Competitive
Auto
Parts

1) How does the cost of automobile repairs affect insurance premiums?

Insurers spend nearly $6 billion annually to pay for parts and services to repair crash damage for insureds. The price competition that currently exists in the auto parts market is reducing prices by 25 to 40 per cent and more, depending upon the type of repair involved. Such savings help to keep premiums as low as possible for all insureds-those who use competitive auto parts as well as those who do not. (See "Competitive Auto Parts vs. Carmakers' Parts" and "Parts Prices Affect Insurance Premium Costs for All Consumers")

2) How do competitive auto parts affect price of carmakers' parts?

In general, competitive auto parts prices drive down the prices charged for carmaker parts. However, competition only exists for a few kinds of crash parts such as bumper covers, grilles, head lamp capsules, fenders, hoods and trunk lids. In markets that lack competition, carmaker parts costs soar. The bottom line, then, is that consumers realize the full potential from parts competition only when broad-range competition is allowed to exist so that the market becomes more attractive to makers and suppliers of competitive auto parts. If competitive auto parts are forced out of the market, consumers would be double losers. They would lose not only the potential savings from parts prices going down, but also would have to absorb the price increases that could be freely imposed if carmaker parts were the only choice. (See "Parts Prices Affect Insurance Premium Costs for All Consumers")

3) Why do carmakers try to discourage consumers from using competitive auto parts? Profit motives fuel carmakers to discourage the use of competitive parts. In markets where there are no competitive parts, carmakers are able to raise their prices without concern. But in markets where competitive auto parts provide competition, carmaker parts prices are driven down. (See "Parts Prices Affect Insurance Premium Costs for All Insurers")

4) How did today's competitive auto parts market develop?

Worn out car parts have been replaced with competitive auto parts for the past fifty years or more. The best known are maintenance parts like spark plugs, batteries, oil filters, brakes and suspension, windshields, air conditioning condensors and radiator cores from other competent sources have competed with carmakers' parts for many years. Introduction of competitive crash parts during the late 1970's and early 1980's was simply an expansion of the existing competitive auto parts market. (See “Competitive Auto Parts vs. Carmakers' Parts")

5) Where do competitive auto parts come from? How do they reach the consumer?

During the late 1970's and early 1980's, carmakers began contracting with overseas firms to supply sheet metal crash parts for use in assembling new cars. The overseas suppliers soon discovered that another market existed for those parts, and some ventured into business on their own, selling competitive crash parts directly to suppliers in the United States. (See "Competitive Auto Parts vs. Carmakers' Parts")

6) What role do auto repair shops play in the use of competitive auto parts?

Body shops may use one or more competitive auto parts suppliers. When a competitive auto part is available, a body shop may opt to include the competitive auto part in the repair estimate. A car owner may accept the body shop recommendation to use competitive parts, or may decide instead to use carmaker parts.

Q&A: (continued)

Competitive
Auto
Parts

7) What role do insurers play in the use of competitive auto parts?

When insurers pay for replacing crash
parts, their first concern is that the
replacement part be of like kind and
quality-as promised in the policy. Their
recommendation on which parts to use
is based on quality, availablity and cost
of the parts. They want a quality repair
job for their customers, and a fair and
reasonable price to keep their insurance
costs in line. However, insurers' esti-
mates simply establish the amount of
loss. They do not tell a policyholder what
parts must be used or where repair work
must be done. In the end, the car owner
decides. (See "Competitive Auto Parts vs.
Carmakers' Parts")

8) How safe are competitive auto parts?

The insurance industry has long devoted time, money and resources to promoting vehicle and driving safety. One of the nation's most respected organizations dedicated to the cause of auto safety, the Insurance Institute for Highway Safety, has said, "The source of cosmetic parts used to repair cars has little to do with the possibility of injury in those cars after they've been repaired." (See "A Question of Safety")

9) What is the difference between federal standards for new cars and those for repaired autos?

Federal standards require that a vehicle meet certain safety criteria when new. However, when repaired, a car may no longer continue to meet "new car" federal standards because it has been altered -regardless of the type of repair parts used. There are no federal standards that apply to repaired autos. Further, while there are federal standards for lights and

associated equipment, there are NONEwith the exception of the hood-that apply to cosmetic body parts. (The federal standards applying to hoods on new cars state that hoods must not intrude into the passenger compartment in a head-on collision.) A spokesman for the Insurance Institute for Highway Safety has said, "While it is possible that a replacement hood could compromise performance, it's not the cosmetic soft body part but the hinges and attachment systems that are most likely to be the critical areas of performance. These attachments are not among the cosmetic parts at issue. (See "A Question of Safety?")

10) How can consumers evaluate the benefits of using competitive auto parts?

Some manufacturers now stamp their parts with an identifying logotype which is registered with the Aftermarket Body Parts Association. This identifies who manufactured the parts used. In addition, reputable suppliers of competitive auto parts offer warranties on their parts which match and often exceed those offered by the carmakers. Further insurance companies require that the competitive auto parts they recommend have corrosion resistance equal to or better than that of carmaker parts. A car owner faced with the choice of using a part from a carmaker or from a competitive auto parts manufacturer can select competitive auto parts knowing that they come with warranties which are as good as and often better than those of the carmakers. (See "Quality of Parts Assured by Competitive Parts Manufacturers", "Corrosion Warranties" and "Counterfeiting: A NonIssue")

11) Do competitive auto parts fit as well as carmaker parts?

All cosmetic auto body parts-those manufactured by carmakers and those manufactured by competitive auto parts companies-must be fitted and adjusted by the body shop that installs them. The skill of the body shop worker plays a vital role in the end repair result. A skilled body shop person can fit competitive auto parts and carmaker parts with equal precision. (See "Quality of Parts is Assured by Competitive Parts Manufacturers")