Competition Starting To Affect High Cost Of OEM Parts
Even without the cost of paint and labor, a 1998 Ford Explorer XLT built entirely from original equipment manufacturer (OEM) replacement parts costs nearly three times its original retail price, according to the Alliance of American Insurers.
Over the past 17 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 1998 Explorer, with a few nonstandard options, retails for approximately $27,145. Amazingly, however, building it from OEM parts would cost more than $77,000.
"The study demonstrates the value of free-market competition," says Kirk Hansen, Alliance director of claims. "In past years, when the OEMs had a stranglehold on the marketplace, Alliance studies showed that building vehicles from OEM parts more than tripled the original retail price. With the increasing acceptance of competitive replacement parts, OEMs are finally starting to lower their prices. Though the costs of OEM parts are still outrageous (more than 280 percent of the cost of the vehicle), they are finally heading in the right direction."
Ford recently reduced its list prices for frequently damaged crash parts—hoods, bumpers and fenders—by an average of 35 percent for the new models of the Taurus, Sable, F150, Escort and Tracer. The company also has introduced a Bumper Fascia Truckload Program that has resulted in average price reductions of 29 percent on its 41 top-selling bumper fascias.
Hansen continues, "OEMs are spending a fortune trying to force anti-consumer legislation that would limit the use of competitive replacement parts. Although they talk about 'genuine' parts and have manufactured false issues about quality and safety, their goal is to destroy free-market forces—they don't want to compete! Limiting the availability of competitive replacement parts would let OEMs charge whatever they wish for parts. That is why they are seeking legislation to prohibit the sale of competitive replacement parts."
However, most people don't want to spend $80 to $100 extra for a part, just because it comes from a car company. "Just as most people have learned the value of buying PC-compatible computers or generic prescription drugs, more people are realizing that competitive replacement parts are a good deal," Hansen says. "In addition, by repairing cars with less expensive replacement parts, we can control one of the major factors contributing to high auto insurance premiums. By using quality CAPA-certified parts, we can ensure quality repairs."
For these reasons, the Alliance and its member companies support the sale of competitive replacement parts approved by the Certified Automotive Parts Association (CAPA), an organization that tests auto parts produced by independent manufacturers. To earn the CAPA stamp of approval, a replacement part must pass stringent tests to assure that it is equal or superior to its OEM counterpart. Last year, CAPA received complaints on only 0.05 percent of the more than 2.5 million parts it certified. Therefore, the only discernible difference between an OEM part and a CAPA-certified part is price.
How can the rebuilt car reach a price of $72,008.07? Consider some of the prices for Ford parts. Replacing the Explorer's front doors—including power windows and mirror, inner-door components and hardware—would cost $4,072.99, while the rear doors, power windows, inner-door components and hardware are priced at $4,700.06. The total for just the front and rear doors is $8,773.05.
By comparison, the Ford Explorer's OEM rear bumper cover costs $339.07; the same part made by an independent manufacturer costs only $240. An OEM headlamp assembly, at $178.88 is more than double the aftermarket price of $80.00. And an OEM windshield priced at $1,308.09 is nearly four times the independent's price of $353.18.