To Repair or Replace: That Is the Key Question

February 2, 2009
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Repairs have been on the increase for a few years. Emerson saw over a 30 percent jump in compressor replacement sales in 2006, which it attributes to the higher cost of buying a new system under the 13 SEER ruling. (Courtesy of Emerson Climate Technologies.)


The news regarding shipments of air conditioners and heat pumps is a little bleak these days. AHRI’s report from November showed that combined U.S. factory shipments of central air conditioners and air-source heat pumps were down 30 percent compared with the same month a year ago. For the year-to-date, combined shipments showed an 8 percent drop compared with the same period last year.

Given the current economy, it’s not surprising that shipments are down. Housing prices continue to decline, credit is difficult to obtain, and unemployment has reached a 14-year high. The end result is that many consumers may not have the money to replace broken air conditioners and heat pumps with new units and will instead be looking for repair options.

This may cause a shift in the way contractors do business because many have typically followed manufacturer recommendations to replace equipment that is over 10 years old. If there’s no money to replace the unit, then repairing it is the next best alternative. And contractors can agree that repair is preferable to not providing any service at all. Indeed, there was anecdotal evidence this summer that consumers were putting off expensive repairs and replacements altogether and simply buying room air conditioners to get through the warm months. That’s a trend that could be troublesome for contractors.

DETERMINING LIFE EXPECTANCY

Deciding whether to repair or replace older air conditioning or heat pump units in these economic times will certainly be a topic for debate around the kitchen table, noted Bill Cunningham, product manager - cooling splits, Lennox. “First and foremost, I would say that there isn’t a hard rule applied to every situation: Each individual situation stands on its own. I suggest that contractors become informed consultants in order to help the homeowner understand the impact of their decision. There certainly are scenarios where a repair makes sense,” said Cunningham.

Figuring out whether or not the unit should be repaired will vary based on the usage and maintenance of the equipment. Obviously, a properly maintained system will probably perform longer than one that is not. While manufacturers typically recommend replacing older units, a homeowner could conceivably repair a unit indefinitely if the components were available, noted Cunningham.

“However, that may not be the most financially logical decision,” he added. “Aging systems may not operate as efficiently as they did when new. A homeowner with an older system could expect a reduction of 30 percent or more in their utility usage by replacing their system with a newer, more efficient unit instead of repairing. In some cases, this could be enough to justify the decision to replace.”

Andy Armstrong, director of marketing, Unitary Products Division, Johnson Controls Inc., noted that while repair may be a viable alternative in some cases, contractors must consider each homeowner’s situation. “It may be acceptable to repair a system to meet the homeowner’s short-term needs. But in the long run, repairing a system over and over can be a recipe for disaster. Eventually, the repaired system will reach the end of its useful life, and the homeowner will have to invest in a new system.”

When faced with the repair versus replace situation, HVAC contractors should compare an existing system’s current and future operating expenses to those of a new high-efficiency system, said Armstrong. “In many cases, if the system is aged, and especially if the system has not been serviced regularly, the new system will provide significant utility savings that can be factored as a payback in a decision to replace.”

A system’s repair history should also be taken into account, as equipment with numerous failures or repair problems is not likely to just get better. “Too often homeowners continue to pour money into an aging system instead of looking at new system options,” said Cunningham. “Contractors need to educate homeowners on the health of the system and help them make an informed decision as to whether a repair is justifiable or if it is throwing good money away.”

When faced with the repair versus replace situation, HVAC contractors should help homeowners compare an existing system’s current and future operating expenses to those of a new high-efficiency system. (Courtesy of Johnson Controls Inc., Unitary Products Division.)

REPAIR ALMOST ALWAYS AN OPTION

Scott Meenen, owner, G&S Mechanical Services, Baltimore, is one contractor who believes that repairing is almost always an option. His actions speak louder than words, given the 30-year-old GE heat pump he’s still maintaining in his own home and the 1986 work truck he recently converted to run on natural gas.

“I have better things to do that are much more interesting than ripping out equipment and putting in new systems,” said Meenen. “I’d rather repair in place, then move on to something more interesting. But I’m also not afraid of old equipment, and I know how to fix things. A lot of contractors either don’t know how or they don’t care.”

Meenen stated electrical problems are often responsible for cooling system problems. For example, he noted that components like contactors can wear out and motor-run capacitors can fail, sometimes causing motors to burn out in the process. All these problems can be repaired, and he hopes that other contractors will give customers that option as well.

“Unfortunately, I’ve seen where a wire will burn loose and cause a capacitor to be out of circuit, which causes the fan motor to be out of the circuit, and the customer is told they need a new system. That’s just theft to me,” he said.

So when does Meenen recommend that customers replace their air conditioners or heat pumps? The answer is almost never, but he will suggest it if a system is “rotted out and nasty.” But even then, a little TLC can do wonders. “I had a customer recently who thought his system was low on refrigerant. Turns out the indoor coil was filthy. It cleaned up well, though, and it cools just fine now. Another customer also had a problem with cooling, and it turned out the system was packed with dog hair. I cleaned it out, and the equipment is working fine.”

Repairing systems is also important to distributor Randy Boyd, president of AC Supply, Fort Worth, Texas. “My focus is on repair parts, which is why only 6 or 7 percent of my business comes from equipment sales. We feel that contractors should give homeowners the option to repair the unit that’s broken. Tell the customer it’s possible to replace the unit for this amount of money or fix it for this amount of money, and here are the parts I’m going to use to make the repairs.”

To that end, Boyd has put together component packages showing contractors the cost of replacing the compressor, fan motor, contacts, relays, and capacitors compared to the cost of buying a whole new unit. “Contractors need to ask themselves if they are giving the consumer the best value. My hope is that contractors will be good stewards of the industry and say, ‘Sure, I’d love to sell you a whole new unit, but it’s just a compressor.’”

Obviously some contractors are taking compressor replacement pretty seriously, because Boyd saw compressor sales double in 2006. He believes that trend will continue, especially as fewer homeowners have the money to replace an air conditioning or heat pump system.

The silver lining to this scenario is that it’s often easier to find parts to repair an older system than it is a new one. “All the new systems are going electronic. It’s a circuit board now, instead of a contactor, relay, and capacitor. In that case, you usually have to go back to the OEM to get that circuit board, because you can’t find an aftermarket part,” said Boyd. “Contractors need different tools, too, because one meter works on circuit boards from 1992 to 2002, but it won’t work on a circuit board after 2002.”

REPAIRING A CONTINUING TREND

While the economy is definitely a factor in deciding whether to repair or replace a system, repair has become much more prevalent over the last three years, said Brandy Powell, residential marketing, Emerson Climate Technologies. “We saw over a 30 percent jump in compressor replacement sales in 2006, and we wholeheartedly attribute that to the higher cost of buying a new system under the 13 SEER ruling. While we haven’t experienced another big jump in replacement compressor sales due to the recent tightening of the economy, the sales are holding steady, so the number of repairs is clearly holding up at this higher level.”

One of the drivers for the large increase in compressor sales is that when the 13 SEER mandate took effect, the cost of a new system increased to the homeowner. Quality contractors who installed new systems recommended that both indoor and outdoor units be replaced. Buying both pieces of equipment significantly increased the cost to the homeowner, so instead of making that large purchase, they often opted to replace failed compressors, as well as other components.

That trend continues today, said Joe Linsenmeyer, director of marketing operations and planning, Emerson Climate Technologies. “To a large extent, everything that can be repaired is already being repaired, so I don’t think we’ll see a big increase in the number of repairs, although it will continue to grow slowly over the next few years. Consumers just don’t have much money right now. Either they don’t have a job or their line of credit has been frozen, so even spending $1,500 on a new compressor may be a challenge. Chances are if they can’t afford $1,500, they’ll buy the $100 room air conditioner and wait until the economy gets better before buying a replacement system.” (Indeed, some evidence in California last summer pointed to lower sales of replacement a/c and heat pump units and a corresponding increase of window unit sales.)

A recent survey conducted by Emerson Climate Technologies bears witness to the fact that more contractors are now repairing systems that would have previously been replaced with a new system. When contractors were asked if they had experienced an increase in major a/c system repairs (motor/compressor change-outs) versus replacing them with 13 SEER systems, 42 percent noted they had seen an increase in repairs and 75 percent said it was due to the poor economy.

Some contractors may not prefer this trend, as it often takes a skilled technician a significant amount of time to diagnose the problem in the system and then repair it. As Powell noted, “Many contractors prefer to replace the older unit as opposed to repairing a major problem such as a failed compressor. The homeowner gets a newer system with a longer warranty, and the contractor may have fewer callbacks with a new system. Repairing often requires a skilled technician to spend more time troubleshooting the system, which may involve the changeout of the compressor and any other failed components. With a new system, many contractors believe the customers will be a lot happier in the long run.”

Another significant point Powell adds is that failure rates are as much as three times higher on compressors that have been changed out, due to the fact that there may be other problems in the system that haven’t been resolved. “Many times there’s something else in the system that caused the compressor to fail. If a technician doesn’t remove the root cause, then there is a significant increase in the probability of failure of the replacement compressor,” said Powell.

Linsenmeyer believes the on-going trend to repair rather than replace will ultimately create pent-up demand for new systems, and perhaps consumers will act on that need as early as 2010.

“You can keep repairing virtually forever, but this is not necessarily cost effective and really just delays the inevitable,” he said. “Many people who choose to neither repair nor replace their system might be sitting there with a couple of room air conditioners. Once they have the money to replace the system, they’ll see increased comfort and savings with new higher SEER equipment.”

Until that happens, it’s likely that contractors will have to shift their focus from installing new systems to repairing existing units. This could require a change in skill sets, as technicians who only install systems may require additional training on diagnosing problems and subsequently fixing them. Still, that investment in training might be worth it, as repairing a system opens the door to replacing it down the road when the economy recovers, and homeowners are once again in the market for new equipment.

Sidebar: Survey Says ... Repair

The NEWS thought it would be interesting to ask readers about the oldest air conditioning and heat pump systems they’re currently maintaining. The answers were surprising, but not entirely unexpected, given that almost everyone who responded said they were being asked to repair far more often than replace, given the poor economy.

On the commercial side, Will Reyna, owner, Four Seasons Heating, Air Conditioning, and Refrigeration, Killeen, Texas, said he’s currently maintaining a system from 1968 in an apartment complex, while Steve Russell, service manager, Shoemaker Air Conditioning, Tulsa, Okla., said he is servicing commercial systems that are over 46 years old.

Bill Mihalovich, president, Air Repair Mechanical Services, Newark, Ohio, said on the residential side, he’s maintaining a 1972 Lennox heat pump with a two-transformer system and 30-kW electric heat. “I am finding a lot of customers, both new and existing, want to fix older systems rather than replace them.” While repairs work most of the time, Mihalovich did have his hands tied with one customer who was already going on the third compressor after the prior one blew out the terminal. The customer was still reluctant to upgrade to a new higher-efficiency unit, due to the economy and job losses in Ohio, he noted.

Many others who responded to the survey added that they are maintaining residential heat pump and air conditioning systems that are two to three decades old. Bucking this trend is David Hutchins, president/owner, Bay Area A/C and Appliance, Crystal River, Fla., who said his replacement sales are actually up, even though he regularly services systems that are over 20 years old. “Usually it’s because of the wait time for an indoor or outdoor coil to be ordered,” he said. “In many cases, customers won’t wait weeks for a part.”

Publication date: 02/02/2009

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