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Wheels: Should I buy an insurance write-off?

WHEN considering buying a used car, you may come across cars that are advertised as a Cat C, Cat D, Cat S or Cat N that are much cheaper than similar examples of the same age and model. But what do these terms mean?

All of these phrases refer to the fact that a car has been written off at some point in its life, with a type of category (Cat C for example) referring to the level of damage that was caused causing an insurer to determine that it to be beyond economical repair.

This decision usually depends on if the cost to repair a car exceeds 50 per cent of its value at the time of an accident. If this happens, an insurance underwriter settles the claim, paying out the market value of the car at the time with it being surrendered by the owner. However, what happens to the car afterwards depends on the severity and type of damage, including the category under which it has been written off.

On October 1, 2017, updated legislation came into force, introducing new write-off categories. This guide explains exactly what each of the new categories means and outlines the ramifications of buying a car that has been categorised.

Remember, finding that a car you’ve bought was previously an insurance write-off isn’t necessarily the end of the world, but you should aim to know before you buy it. There will be consequences when you come to sell it.

What are Cat A and Cat B cars?

When a car has been damaged and an insurance claim is made, an insurance assessor will gauge the extent of damage in order to determine the cost of repairing the car. If the necessary repair costs run beyond a certain amount, the insurer can decide to write off the car and settle the claim by paying the car’s owner instead.

What happens to the car after the claim has been settled relates to under which category (cat) the car has been written off under. The current system of write-off categories has been in force since October 1, 2017, and supersedes the previous system. However, Category A and B (Cat A and Cat B) are still reserved for cars that can never be returned to the road.

Category A write-offs are judged as being so severely damaged that not only are they beyond repair, but no parts may be salvaged either. Such a vehicle must be crushed and destroyed so that no component from it can be used again.

The ‘B’ in a Category B write-off is significant — the letter stands for ‘break’, which means that a car written-off under this category may be broken down for parts to be used on other cars. The car itself, though, cannot be used on the road again. In many cases, if it’s financially unviable to break it for parts, the car will be treated the same way as a Category A car and crushed in its entirety.

What happened to the Cat C and Cat D categories?

The next two categories were formerly known as Cat C and Cat D, both of which relate to cars that can be returned to the road if properly repaired. According to the Association of British Insurers (ABI), such write-offs are ‘repairable total-loss vehicles where repair costs including VAT do not exceed the vehicle’s pre-accident value’. These were the two categories most likely to be encountered in used-car sales listings.

As of October 1, 2017, Category C (Cat C) has been replaced by Category S (Cat S). This is assigned to cars that have suffered structural damage significant enough that repair shouldn’t be attempted on a DIY basis. The change of category name came about because the determination of category is now based on whether a repair is feasible, rather than whether it’s economically viable. However, the latter will still be the focus of most insurers — they’d rather pay out on a claim than spend more money on a repair.

The former Category D (Cat D) has been replaced by Category N (Cat N). This refers to cars that haven’t suffered structural damage, but some safety-critical components such as steering, brake or suspension components may require replacement. Again, if properly repaired, a Cat N car can be legally returned to the road.

A Cat S or Cat N marker can sometimes be given to cars with relatively minor damage. An older, low-value car might be written off after a light scrape in a car park, simply because the cost of processing the insurance claim exceeds the car’s value.

The ABI has stipulated that individuals with the power to categorise damaged vehicles into the four new salvage codes must have the correct qualification to do so.

The amended system is intended to help inform used-car buyers if a car has previously suffered structural damage. This is becoming increasingly important as the complexity of modern cars means they may be written off because of electronic rather than structural damage.

Some vehicles, including classic cars or models of special interest, can be allowed to be repaired ‘irrespective of extent of damage’, as long as it’s safe for them to return to the road.

Why buy a Cat N or Cat S car?

Whether it makes sense to buy a Cat N or Cat S car comes down to cold economics. The insurer has made a decision that repair isn’t economically viable based on profitability. After writing it off, the insurer will sell the car as salvage, usually at auction.

Cat B cars are usually bought by car breakers for their parts and scrap metal. Cat S and Cat N cars can be bought by car repairers, dealers or private individuals for repair and return to the road. The main incentive is price — a car sold as repairable salvage usually has a far lower value than an undamaged example of the same age, mileage and model.

When choosing to buy a damaged-repairable car, the buyer will typically have a good idea of the costs involved in bringing the car back to pre-incident condition — although there’s a risk that unseen damage could mean the car costing more than expected to repair.

If you intend to repair a salvage car for personal use, you might be more willing to bear a hefty repair bill than if you want to sell the car straight away. If you’re repairing the car in order to sell it, there must be sufficient profit margin in the car after repair to make the exercise worthwhile — particularly as cars sold with a Cat N or Cat S marker have a lower showroom value than they would otherwise.

If you’re buying for personal use, resale profit isn’t a factor. If a salvage vehicle holds particular interest — perhaps it’s a model or specification that you’ve long been searching for — a repairable Cat N or Cat S car could make sense even if the cost of repair means it ends up saving you only a little money compared to an undamaged car.

Buying or selling a Cat N or Cat S car

It’s legal to sell a Cat N or Cat S car as long as its status is declared. This declaration must be clear, even if the car has been repaired to its pre-incident condition. A car bearing any write-off marker will be worth far less than one with a ‘clean’ history, even if the damage was minor and fully repaired to a high standard — many buyers simply aren’t comfortable with a history of damage.

Declaring a car’s Cat N or Cat S status is essential, whether selling it or part-exchanging it. If you don’t, the new owner could sue you for damages.

Not everyone is convinced about the merits of buying a Cat N or S car. Neil Hodson, managing director of car history check firm HPI, cautions that ‘the real risk with buying a write-off is paying good money for a vehicle that’s been badly repaired and is a danger to drive, or worse still, should never have been put back on the road in the first place. If a write-off hasn’t been properly repaired, any price is too high’. On the other hand, Hodson concedes ‘there are write-off categories that, if repaired professionally, offer good value for buyers’.

Others are more doubtful still. Trading Standards officer Gerry Taylor says that buyers should avoid Cat C and D cars since the risk they haven’t been repaired properly is too high and an imperfect repair could affect crash performance.

Write-off engineer reports

Despite all this, you may still want to buy a Cat N or S car. In that case, have it inspected by a trained motor engineer employed by organisations such as the AA and RAC.

The engineer will inspect the car and tell you all you need to know about its condition, crashworthiness and any lurking problems that aren’t obvious to the untrained eye.

It won’t be cheap, but if the worst happens a report could be offered as evidence in court. In any case, insurers can insist on an engineer’s report before they’ll consider insuring a Cat N or S vehicle.

Insuring a Cat N or Cat S car

Don’t expect insuring your Cat N or S car will be straightforward. Some insurers won’t consider covering such a car and those that do may charge a higher premium. An engineer’s inspection report will certainly smooth the way.

What the law says

Thanks to the Consumer Rights Act 2015, car buyers are better protected, since the law states that any goods purchased should be ‘of satisfactory quality’, ‘fit for purpose’ and ‘as described’.

If you were unwittingly sold a car that the seller knew to be a Cat N or S, the seller is in breach of the last requirement. Even if the seller was unaware of the car’s status, it’s still not of satisfactory quality or fit for purpose. It also falls foul of the ‘innocent misrepresentation’ clause of the Misdescriptions Act.

Either way, you would have grounds to take legal action against the seller. Of course, they may immediately offer you a refund, but you’d be wise to tell Trading Standards to protect future customers.

Cat N and S cars used to have to undergo a Vehicle Identity Check, or VIC, before being allowed back on the road. This was intended to stop criminals selling disguised write-offs to ignorant buyers, but it identified so few cars that it has been abandoned.

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