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November/December 2002

That'll be CA$H
    A Look at “Cash Pricing” and Why It Exists
by Penny Beverage

"Will this be going through your insurance?”

We’ve all heard this question a zillion times. And usually, the answer is yes. But not always.
Sometimes consumers decide to pay for repairs themselves.

In that case, auto glass shops have been known to drop the price of the glass replacement even further. While the difference usually is swept under the rug to the public, it is known well throughout the industry and was even the focus of a 1998 Hard Copy expose.

Last month, when AGRR called shops for its “Price Points” section and asked for both cash and insurance quotes, most shops were glad to admit the discrepancy, though. Some would not even share the cash price (because of exposes like the Hard Copy one in 1998, along with a Consumer Reports article published the same year) but were willing to admit that there is a difference.

“Usually cash prices are a lot less,” said a representative from a shop in Tacoma, Wash., when AGRR surveyed shops for the price of a windshield replacement on a 2001 Buick LeSabre. (The price quoted from this shop was $352 for cash, $716 for insurance. See the sidebar below for more data.)

2001 Buick LeSabre
NAGS Part No. DW01424 
NAGS List Price: $1496.80

Shop #1         $716.72             $1180.22 
Shop #2         $502.16             NA 
Shop #3         $425.00             $640.00 
Shop #4         $491.52             NA 
Average         $533.85             $910.11 
Median          $496.84             $910.11 

Shop #1             $451.00         $629.00 
Shop #2             $523.51         $521.51 
Shop #4             $187.00         $187.00 
Average             $345.48         $445.84 
Median              $335.50         $521.51 

Shop #1             $490.00         $537 
Shop #2             $375.00         $764.77 
Shop #3             $681.09         $920.20 
Shop #4             $352.00         $716.00 
Average             $474.52         $734.49 
Median              $432.50         $740.39 

NA=Not Available. 

Why the Discrepancy?
While most agree that a difference does exist in cash and insurance pricing, few are certain of the cause of the discrepancy. Some suggest cash quotes are just that—quotes—and usually change after the sale is complete.

“Sometimes, cash pricing can be deliberately vague to try to garner the business first and deal with the variables later,” said Bob Hittenberger of Best Glass Inc. in Phoenix.

Others say the discrepancy is real and prevalent, but for a basic reason: shops can afford to drop the price if they don’t have to wait to be paid and if they are sure they won’t be “short-paid.”

“I can justify giving cash customers a bigger discount as the sale is just that, cash in hand when the job is done,” said Donnie Thomas of Burns Glass in Burns, Ark. “You don’t have to fax or e-mail an invoice and then wait three to 12 weeks for payment, which may have been audited, and then not get paid for what you billed anyway.”

However, many claim that with the surge in electronic billing methods, this is no longer an issue. In 1998, when the original Hard Copy and Consumer Reports exposes ran, the long wait for payment (via mail) and lengthy paperwork involved with insurance companies were cited as the number-one reasons for offering cash customers a larger discount.

Michael Lattomus of Union Auto Glass in Wilmington, Del., said there is yet another cause lying in the hands of the insurance company, though.

“Honestly, the insurance company has the option to negotiate with the independents and get a better price, but they don’t do that, so I think they’re over-charged,” Lattomus said.

In fact, Lattomus, unlike some of his cohorts, said he has so little trouble getting paid by the insurance companies these days with electronic billing and such that he usually tries to convince the customer to do the job through insurance.

Insurers’ Outlooks
While insurance companies realize cash pricing exists, most do acknowledge the difference.
“The practice of cash pricing is something that has been around for many years,” said David Hurst, spokesperson for State Farm.

Hurst said that shops have a number of valid reasons for offering discounted shop prices and does not see a problem with it.

“Our position is that the shop is free to offer discount prices if it wishes,” he said. “It’s just a business practice ... we don’t view it as something bad; it’s the glass shop owner’s perogative.”

He did say that State Farm takes it into consideration, though, when setting its own pricing.

“We will consider this cash pricing when we were doing our [pricing], but we do have to establish prices that are fair for the consumer—and also for the glass shops,” he said. 

One insurance company representative (who wished to remain anonymous) said that the cash-versus-insurance pricing difference is no different than pricing differences in other industries.

“In any business, glass or whatever, cash in hand is much more valuable,” he said. “It’s common sense.”

Lattomus said this really doesn’t affect the consumer, though.

“The consumer has to pay the deductible anyway, so it’s the same thing,” he said.

Solving the Problem
Cash pricing is a reality and doesn’t seem to be going away soon. The insurance representatives contacted for this story did not expect it to change in the near future, but were accepting of it also.
Some shops said that because the problem lies in billing, when insurance companies are willing to pay shops quickly, cash pricing won’t be an issue.

“You don’t have to … wait three to 12 weeks for payment,” Thomas said.

Few cited this reason, though, with the rise of electronic billing and direct-deposit programs. 

However, Lattomus said it is up to the insurance companies themselves to solve the problem.

“The insurance companies have the power to change it when they want to,” he said. 



Penny Beverage is the editor of AGRR magazine.




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