How expensive parts on modern cars have driven up repair and insurance costs (2024)

Amna Nawaz:

Inflation eased a bit more than expected last month, providing some welcome news for consumers. But Federal Reserve officials say they want more progress and don't expect to cut interest rates much this year.

Last month saw the mildest inflation increase since 2021. The Consumer Price Index rose two-tenths of a percent in may and was up 3.4 percent compared to a year ago. That is excluding the more volatile costs of energy and food. Hospital services, rents and restaurant prices all climbed higher, but there was a broader slowdown for other goods, including gasoline, dairy products and airfare.

Geoff Bennett:

That inflation news provided some relief compared to recent reports. Polls show that inflation has consistently remained among Americans' top economic concerns.

Today, Federal Reserve Chair Jerome Powell said he wanted to see more progress in the battle against inflation too. In fact, after projecting as many as three rate cuts for 2024, Powell said today the Fed may only cut interest rates once later this year.

Jerome Powell, Federal Reserve Chairman:

We're looking for something that gives us confidence that inflation is moving sustainably down to 2 percent. And readings like today's, that's a step in the right direction, but one reading isn't — just it's only one reading. You don't want to be too motivated by any single data point.

Amna Nawaz:

Economist Diane Swonk of KPMG said keeping interest rates at a higher level could mean more pain for millions.

Diane Swonk, Chief Economist, KPMG:

Those who get hurt from higher for longer interest rates are everything from small and mid-sized businesses that are set to reprice their loans this year — they're not in fixed-price loans — and also consumers, particularly low-income consumers and younger borrowers, who are seeing the rates compound on their credit cards.

They have already tapped out their credit cards to make ends meet and are now having that compounding rate at a very high rate, which means you're seeing delinquencies rise as well.

Geoff Bennett:

The inflation news also finally contained a bit of good news about your auto insurance premiums. They have been rising for months and are one part of why inflation has had such a bite.

While they finally dipped just a bit today, they remain much higher than a few years ago.

Economics correspondent Paul Solman takes a closer look at why that is.

Regan’s Service, Regan’s Service Inc.:

Batteries, car batteries skyrocketed. They have probably gone up 15, 20 percent for a car battery.

Paul Solman:

In the last year?

Steve Regan:

In the last year.

Paul Solman:

Steve Regan and brother Pat run my neighborhood auto shop.

Steve Regan:

This tire here, it was $20 or $30 less for this tire even a year ago.

Paul Solman:

But the big new cost for auto repairs, higher-tech parts.

Steve Regan:

There's a lot more electronics than there ever were. Your car, for example, probably has 15 different computers in it, maybe more.

Paul Solman:

And this stuff is expensive to replace, more so with every added computer chip.

Steve Regan:

A little lens like this, just the part…

Paul Solman:

Yes?

Steve Regan:

… can cost $125, $150.

Pat Regan, Regan’s Service Inc.:

Cameras, parking sensors, self-parking capability, this stuff can all be damaged in a front-end collision.

Paul Solman:

Like a busted rearview mirror and a parking sensor knocked loose before I bought the car.

See, you can see where the crack was. Look.

Body shop quote, $3,000. But my wife glued the mirror housing, impressing Steve…

Steve Regan:

She did a good job.

Paul Solman:

… who advised reattaching the dangling forever beeping sensor.

Steve Regan:

I see your tape job.

Paul Solman:

Yes, and?

Steve Regan:

And I wouldn't give up your day job.

(Laughter)

Paul Solman:

I don't intend to.

Meanwhile, no surprise that what's true in suburban Boston is true elsewhere.

Shannon Martin, Bankrate:

The cost of labor surrounding vehicle repairs is increasing and still about 20 percent higher now than it was before the pandemic.

Paul Solman:

Which also, crucially, means insurance rate hikes, says Bankrate columnist Shannon Martin, up 26 percent nationwide this year, 40 percent higher than pre-pandemic.

Shannon Martin:

So all the technology that helps keep us safer on the road also means it costs more to have your vehicle repaired. And then, in terms of labor costs — and America's been experiencing a labor shortage in the world of auto technicians for some time now. And there isn't the same pool to pull from.

And this is driving up the cost of your car insurance and delaying the time it takes to get your vehicle repaired.

Al Calderone, Customer:

Insurance prices have just increased dramatically.

Paul Solman:

Al Calderone is a Regan's regular.

Al Calderone:

Those companies are really taking advantage of the consumer in a variety of different ways. In general, there's a lot of — there's a lot of industries that are gouging.

Paul Solman:

Insurance companies among them, he thinks.

But what choice do they have, given the lofty parts prices car manufacturers have been able to impose, as Adam Siegel, a third-generation principal at family-owned Webster Auto in Somerville, Massachusetts.

Adam Siegel, Webster Auto:

They're adding either technology, trademark logos.

Paul Solman:

But why do I need to put a logo on there? I guess for continuity, for…

Adam Siegel:

If someone comes in here, and our obligation is to get that car back to the previous condition or other methods of eliminating the opportunity for aftermarket parts creators.

Paul Solman:

You mean eliminate the opportunity for competition?

Adam Siegel:

Exactly.

Paul Solman:

That condition included branded parts, instead of any made by third parties in the aftermarket.

Adam Siegel:

GMC Sierra.

Paul Solman:

So the manufacturers have a de facto patent. Siegel challenged me to estimate the repair of this collision-bruised behemoth, a few scratches, a dent I couldn't even see.

Adam Siegel:

Give it a ballpark.

Paul Solman:

In the first place, I have to tell you, I would get the paint and I would try to do that myself.

Adam Siegel:

Absolutely.

Paul Solman:

This, I wouldn't care about at all. So I would say the cost would be zero.

Adam Siegel:

Yes. Yes.

Paul Solman:

How much is it?

Adam Siegel:

I'd say $5,500.

Paul Solman:

Fifty-five hundred dollars for this scuffing and that dent?

Adam Siegel:

Yes. Yes, there's a lot to this that the naked eye will never see, and parking sensors.

Paul Solman:

Yes, I see the sensors. But…

Adam Siegel:

But we have a front-facing camera.

Paul Solman:

Yes.

Adam Siegel:

We have a cruise control radar.

Paul Solman:

Yes.

Adam Siegel:

There's a lot of tech in this car.

Paul Solman:

But the $5,500 wouldn't even include replacing any damaged sensors.

Meanwhile, back at the Regan's…

Pat Regan:

Had that one headlight cracked in that accident, that headlight is a $10,000 headlight. And…

Paul Solman:

What? What are you talking about?

Pat Regan:

The headlight is — that's how much that headlight would cost.

Paul Solman:

Ten thousand dollars?

Pat Regan:

Ten thousand dollars.

Paul Solman:

So insurance companies pay for pricey parts…

Steve Regan:

Tires are very volatile.

Paul Solman:

… whose prices manufacturers control.

Adam Siegel:

Let's say we order a bumper from Mercedes. They will charge us a $150 to $300 core deposit. And in order for us to get that money back, we have to give them the old bumper.

The reason they do that is to eliminate these bumpers from the market in general.

Paul Solman:

And get this. Because repairing a modern car costs so much, damaged vehicles, especially high-end ones, are often considered totaled. So cars that could last 15 to 20 years or more are regularly soon scrapped.

Adam Siegel:

A lot of these luxury cars, the parts prices are so high that it is difficult to get into a repair of a car that's seven to 10 years old without totaling it out, because there's just not that many aftermarket options for these vehicles.

Paul Solman:

Hey, even high water could short out the electronics and render a car not worth fixing.

Maria O’Brien, Boston University:

You could make the case that a car is now mostly a computer.

Paul Solman:

Insurance expert Maria O'Brien echoes the mechanics.

Maria O’Brien:

When the car is involved even in a relatively minor accident, if it turns out that a sensor is damaged or something else related to the computer system is damaged, what might have been a new plastic bumper is now considerably more.

Paul Solman:

And, of course, says O'Brien, a law professor, manufacturers will do whatever they can to make sure the replacement parts are theirs.

Maria O’Brien:

Which doesn't mean that they are necessarily breaking the law, but they are absolutely going to try to manage the availability of their product in a way that results in the biggest profit possible for them.

Paul Solman:

And as our cars and trucks become more computerized every year, the more potential for profit because the pricier the irreplaceable parts, which helps explain skyway-high auto repair inflation.

For the "PBS NewsHour," Paul Solman.