Three forces that shaped auto claims in 2025 are already impacting 2026: tariff-related parts inflation, rising total loss frequency across the U.S. and Canada, and shifting collision economics driven by new vehicle technology. Together, these trends are transforming how claims are settled and what it takes to complete a proper, safe and affordable repair.
Parts inflation: Tariffs are starting to sting
Last year, many industry insiders expected tariffs to generate an immediate spike in the average cost of automobile parts. Those expectations were not realized in the first half of 2025, which saw parts inflation tracking at 3.5%. By December, however, it increased to 4.25%, according to Mitchell data. As the inflation rate accelerated, the impact varied significantly by part type and manufacturer. Bumper covers, for example, saw inflation jump from 3.2% in 2024 to 6.7% in 2025. Door shells, on the other hand, held steady at approximately 7% year over year. This is important because tariffs are driving up the cost of raw materials used to create parts, particularly polyolefin plastics sourced from China.
Manufacturers face less pricing pressure on whole vehicles, where competition constrains what the market will bear. On parts where a customer needs a specific component for a specific vehicle, OEMs have more latitude to pass along expenses as their input costs grow.
The industry response to this trend has resulted in a meaningful shift toward alternative parts. In the U.S., aftermarket, recycled and remanufactured parts utilization jumped by nearly 1.5 percentage points year over year. In Canada, the increase was closer to 2 points. This trend is supported not just by cost pressure but by improved availability. Aftermarket inventory has normalized to pre-COVID levels, and recycled parts supply chains have stabilized after years of consistent accident and salvage volumes, giving both carriers and repairers more flexibility when it comes to parts sourcing and expanding supplier networks.
Repair, not replace, decisions are on the rise
The percentage of parts repaired versus replaced is climbing, rising by almost a full point in the U.S. and a quarter point in Canada after more than a decade of steady decline. Among the reasons for this decline are that new vehicle technology made certain repairs impractical and the use of lighter-weight materials in automobile production introduced additional repair complexity.
Today, collision center economics, and not vehicle design, are causing the reversal. Claim volumes are lower than they were in 2023, which means facilities are under margin pressure. Repair labor typically yields profit margins as high as 60%, compared with 30-50% on replacement parts, depending on whether they are OEM, aftermarket, or recycled. When a facility repairs a component rather than replacing it, throughput improves, cycle time drops, and cash flow is easier to manage.
Collision center operators should evaluate repair-versus-replace thresholds as a profitability lever, while insurers may want to reassess guidelines to ensure these decisions align with their organization's established standards.
More vehicles are crossing the total loss threshold
Total loss frequency increased in 2025. In the U.S., total losses represented 23.8% of all collision claims compared to 23% in 2024. Canadian total loss rates went from 22.9% to 24.5% year over year. The reason for the change: Repair costs kept growing while used automobile values shrank, pushing more borderline vehicles past the total-loss threshold.
Looking ahead, used vehicle values are likely to stabilize or even rise in 2026. J.P. Morgan expects new vehicle prices to grow by 7% this year, a figure that would ripple into the used automobile market. Constrained supply, leaner lease-return inventory from the COVID era, and potentially more favorable financing conditions all point in the same direction. Even so, total loss frequency is unlikely to fall. The cost of repair continues to climb, and that pressure on borderline vehicles is not going away. Salvage values are expected to remain elevated, which adds additional complexity to total loss decisions.
In preparation, carriers may want to re-evaluate their valuation models, while repairers should prepare for continued volatility in repairable claims volume.
Technology costs are becoming non-negotiable
The share of vehicles requiring calibrations after a repair is approaching 40%. This is adding as much as $600 to each collision-damage appraisal completed in the U.S. and $400-450 for those performed in Canada. Calibrations now account for approximately 10% of the total repair expense when listed on the estimate. The added cost and time required to sublet the work are pushing many collision facilities to invest in new technology tools and training. These resources are designed to help technicians improve repair efficiency and ensure that calibrations and other diagnostic procedures are more accurately performed, documented, and billed.
While the average age of vehicles on the road is 13 years, the segment of 0-to-3-year-old models has experienced rapid growth. These automobiles are more likely to have advanced driver assistance systems and other complex technologies that require recalibration following a collision. Compared with slightly older models in the 4-to-6-year-old range, they are also 10% more expensive to repair, assuming the damaged component or sensor can be repaired.
The trends emerging from 2025 point to a claims environment shaped by several converging forces. For insurers and repairers, success in 2026 will depend on taking a more proactive approach: optimizing parts sourcing strategies, refining repair-versus-replace decisions, and investing in the technology required to safely return today's complex vehicles to the road. Organizations that adapt quickly will be better positioned to manage claims severity, improve cycle time, and maintain policyholder satisfaction.
(Photo credit: Jevanto Productions/ AdobeStock)
Ryan Mandell is vice president of strategy and market intelligence at Mitchell, an Enlyte company. In this role, he works with auto insurance executives and material damage leaders to provide actionable insight. For the latest collision claim trends, listen to his podcast or read his quarterly electric vehicle report.
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