CAADE Automotive Industry Standards & Practices 4 — Questions and Answers
Question 1: What is the primary purpose of a 'parts price adjustment' (also called a parts markup) on a collision repair estimate?
- To compensate the insurer for claim processing costs
- To cover the repair facility's overhead and profit on parts procurement (Correct answer)
- To account for shipping and hazardous material fees
- To adjust for regional price differences in the MSRP
Correct answer: To cover the repair facility's overhead and profit on parts procurement
Parts markup allows the repair facility to recover overhead costs associated with ordering, receiving, storing, and managing parts inventory beyond the dealer or supplier invoice cost.
Question 2: Under the Direct Repair Program (DRP) model, what obligation does a repair facility typically have to the insurer?
- To use only OEM parts on all repairs
- To meet specific cycle time, customer satisfaction, and cost benchmarks in exchange for referrals (Correct answer)
- To waive the vehicle owner's deductible
- To provide lifetime warranties on all repairs
Correct answer: To meet specific cycle time, customer satisfaction, and cost benchmarks in exchange for referrals
DRP shops agree to meet the insurer's performance metrics — including cycle time, CSI scores, and cost controls — in exchange for receiving a steady stream of referred claims.
Question 3: What does 'ACV' stand for in automotive appraisal, and how is it generally determined?
- Adjusted Collision Value, set by the repair shop
- Actual Cash Value, the market value of the vehicle immediately before the loss (Correct answer)
- Average Claim Valuation, calculated by the insurance company's formula
- Appraised Collision Value, based on MSRP minus depreciation
Correct answer: Actual Cash Value, the market value of the vehicle immediately before the loss
Actual Cash Value (ACV) is the fair market value of the vehicle in its pre-loss condition, typically determined using market data from comparable sales, valuation guides, and local market conditions.
Question 4: Which type of vehicle title indicates that a vehicle has been declared a total loss and rebuilt?
- Clear title
- Salvage title
- Rebuilt/reconstructed title (Correct answer)
- Lemon law title
Correct answer: Rebuilt/reconstructed title
A rebuilt or reconstructed title is issued after a salvage-titled vehicle has been repaired, inspected, and re-registered, indicating it was previously declared a total loss.
Question 5: What is the significance of 'ANSI/ICAR' welding certification standards for collision repairers?
- They govern the use of adhesive bonding in structural repairs
- They establish performance and training requirements for welders performing structural collision repairs (Correct answer)
- They define allowable tolerances for frame straightening
- They set the minimum thickness of replacement steel panels
Correct answer: They establish performance and training requirements for welders performing structural collision repairs
ANSI/I-CAR welding standards establish the qualification requirements for welders performing structural repairs on vehicles, ensuring weld quality meets safety specifications.
Question 6: What is the role of the 'appraisal clause' in an auto insurance policy?
- It requires the insurer to use OEM parts on all repairs
- It provides a dispute resolution process when the insurer and insured disagree on a loss value (Correct answer)
- It mandates independent vehicle inspections before every claim
- It defines how salvage value is calculated
Correct answer: It provides a dispute resolution process when the insurer and insured disagree on a loss value
The appraisal clause gives both parties the right to hire independent appraisers when they cannot agree on the amount of loss, with an umpire resolving any disagreement between the two appraisers.
Question 7: Which term describes the estimated cost to repair a vehicle if no additional hidden damage is discovered during disassembly?
- Supplement estimate
- Preliminary or initial estimate (Correct answer)
- Final invoice
- Agreed value
Correct answer: Preliminary or initial estimate
A preliminary or initial estimate is written based on visible damage before teardown, and may be supplemented later if additional damage is discovered during the repair process.
CAADE Automotive Industry Standards & Practices 4
What is the primary purpose of a 'parts price adjustment' (also called a parts markup) on a collision repair estimate?