Leasing, Parts, and Car Insurance

I had an interesting conversation with a new client the other day. She leases her car and wanted to confirm whether the car insurance policy covers manufacturer parts, also known as original equipment manufacturer or OEM parts, or would they insist on using third-party parts to repair her car if she files a car insurance claim? No client or prospective client has ever asked that question and it told me she’d either experienced or seen a claim go sideways.

I’ve written about how many car insurance claims departments specify the use of third- party parts before (see https://wiseinsurancegroup.com/third-party-parts-and-car-insurance-claims/). The reason is simple; they cost 20% to 50% of what OEM parts cost. However, the discussion pointed out a big difference between cars which are owned and / or financed versus leased which most people aren’t aware of.

If you purchase a car the finance company or bank does not specify what type of parts are used to repair your vehicle when a car insurance claim is filed. The insurance company is free to use any parts that fit, new or used, to repair your vehicle. Owners continue to make payments until they’re ready to replace it with a new or newer vehicle. You may not like the fact a third-party part was used to repair your vehicle but the bank or finance company doesn’t stipulate what kind of part is used.

This isn’t the case with a leased vehicle. Most lease agreements require OEM parts be used to repair your vehicle if a car insurance claim is filed. The reason is they want to sell your vehicle once the lease is finished and they know third-party parts result in a diminished value. If your car insurance company only pays for third party parts, as most do, then it’s the policyholder’s responsibility to pay the difference in cost between the third-party part and the OEM part, which can be significant!

This experience happened to my client when she bought car insurance from a different agent before we met. Like most people, she was angry about the experience. I explained to her most of the car insurance companies I write policies with offer OEM parts coverage as an option. It cost a little more each year to add this to the policy, however, it can save the policy holder a significant amount of money should they have an accident or comprehensive claim.

If you lease your vehicle, please ask whether OEM parts or covered. If not, ask if you can add this coverage to your existing policy. I know I’d rather pay a little more now than be faced with a much larger bill because I wasn’t informed of that option. What do you think? Share your comments, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!

Evie Wise
Evie Wise


Evie Wise
Evie Wise

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