Financing on an Upswing

December 18, 2006
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With the enactment of 13 SEER minimum efficiency levels for air conditioners this year, what was once a big-ticket purchase got bigger. As the size of the units has increased their installation costs often do, too; the installation sometimes includes renovations of the home space to accommodate the new indoor unit.

The increased installation cost, coupled with the higher unit cost, has led to what some have called a resurgence of HVAC consumer financing. HVAC consumer financing, offered through manufacturers and suppliers for contractors to offer to consumers, has been around for years. Its benefits have been well-established, but now their usefulness is growing still more.

FINANCING BENEFITS

According to Matt Michel of Service Roundtable, in his 2005 seminar, The Comanche Guide to Selling With Financing, “By offering financing, you help people buy.” Breaking the cost down into monthly payments, rather than the total lump sum, helps customers envision how they can pay for a big-ticket purchase. And for a few dollars more, they can see their way clear to a few more bells and whistles - perhaps an air cleaner, thermostat, or humidity-control unit.

“Selling with financing will help you close more sales,” he said. “It will help you close larger sales. … Moreover, when you sell with financing you are doing your customers a favor. You are helping them afford the products and services they want.”

According to Michel, “Consumers who finance HVAC purchases spend 37 percent more on average than consumers who do not.”

Michel stated that up to 69 percent of consumers paid for their HVAC replacements with cash or by check. The remainder used credit cards, manufacturer financing, home equity loans, an independent finance company, credit union loans, or a loan from a family member.

Because of the need to finance more-expensive unitary installations, contractors now have an increased interest in offering manufacturer-based financing. For some dealers, the number of manufacturer-financed HVAC purchases is considerably higher than those paid by cash or check.

THE GROWTH OF FINANCING

Air Comfort Solutions, Oklahoma City, is one such contractor. Company accountant Barbara Bell said that roughly 60 percent of all of the company’s system sales are made using GE Consumer Finance (now called GE Money; see page 17) through their unitary manufacturer, Bryant. That’s a conservative estimate, she said.

“We’ve been really happy with the financing,” Bell said. “There is fast approval and fast pay. We’re pretty tickled with it.” Credit applications are faxed in on the spot, and approval (or denial) is received almost immediately, she said. It typically takes three days for the funding to come through.

“Comfort Credit is the Bryant preferred financing program for our dealers, through GE Consumer Finance,” said Valerie Baldwin, manager, National Dealer Programs and Promotions, Bryant Brand Team. “We find the average sale with Comfort Credit is 50 percent higher for the dealer than the average cash sale. In addition, our dealers benefit from free advertising as their company name and phone number is on the customer’s credit card and monthly statement.

“The credit approval is fast, and consumers are getting approved in the home at a rate greater than the national average of approvals,” said Baldwin. “Using retail financing provides other benefits to dealers: It adds value to their offer, provides them a competitive edge over other dealers not offering it, and allows a dealer to quote payments vs. price which consumers are familiar with and used to utilizing in day-to-day purchases. This method also allows dealers to upsell to higher-efficiency equipment, entire systems, or add-ons such as IAQ or generators.”

MANUFACTURER PROGRAMS

Most unitary manufacturers have consumer financing available through their dealer. (Please contact your distributor or manufacturer for details.) A couple of the latest trends among them have included ways to keep the consumer’s brand and dealer preference in the future. Baldwin, for instance, said Bryant is encouraging its dealers to offer financing for service. “One of our initiatives is to get our dealers to use the financing on service calls,” she said, “because a three-month, same-as-cash transaction costs the dealer 0 percent.”

Lennox’s Home Climate Credit Card Program is a partnership between GE Money Bank and Lennox. To apply for a Home Climate credit card, the customer can access an online credit application form or do so through a local Lennox dealer. The card features competitive interest rates, no annual fees, no prepayment penalties, low monthly payments - and an open line of credit for future purchases.

Rheem Manufacturing’s Heating and Cooling Division’s 2006 “Turn Up The Heat” fall promotion included time-sensitive KwikComfort® consumer financing to help boost dealer sales through the slower fall season. The promotion ran Sept. 15-Dec. 15. It offered 12-month, no-payment, and deferred-interest terms to homeowners purchasing any Rheem or Ruud heating, cooling, or IAQ product.

Of note, sales that included a Protection Plus® extended service plan during the three-month period were available for 1 percent to contractors approved by GE Credit to offer the financing. A 3 percent rate was available when the extended service plan was not included.

“Homeowners are increasingly interested in maximizing system efficiency, especially with today’s rising energy costs and more costly home comfort systems,” said Frank Fodge, marketing operations manager, Rheem Heating and Cooling Division. Homeowners who may have been postponing their purchase of a new home comfort system may find that financing “provides a painless way to afford a high-efficiency system and begin lowering utility bills almost immediately,” he said.

“As a result of these super-low, attractive financing options, we expect many homeowners will be able to step up to more-advanced, more-efficient home comfort systems than they may have thought possible and still be within their budget,” Fodge said.

Sidebar: The First Full 13 SEER Year

As the change from a 10 SEER to 13 SEER minimum efficiency rolled on, The NEWS kept track of the industry’s progress throughout 2006.

Feb. 13: “13 SEER Equipment Takes a Bow”: There were numerous 13-plus SEER product introductions at the 2006 International Air-Conditioning, Heating, Refrigerating Exposition.

Feb. 27: “Quality Installation and Maintenance Is Efficiency Issue”: Over- or undercharging the system can affect operating cost, system capacity, humidity removal, system operating life, and home comfort.

April 10: “Facing the Mismatch Problem” - Why would anyone consider replacing one coil and not the other? The 13 SEER transition brought the ongoing mismatched coil debate to a head.

April 17: “Sound Selling Process Needed in Post-13 SEER World”: Getting the decision-maker to agree that the benefits are critical for a successful sale.

May 15: “Discussing the Impact of 13 SEER”: John Turnage, Umpire Technologies Group, said, “Improperly installed 13 SEER equipment will not deliver 13 SEER efficiency. … duct leakage is an efficiency killer.”

May 29: “Where Are the One-Ton Units?”: Having a hard time finding systems in the 1-ton, 12,000-Btu range? There are still some split systems using micro-channel coil technology, plus appropriate ductless units.

June 26: “A Market Adapts to 13 SEER Changes in 2006”: Since everyone is selling 13 SEER-plus units, dealers have to differentiate themselves with other strategies. “Going Above and Beyond the Call of Duty”: Many manufacturers have gone beyond the mandate to produce units with ratings of 18, 20, and even 23 SEER.

Aug. 7: “How High Will SEER Go?”: Component suppliers and unitary manufacturers are developing equipment with higher SEER ratings.

Sept. 4: “Start an In-House Training Department”: One company set up a training department “partly because the information we received from other sources was incomplete, limited to their particular application, [or] just plain incorrect.” “Manufacturer Training Adapts to New Needs”: One of the most significant changes in 13 SEER training came from the reintroduction of TXVs.

Oct. 23: “Keep it Simple to Upsell”: Contractors who made the decision not to stockpile 10 SEER units seem to understand the need for tried-and-true upsell techniques. “Where Did My Sales Go?”: Top-performing contractors said they’ve seen the need to enter a new realm of professional selling in order to differentiate themselves.

Nov. 22: “ARI Reaches out With Consumer Information”: Replacing both the indoor and outdoor coils is “the only way to offer a customer an ARI-certified matching system,” said Drew Cameron, HVAC Sellutions. “Customers Don’t Know What’s Best for Them”: Sometimes too much information can be almost as bad as not enough. Sometimes the best option is not to offer too many options. “Tight Spaces Require Creative HVAC Solutions”: Many contractors had to find ways to install larger indoor coils in tight spaces such as attics or main-floor closets.

Sidebar: Consumer Financing Through GE Money

KETTERING, Ohio - GE Consumer Finance’s Retail Sales Finance unit announced that is changing its name to GE Money - Sales Finance. The business unit has achieved double-digit growth over the last four years and has doubled its assets in just the past two, reaching $16 billion, according to Glenn Marino, president and CEO of GE Money’s Sales Finance unit.

GE Money’s Sales Finance division helps business owners increase sales and profits by providing extended financing, installment lending, revolving credit, private label credit cards, bank card programs, and other types of financing to independent and regional retailers, dealers, manufacturers, service providers, health care professionals, and consumers.

“The new name reflects how we’ve evolved beyond the retail space,” said Marino. “We’re broadening our markets, channels, and product offerings.”

HVAC work is a specialized financing area for GE, “from simple upgrades and retrofits to complex replacements,” the company said. Its HVAC financing makes a range of promotional offers available, with “the least amount of paperwork in the industry,” the company said.

When a dealership is enrolled with GE Money, the dealer can offer customers a Climate Select credit card branded with the dealership’s name.

For more information, visit www.climateselect.com.

Publication date: 12/18/2006

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