Insurance Contract for Obtaining Your
Inventory – Blessing or Curse?
AutoSalvageconsultant.com was formed in 2001 to help recyclers improve their businesses. With over fi fty years of experience in three staff members, the group is THE defi nitive source for
recyclers’ management and training needs. The founder, Ron Sturgeon, is past owner of AAA Small Car World. In 1999, he sold his six Texas locations, with 140 employees, to Greenleaf.
In 2001, he founded North Texas Insurance Auction, which he sold to Copart in 2002. In 2002, his book “Salvaging Millions” was published to help small business owners achieve
signifi cant success and was recently reprinted in the U.S. and published in China, Korea and the Czech Republic. In June 2003, he joined the new ownership and management team of
GreenLeaf. He also manages his real estate holdings and investments. You can learn more about how to help your business at www.autosalvageconsultant.com. You can reach us at 5940
Eden, Haltom City, TX 76117 or by calling or sending Mike Gibson or Tammy Sturgeon an email message. Mike can be reached at 817-925-0061, mikeg@autosalvageconsultant.com
and Tammy can be reached at 817-999-1224 or tammysturgeon@all-import.com.
Part 1 of 3
This is a three part article, watch the next two months for the remaining portions. We get lots of
inquiries about the pros and cons of an insurance contract for obtaining inventory. Also, due to the
high cost of selling through pools, many insurers are considering contracts again. Likewise, recyclers
are looking at their high costs and considering alternatives. An insurance contract refers to a contract
between a recycler and an insurance company for the purchase of wrecked vehicles. Most contracts
require the recycler to pay the insurance company a set percentage of the vehicle’s actual cash value or ACV. Be careful, as this method of purchasing
vehicles is foreign to most recyclers although most insurance companies are very familiar with it. The best way for a recycler to get a feel for this method
of purchasing is to start recording the ACV of vehicles they purchase at the auction and what the cost was. Many times, the ACV is shown on the website
or paperwork, or you can calculate it closely by using the highest retail value in an NADA guide book. Divide the ACV into the bid price you paid for the
vehicle and determine the percent of ACV the vehicle cost you. Over a period of time, you will be able to determine what the average percentage of ACV
is that you are paying for vehicles. For certain, the insurance company knows what their gross and net percentage of ACV is for the average vehicles they
are sending to auction. This number is just an indicator, and in many cases, will be higher than the insurance company is proposing to charge you. But
remember, what you pay at the auction is for cars that you select, just the “best” purchases for you, with the parts you have high demand for. Next month,
we will begin the discussion of the pros and cons of having a contract.
This article was written by Mike Gibson, a staff consultant at autosalvageconsultant.com.
Remember, only you can make BUSINESS GREAT!
Please email if you would like me to send previous articles.