Insurers Take Back Door to Parts Discounts - BodyShop Business

Insurers Take Back Door to Parts Discounts

Since when did one single vendor set the pricing for OEM parts? And since when did we, as shop owners, stop buying OEM parts from our trusted vendors and start buying them from insurers’ “preferred” vendors — who actually charge us more?

Our shop has noticed dealerships appearing in the aftermarket parts databases using ADP and CCC. I’m not sure about Mitchell since our shop hasn’t purchased the A/M parts programming from Mitchell, but I do have all three estimating programs. Recently I wrote an estimate for a left taillamp on a 2000 Pontiac Grand Prix GT. The 5978571 GM part has a suggested list price of $248.12. This so-called “replacement part” was estimated with the ADP system, and according to the attached estimate and parts worksheet, was to be purchased from Pedigo Chevrolet in Indianapolis.

As seen on the parts worksheet, Pedigo revised GM part number to OED5978571, and I presume the “OED” stands for “Original Equipment Discount.” The suggested list price has been changed to $235.71, exactly 5% less than the factory suggested list price of $248.12. The cost of this part from Pedigo was to be $186.09 for our shop.

But keep in mind the following:

  1. Pedigo Chevrolet is not our vendor.
  2. The part listed isn’t an A/M replacement part but, in fact, a GM part in the same box and stamped with the same GM part number — not the OED5978571 as listed on the ADP worksheet.
  3. We did purchase this part from Pedigo for proof and will be sending it back to our vendor, since they’re receptive to our problem with this type of pricing.
  4. Since when did one single vendor set the pricing for GM or any other carmaker in our area?

As of today, I haven’t seen or heard hide nor hair of an insurance survey of the local dealerships parts-pricing structure. Has anyone else? Why not? Because this isn’t how insurance surveys are completed and competitive rates for shops are set in my area. Competitive rates are completed by including all competitors — not just a single business!

The Problem
The discount at Pedigo was based at 25% from the GM suggested list price of $248.12, not the Pedigo Chevrolet list price of $231.75 as listed on the attached ADP estimate. However, our shop’s choice of vendors for GM parts is and, has been, Penske Chevrolet.

Over time, we’ve earned their respect and receive a 30% discount from the factory-suggested list price because of our high volume of parts usage, low return rate and prompt payment.
In other words, the cost on this same part in the same box is $173.69 from our vendor, while it’s $186.09 from this dealership — as listed on the ADP estimate — costing our shop an additional $12.40.

When I asked Pedigo’s parts manager why they wouldn’t match the discount we receive from our GM supplier on either the GM suggested list or the PXN list price, he said he would, but only if we were to purchase all our GM parts from them! But this company didn’t earn my business or my respect.

I told him we’d make it a point to revise any and all our estimates when the Pedigo name was to be listed on a parts worksheet before uploading that estimate to an insurer and would replace those items with used parts whenever possible. Furthermore, I would never spend a dime with someone running this type of cut-throat
business.

It’s also worth noting that we specifically ordered the OED5978571 part number. On the Pedigo invoice, it does have the 5978571 part number with the suggested list price of $248.12, not the Pedigo revised number. I give the salesperson at Pedigo credit; he did tell our parts manager that this would, in fact, be the case. I’m still wondering why.

I, along with others in the collision industry, feel this is just another way for insurance companies and database companies to force parts discounts upon us, going through the back door again! Something must be done about this.

I, for one, spend my hard-earned dollars to the tune of about $1,600 a month with these estimating and management systems, just to turn around and be manipulated by them!

If this type of discounting continues, sooner or later, will there be wars among the dealerships? Could these dealerships possibly make arrangements with the database providers and insurance companies at their cost, therefore eliminating our profits?

Keep in mind, insurers don’t have to pay on the basis of our cost, but rather, on our suggested list pricing directly from our invoices, with the exception of used parts and some A/M items. The insurance companies don’t have any obligation to us whatsoever. We’re not guaranteed a profit or profit margin.

I, for one, can hardly wait to see what’s next!

Writer Pat Johnson is owner of Brother’s Body & Paint Inc. in Martinsville, Ind.

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