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Alliance of American Insurers Study Demonstrates High Cost of Auto Replacement Parts

1 December 1997

Alliance of American Insurers Study Demonstrates High Cost of Auto Replacement Parts

    SCHAUMBURG, Ill., Dec. 1 -- Even without the cost of paint
and labor, a Ford Taurus built entirely from original equipment manufacturer
(OEM) replacement parts costs more than three times its original retail price,
according to the Alliance of American Insurers.
    During the past 16 years, the Alliance has conducted numerous "replacement
parts" studies, using a variety of vehicles and automakers, to demonstrate the
excessive cost of automobile replacement parts.  The result is generally
triple the original cost of the car.  The 1997 Taurus, with a few non-standard
options, retails for approximately $18,985.  Building it from OEM parts,
however, would cost more than $72,250.
    "The study makes two points," said Bill Schroeder, Alliance vice president
of claims.  "It shows that excessive prices for car parts play a major role in
the cost of collision insurance, and it further proves the need for
legislation allowing the use of aftermarket parts.  When aftermarket parts are
available to repair a car, they not only sell for less than OEM parts, but
also bring down the price of those parts.  Car manufacturers have enjoyed a
monopoly on parts for too long, and these prices show it."
    How can the rebuilt car reach a price of $72,251.60?  Consider some of the
prices for Ford parts.  Replacing the Taurus' engine assembly would cost
$3,425, while the electronic fuel injection system is priced at $1,810.  Other
prices include:  hood, latches, hinges and components $509.13; headlamps, side
lamps, mounting panels and hardware $572.54; transaxle assembly $2,240; and
rear suspension and brakes $1,921.12.
    High-priced auto parts affect consumers in two ways.  If they are buying
the parts independently, they pay the excessive price.  If their insurers are
picking up the tab, it may affect their premiums.  For these reasons, the
Alliance and its member companies support the sale of aftermarket parts
approved by the Certified Automotive Parts Association (CAPA), which tests
auto parts produced by independent manufacturers.  To earn the CAPA stamp of
approval, an aftermarket part must pass stringent tests to assure that it is
equal to its OEM counterpart.  The difference is in the price.

                            OEM      Aftermarket
    Front bumper cover    $321.13      $262.00
    Hood panel            $225.40      $188.00
    Fender panel          $119.60      $100.00
    Radiator              $308.29      $225.00
    A/C condenser         $189.00      $112.94

    "By repairing cars with aftermarket parts, we can control one of the
factors that contributes to high auto insurance premiums.  And by using CAPA
certified parts, we can ensure the quality of repairs," Schroeder said.  Two
other primary cost drivers in auto insurance are fraud and litigation.  The
insurance industry is working with consumer groups, law enforcement and
government to put a dent in these problems as well, he explained.

SOURCE  Alliance of American Insurers