PAY ATTENTION TO TERMS

For the most part, D. Brian Baker, president, Custom Vac Ltd., Winnipeg, Manitoba, Canada, doesn’t mind OEM warranties. He buys the 10-year parts-and-labor warranties from the manufacturers for all new installations, registers the equipment himself, and fully explains the terms of the warranties to homeowners. Taking these steps, as well as installing the equipment correctly in the first place, has resulted in Baker having virtually no warranty issues involving his own installations.

The key is for contractors to thoroughly understand the terms of the warranty — everything from the (usually short) time period in which the product has to be registered to the proof of regular maintenance needed if the equipment fails. “We always register the equipment ourselves and then send the homeowner a copy of it with the invoice,” said Baker. “If you leave it to the homeowner, it will never get done. This is a big problem in new construction, because the house doesn’t always have an owner when the equipment is installed. In those cases, we usually hold the warranty papers until the sale of the home, just so we can put the new owner on the paperwork.”

Once the product is registered, homeowners have to understand their new equipment needs to be serviced regularly in order for the manufacturer to honor the warranty. “We explain to all our customers that if they don’t have their unit cleaned and maintained regularly, the manufacturer can deny that warranty,” said Baker. “As an industry, we do a really crappy job of educating consumers about their responsibilities regarding warranties and how they need to make sure their equipment is properly maintained.”

One of the problems is that homeowners do not understand that, with few exceptions, OEM warranty terms and conditions are limited, meaning they cover components only, said David Sewell, a retired HVAC consultant in Baltimore. “In my experience, successful contractors ensure the end user is made aware of the differences between an OEM limited warranty and their own extended warranties and/or guarantee(s) and use this information to differentiate themselves in their
markets — ultimately to gain and keep new customers.”

Making sure customers understand what is included under the warranty can be difficult because, “no matter how carefully you document what is covered, all homeowners hear is ‘everything,’ said Martin Hoover, president, Empire Heating and Air, Decatur, Georgia. “All the exclusions and conditions put us in an uncomfortable position as we typically treat our customers better than the warranty companies do. And, if there is a claim, most manufacturers pay a ridiculously low amount for the work performed.”

ROOM FOR IMPROVEMENT

In fact, one of the most common complaints about OEM warranties is that they don’t cover all the costs contractors incur when performing this work. “The amount of compensation received for warranty work is not even close to covering the contractors’ costs,” said Bob Keingstein, president, HVAC/plumbing division, Boss Facility Services Inc., Ronkonkoma, New York. “Look at the standard compressor warranty. The manufacturer provides a replacement compressor and generally nothing else — no refrigerant, brazing materials, rigging, freight, administration costs, labor, etc. The contractor is left to pay for it through their own warranty reserve in the first year of operation.”

Many manufacturers have also started implementing a $50 or $75 processing fee for any claims, said Hoover, which further reduces profitability. “This new procedure just further erodes the benefit of the warranty to the consumer and the contractor.”

Baker has no issue with the amount he is compensated for warranty work on others’ installations, and he is often contacted by manufacturers to fix or modify systems in order to make them work properly. What irks him is the fact that those who install systems that subsequently require warranty work due to poor installation can still buy equipment at the same price that Baker pays. “We are such a low-maintenance company because we have no claims. We’re not wasting one minute of the supplier’s time filling out paperwork or processing warranties. They should be happy to have us, but they’re not. They really couldn’t care less because they’re looking for the guys who move lots of volume, and it’s sad.”

Ultimately, everyone ends up paying more for equipment since manufacturers roll the cost of warranty repairs into the price of the systems. “We’re all paying an inflated cost on the products, because that’s what they’re forcing us to do,” said Baker. “And, manufacturers couldn’t care less about reducing warranty costs, because it’s all built into the price.”

To solve these problems, Baker would like to see manufacturers and distributors take a more hands-on approach to ensure installations are done correctly by qualified contractors. “Many years ago, we used to have to fill out a commissioning report on every system we installed. If we did not fill out that form and return it, manufacturers were not going to provide a warranty. Today, they don’t care. The biggest reason products fail is that they’re poorly installed, and manufacturers just respond by charging more for the equipment. Everybody pays more, because they’re paying for the warranty.”

Publication date: 7/13/2015

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