More consumers want contractors to help them finance their home improvements, especially when it comes to their HVAC systems. That’s the key finding of a recent survey by Modernize, a service that connects homeowners with contractors. These results support the case that HVAC contractors should offer financing options to close more sales and sell higher-end equipment.

The Modernize survey found about 25% of respondents who indicated they would pursue financing for a home improvement project planned to do so through their contractor. That rose to 29% for HVAC improvements, said Cassie Morien, Modernize’s senior content strategist. Cash remains the most common way consumers pay for home improvement projects.

Those numbers are for people who plan their projects. Most HVAC projects are unplanned and usually occur when there is a problem. What seems like a simple issue can quickly turn into the need to replace an entire system. This creates an unpleasant financing situation for the consumers, who are suddenly looking at a large, unexpected bill. Even for those with the means to pay, it creates a disruption.

“Whether the customer has the funds on hand or not is not really the issue,” said Joel Cannon, senior vice president of sales and marketing for EnerBank USA. “It’s really the unexpected nature of the expense.”

Only 13% of consumers consider their financing options before meeting with a contractor, the Modernize study finds. A third will do so after they learn the cost of the repair or upgrade. Morien said that’s why contractors need to come prepared.

“We tell contractors that it’s really an advantage to come armed with that information as early as the first call,” she said.


Lessening the Sticker Shock

Doing so lessens the sticker shock many consumers feel when they find out the cost of a project, Cannon said. They feel more comfortable knowing they have a financing option. Cannon recommends including the fact a firm offers financing in the marketing materials. It should also be brought up in the scheduling call and at the start of the first visit.

Modernize recommends homeowners speak with at least three contractors before settling on one. Offering financing can differentiate an HVAC contractor from the competition, Morien said.

“If you don’t have a financing partner, now is the time to look at one,” she said.

There are a few options that are especially appealing, Cannon said. One is a deferred payment. This is for consumers who could pay with cash, but prefer to wait.

The other is a low APR with monthly payments. With the rise of subscription-based services, many consumers think in monthly payments these days, so this appeals to them. Of course, the low APR requires the HVAC contractor to essentially buy down the rate. Cannon points out that expense is often the same or less of what a contractor would pay for credit card swipe fees.

The best way for an HVAC contractor to budget for this cost is by viewing financing as part of the overhead, like the light bill or paying for insurance on trucks, Cannon said. He recommends taking the average cost of financing and dividing that amount by half and adding that to every job. This allows an HVAC contractor to offer financing without sacrificing margin.

Offering financing also means an HVAC contractor can offer more options to the homeowner. Cannon said many of EnerBank’s partners use a good-better-best system. They offer one system with a certain same-as-cash or low-APR offer, another more expensive option with longer terms or a lower rate, or a high-end option with the longest term and lowest rate.

Some HVAC contractors may feel uneasy discussing financing, much less to move the customer into a more expensive product. But Morien said this actually benefits all parties. The higher-end units often provide more comfort and use less energy.

“That really becomes the best homeowner experience for all,” she said. “The contractor is getting a higher paying job and the homeowner is getting longer-term savings and feel really confident with the product they went with.”