Insurers: Car Makers’ Monopoly Over Car Parts Could Cost $3 Billion

January 26, 2009

Consumers and insurers would face staggering costs if car companies gain a monopoly on the market for parts needed to repair vehicles after a collision, according to insurance companies.

Research findings published by the Property Casualty Insurers Association of America (PCI) suggest that even without the cost of paint and labor, a 2005 Ford Mustang GT built entirely from car company crash parts would cost nearly three times the car’s original price. In one example, the price of a car company right headlamp assembly for the Mustang was $156.17, compared to $121.00 for a certified aftermarket right headlamp.

Using parts made by companies other than the original car maker, known as aftermarket parts, produced a savings of $35.17, or 23 percent. Aftermarket parts are certified by The Certified Automotive Parts Association (CAPA), a non-profit organization that oversees a testing and inspection program for certifying the quality of parts used in collision repairs.

PCI said that the availability of aftermarket parts fosters competition in the market and helps bring about lower costs for replacement automobile parts.

“This study reinforces the fact that aftermarket parts not only provide lower-priced, quality alternatives, they also keep car company parts prices lower, resulting in tremendous direct and indirect savings for consumers,” said Robert Passmore, PCI’s director of personal lines.

Some automobile manufacturers are seeking replacement part patents that PCI says could eliminate competition. “Car company efforts to gain a monopoly by eliminating aftermarket parts would increase repair costs and harm consumers,” said Passmore. “The loss of a competitive market for these parts would also add more than $3 billion to insurers’ costs, which would be passed on to consumers in the form of higher insurance premiums.”

Insurers also contend that higher repair costs would mean that more vehicle owners without physical damage insurance coverage would be forced to forego repairs and more vehicles would be declared total losses, requiring consumers to replace their vehicles. Greater numbers of total losses resulting from higher repair costs also hurts auto body repair shops by lowering the number of overall repair jobs.

Source: PCI

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