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Insurance and Replacement Parts: OEM or Not?

 

You've just been in a car accident, which means you have a ton of paperwork to do, as well as working out your transportation until your car is fixed (unless your insurance covers rentals). You're stressed, frustrated, and possibly even missing work in order to have time to handle everything - but at least once you contact your insurance company and give your car keys to the mechanic you can relax right?

 

Wrong.

 

Before you can even begin to relax you have to decide whether or not you want the auto body shop fixing your car to use OEM replacement parts, or not.

 

What is OEM?

OEM, or "original equipment manufacturer" refers to replacement parts that are actually made by the same company that produced your car. The alternative to OEM is aftermarket parts, which are the automotive industry equivalent of buying generic.

 

Most non-OEM parts manufacturers, and the majority of insurance companies, consider the difference between OEM and aftermarket parts to be negligible. In fact, insurance companies generally advocate the use of aftermarket parts, because they're significantly less expensive. They don't prevent you from using them, of course, but they may not reimburse you 100% if you opt for OEM parts instead. While it may not seem like that big a deal, consider that OEM parts are usually much more expensive than their unbranded brethren. For example, if you had to replace the hood on a 1996 Ford Contour, the aftermarket price would be $300 or so, while the OEM version would be roughly double that amount. Since you pay the balance of the bill, after whatever your insurance company allows, choosing OEM parts can cost you a fortune.

 

There are a few insurance companies, such as Chubb Insurance Group, which take the opposite tack and encourage policyholders to select OEM repair parts without a penalty, but such companies are generally among the most expensive auto insurers out there: you may not pay for parts directly, but the money you think you're saving is built into your premium.

 

What to Consider

Ignoring the cost to use OEM parts for the moment, there are two things to consider before making your choice, resale value and safety.

  • Resale Value
    Aftermarket repair parts may be less expensive, but they will adversely affect the resale value of your vehicle. If you plan to resell or trade your car, OEM parts may be a better bet. If your vehicle is leased, OEM parts are essential if you want your security deposit back, as you are technically returning the car in a condition different from the original configuration.
  • Safety
    OEM-parts advocates claim that non-OEM repair parts are not as safe as their OEM counterparts because they are not subjected to the same rigorous crash-testing procedures. However, this may not be true. The Insurance Institute for Highway Safety (IIHS) says that, at least when it comes to cosmetic repairs, the use of non-OEM replacement parts does not degrade the safety of a vehicle in a crash.

Ultimately, the decision to use aftermarket or OEM parts for your auto repairs is up to you. Consult your insurance policy for guidance, and speak to your insurance agent if you need clarification, and then tell the mechanic what kind of parts should be used to repair your vehicle. As long as the non-OEM parts are approved by CAPA (Certified Automotive Parts Association) there is no danger in choosing the less expensive path to repairing collision damage.