplying lower-cost alternatives for vehicles that still make sense to repair.
What stands out:
North American organic growth turned positive last quarter as alternative-parts utilization climbed above 40%.
What to watch:
Repairable claims, alternative-parts adoption, North American growth, margins, and restructuring.
The Takeaway: Buy this if you want the recycled and alternative-parts side of the accident economy.
The risk is fewer repairable claims reducing parts demand.
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CarMax (KMX)
What it does:
CarMax is America's largest used-car retailer and also operates a major wholesale vehicle business.
Why it fits:
Used-car values help determine the economic line between repairing and totaling a damaged vehicle.
What stands out:
Latest-quarter average retail selling prices increased 4.5%, while wholesale prices rose 5.1% and wholesale units increased 8.4%.
What to watch:
Used-car prices, wholesale values, retail demand, financing, and vehicle acquisition trends.
The Takeaway: Buy this if you want exposure to the vehicle values sitting underneath the repair-versus-replace calculation.
The risk is weak affordability keeping used-car demand pressured.
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A Wreck Can Still Have Plenty of Value
An insurer may be finished with a damaged car.
The market is not.
Progressive and Allstate decide which vehicles are economical to repair. Copart finds buyers for the ones that are not. LKQ helps turn usable components back into replacement parts, while CarMax gives us another read on the used-car values influencing the entire calculation.
For you, Thursday's Copart report gets to a surprisingly large business hiding behind an everyday question:
When does a damaged car stop being something to fix and start becoming something to sell?
Best Regards,
— Adam Garcia
Elite Trade Club
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