Why Brand-New Teslas Are Showing Up in Junkyards

Rather than repairing Teslas under collision or property damage coverage, some car insurance companies are sending Tesla Model Ys that have been in crashes to salvage auctions, where they are sold for parts.

According to data from Copart and IAA, two of the U.S.’s largest salvage auction houses, of the 120 Model Ys listed in December 2022 and early January 2023, the majority had fewer than 10,000 miles on them, and all were from the model years 2022 and 2023. They originally retailed for anywhere between $60,000 to $80,000, making them high-end and lightly used vehicles. So why are they being sent to salvage auctions rather than repaired and returned to their owners?

The reason is because of Teslas’ high repair costs. According to RepairPal, the average cost of both scheduled maintenance and unscheduled repairs of a Tesla is $832, compared to $652 across all car types. That means, on average, Teslas cost nearly one-third more to repair and maintain than all other cars.¹ Repair costs would be even higher if the issue is due to a collision.

As a result, companies like State Farm, GEICO, Progressive, and Farmers are buying back totaled cars and auctioning them off, which is why you might see some pretty pricey Model Ys in junkyards.

On an investor earnings call for the fourth quarter of 2022, Tesla CEO and product architect Elon Musk addressed these “unreasonably high” repair costs. He said the company is going to make design and software changes to the vehicles so they’re cheaper to repair and insure. In order to pressure auto insurance companies to reduce their rates, Tesla will change the design of the bumper and provide spare parts, which will lower repair costs.

Tesla has its own insurance option, launched in 2019, which the company claims results in car insurance costs 30 percent lower than competitors’. Tesla Chief Financial Officer Zachary Kirkhorn said that as of Q4 2022, its insurance business had total annual premiums of $300  million and is growing 20 percent quarterly, a rate faster than Tesla vehicle sales.²

However, most Tesla drivers won’t be able to purchase Tesla’s in-house insurance. That’s because, as of February 2023, it’s available only in the following states:

• Arizona
• California
• Colorado
• Illinois
• Maryland
• Minnesota
• Nevada
• Ohio
• Oregon
• Texas
• Utah
• Virginia

For those who live in the eligible states, Tesla’s insurance is available for the following models:

• Model S
• Model 3
• Model X
• Model Y