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Auto Parts Prices: An Ill-Timed Surge

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In order to get you the most accurate price estimates for keeping your car/truck on the road, we survey dozens of parts suppliers on a regular basis. Historically, parts prices have been pretty stable, increasing a few percent each year at most.

So far this year we're seeing increases averaging 5%, with some price increases exceeding 10%, and much of the increase has occurred recently, just as the economy is struggling. Why would parts makers increase prices just as marginal demand is flagging? The answer lies in the extraordinary volatility the commodity markets are experiencing.

The graph above shows a composite price index for copper, iron ore, aluminum, zinc, lead and a few other industrial metals. It's fallen 35% from its peak just 6 months ago - an unprecedented collapse driven by the global financial meltdown. Yet the auto parts just coming to market were produced under contracts signed several months back, while metal prices were at historic highs. Thus we see what appears to be irrationality by the parts makers.

Fortunately for them, people still need to get their cars fixed and will pay the extra in most circumstances. And fortunately for consumers, lower commodity prices are being factored into the parts being built right now, so lower parts prices (and overall repair costs) should be right around the corner.

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