HVAC Industry: Who wins with High Warranties?

During the sales process, it is inevitable warranty periods will be raised.  I remember raving about how the latest and greatest HVAC product led the industry with the longest warranty period.  Very often this only lasted a short period of time as other Manufacturer’s would continue to match warranties with their line.  Things often got out of hand as warranties have reached ‘limited lifetime’ on parts like compressors or heat exchangers.  So, who wins when things reach the extreme?

Let me tell you a quick story as an example.  Let’s say Eleanor Rigby calls Joey Bag O’Donut's HVAC to install a mechanical system. Eleanor, being an elderly and lonely homeowner, was wooed into the solution that would provide the most comfort in her twilight years.  Since she spends a lot of time at home, and every summer seems to be warmer than the last, Mrs. Rigby spared no expense on her new multi-zone ductless heat pump.  She wanted to make sure her comfort was protected with the industry’s highest 12 year limited warranty, and keeping her electric bills low were her priorities as she is on a fixed income these days.  Joey did a great job; his workmanship is second to none! They should really consider re-branding his company; the name gives a bad impression…

Let’s fast forward 10 years.  Mrs. Rigby took great care of her system, having Joey’s service department return every year for maintenance.  This kept her unit under manufacturer warranty and operating at its peak efficiency.  Unfortunately, something happened last night with the system and Eleanor had to call for emergency service.

Contractor Perspective

When Joey’s service tech showed up, he knew exactly what happened.  Eleanor was a great customer and he wanted nothing more than to tell her it was going to be an easy fix.  This time it wasn’t.  The control board failed after 10 years of impeccable service, due to the compressor shorting out.  This was a long time for a heat pump that ran almost continuously year round!  Joey’s tech knows this type of work will take some time, and labor (along with the older R-22 Refrigerant) is not covered under the manufacturer warranty.  So, he delivers the bad news to the homeowner.  This is a tough conversation for the technician, particularly since he knows they will not make any money on parts.  When covering Mrs. Rigby’s options, he explains replacement of the system makes the most sense as technology has come a long way in the last 10 years.

  •  The contractor is not able to make any money on the parts under warranty, time on paperwork, nor the sale of a new system if repaired, which could be the best option for Mrs. Rigby.

Homeowner Perspective

Mrs. Rigby is always on top of things.  This includes scheduling maintenance and paying her bills.  How could she do everything right and still have this problem?  She was so frustrated, she only bought this system 10 years ago and the unit is still under warranty!  How can Joey’s tech be saying she should replace a system that has 2 years left from the manufacturer?  She knows she should weigh her options, but realistically she has to go with the cheapest, and this is to fix the system.  Eleanor just wasn’t budgeting for such an expense.

  • An expensive repair gets the now ‘low efficient system’ operating once again.

Manufacturer’s Perspective

An unhappy customer can be a lot to handle.  The system is under warranty, installed to their specifications, and has been maintained every year.  Looks like the brand needs to supply a compressor and control board for this old unit.  Let’s hope the distributors are able to locate old stock in their warehouse because shipping these parts from overseas or cross country can take weeks!  A loyal customer like Mrs. Rigby should not have to wait weeks to be comfortable.  Warranty parts are a tough thing to budget, even when failure of these systems are so rare.  After all, 10 years of operation is hardly a manufacturer defect!  Is the Contractor sure this is what was wrong – hate for this to come back and bite them if the repairs now show another larger issue.

  • Another lost opportunity to install the latest design in Mrs. Rigby’s home, who could have undoubtedly touched many leads when she talks about it at her church.  How many years before this consumer is presented with a repair vs. replace option again?  Will she blame the brand for the recent service costs?

So, who wins in this story?

We could argue all sides come out on the losing end with higher warranties, a perspective that I never had when selling systems.  Although this may help in the sales process, is every factor considered when presenting the ‘highest warranty in the industry’?

Excess Air

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Comment by Morgan M Audetat on August 11, 2015 at 7:16am

They can't. It is up to us to educate the consumer and downplay warranties while putting the emphasis on good installation and regular maintenance. 

Most major failures are result of pour application, installation and total lack of scheduled maintenance. Many will continue to take the low bid and only called a technician when the appliance fails, but they are grownups. If we tell them the truth our job is done. 

Comment by Chris Heenan on August 10, 2015 at 2:40pm

This is very similar to a race to the bottom in pricing. I noticed the big warranty push most during the 2008 Great Recession but the practice lingers and very true it is tough on all involved. Bad moments for an honest technician dealing with a homeowner with a failed component (or failed system). Homeowner must pay for labor which just like in car repairs is the largest part of their repair expense.

Some HVAC companies hire 3rd party warranty companies to pay the labor bill for repairs to allow them to repair without cost to the homeowner. This of late has become difficult to make claims to the 3rd party insurance companies.

I agree with Morgan, it's best to prep buyers of new systems of where the manufacturers warranty saves them the most is for large item failures.

How now then can an industry back down from these warranties?

Comment by Morgan M Audetat on August 10, 2015 at 6:56am

More still. It is marketing overruling common sense and contractors going along for the ride. 

The best consumer protection is an educated consumer. I stopped selling "warranty" a couple of decades ago. 

Regardless of what it costs the bottom line is still on the bottom. 

We emphasis the quality of the equipment in our personal experience and the factory support we enjoy. We stress regular maintenance by qualified technicians and let people know things will fail and we will be there to fix them when they do. 

Extended warranties are a very high profit center for many appliance retailers. I tell my customers; just say no. 

Comment by Hans Joachim Preiss on August 6, 2015 at 8:56am

You're touching a sore spot with this topic, Christopher. I think you're right on with your story. Consumer protection should put an end to manufacturers' warranty policies that aren't worth the paper they are printed on.

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