Traditionally, the law allows you to recover fair market value for your vehicle when your vehicle is totaled by another’s negligence in a car accident. The point of this evaluation is to make you “whole” by putting you back in a position to replace the vehicle you lost. But right now the steel shortage has caused such a car shortage that you cannot buy a new car for the normal MSRP. The cars are being preordered and sold at a higher price immediately. For victims of car accidents, this means that you cannot replace a totaled car with a new car for the fair market value right now without having to preorder and wait. Some backorders are taking over a year to come in right now. But you cannot wait for a year to get back to your life. So, the traditional notion of fair market value cannot make you whole anymore.
My Car Shopping Trip
Last weekend we decided to go look at buying a new vehicle. My search began online looking at several of the new Ford electric and hybrid vehicles. After checking numerous websites for local dealerships, I could find none of the 2022 electric or hybrid trucks in stock on any of the Ford sites in the Houston area. Some claimed to have trucks “in transit.” I thought this was simply a combination of these trucks being new to Ford and the steel shortage. So, I decided to look at the 2022 Ford Broncos instead. After noticing it was hard to pin down what was on any particular lot online for Broncos as well, I decided to go to a dealership so I could compare the different models of the Bronco that are on the market.
Ford Broncos For Sale at the Kia Dealership
As I was driving to the Ford dealership, I passed a Kia dealership and noticed they had about a dozen brand-new-looking Ford Broncos on the lot. So I pulled in.
I started to walk the Kia lot looking at the rows of new Ford Broncos. None of them had prices on the stickers. Shortly thereafter a salesman came over. I asked him what the price ranges were on them. He told me “The lower-end models are in the mid to high $50,000s and the higher-end models are $75,000 range.” So I told him, on the Ford website, these starting prices are around $37,500 to $50,000 why are these so high? That is when he actually told me “We just order these from Ford dealers and resell them.”
I thought “I was not born yesterday. I’ll just drive across the street and look at the Ford dealership at the normal prices.” (There is a Ford dealer literally across the highway.) So, I thanked him and went across the street.
Ford Dealers with No “New” Trucks on the Lot
I walked into the Ford dealership and started looking at the Ford Broncos inside the showroom. I was told those were the only 2022 Ford Broncos on the lot. When looking at the three Broncos, I noticed that all three were marked “used as is.” All three also had between 150-350 miles on them. Additionally, all three were priced at over $85,000. I asked a salesman what was going on. These are clearly higher than what the websites show they cost.
The Scoop from a Ford Salesman
The salesman explained to me that Ford dealers are so backlogged on 2022 Bronco orders (and other new vehicles) that it can take a year or longer for them to come in when you order them. As a result, other dealers are preordering them and reselling them at a higher price. Furthermore, some people are preordering them, taking them straight to auction, and selling them for $11,000 over the sticker price. Ford dealers are then having to turn around and buy them back as “used vehicles” just to have something on the lot to show people. So, the Ford dealership doesn’t want to sell these that they have for show models so they are jacking the price up even higher after they buy them back. They can do this because these cars are no longer “new” cars that must be sold at Ford prices.
Fair Market Value is No Longer Fair for New Cars
If you are in a car accident and your car is totaled, you are entitled to be paid the fair market value of the car or the replacement cost. As an attorney handling car accident injury cases, I’ve understood this for years—it is how you are made whole for your loss. But here is the problem: the new car price—or fair market value—is no longer the cost to walk on the lot and replace your new car like it used to be. Now, that amount is really the cost of ordering a car and waiting a year now. Insurance companies go by a guide (usually the NADA guide or the Kelly Bluebook). That book will not reflect what is really happening when you try to replace a totalled new car.
Can You Sue For the Real Cost vs Fair Market Value?
In theory, you could sue the auto insurance company and try to prove that the real “fair market value” is no longer the original sticker price. But the problem is that you would need to replace the car now for the best price you could get, then hire expert witnesses to testify as to what is going on in the industry, the average wait to get a vehicle, and the actual cost in your market to replace the vehicle. These expert witness costs are not recoverable. Additionally, attorneys’ fees and expenses are not recoverable in these claims. Thus, your costs would likely wash out your gains in the end.
Can You Claim Loss of Use if You Order a New Car and Wait?
One might creatively argue a right to loss of use damages while you await your new car to come in. However, you generally have a duty to mitigate damages. If a similar used car could be purchased instead of ordering a new one, a jury could find that you failed to mitigate your damages by ordering a new car.
Conclusion
The steel shortage has created a unique problem in the new car industry that makes it impossible to replace a new car in a timely manner. Under our current system of measuring damages, fair market value equaling the sticker price of a new car is simply no longer fair. Moreover, while there are arguments you could make to try to show you are entitled to more than the normal old measurement of fair market value, the cost of proving this in court is likely to make it not worth the individual plaintiff’s time and risk. So for now, I am sad to say that there is no new Ford Bronco in my driveway.
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