Unlike other purchases, an HVAC system comes with two different warranties. One, through the manufacturer, covers miscellaneous parts, the compressor and the heat exchanger. This warranty is independent of the contractor. In other words, any service provider can procure the warranty parts from the manufacturer, and provide service for your system.
The other warranty is for the labor portion of the installation and will only be honored by the installing contractor. Generally the manufacturer’s parts warranty is longer, and so you are free to use any qualified contractor once the original contractor’s labor warranty is complete. (of course, if you were happy with the installing contractor you will likely use them for any parts warranty issue after the labor warranty is up.) Be aware, however, that many contractor’s policy is that any labor warranty in effect is voided if another service provider works on the unit during the labor warranty period.
Over the last several years warranties have become longer. For years, the standard warranty was one year. It is now common to see warranties as long as 12 years, or longer. In considering a purchase with a long warranty it’s worth noting really what a warranty is, and how it serves you.
A warranty is an assignment of risk; specifically who assumes the risk (and cost) of repair or replacement. While they may seem free, and often are presented as free, warranties are never free, ever.
We’ll explain. ok? Whether a manufacturer is making furnaces or iPods, they know a very small percentage of them will fail. The cost of repairing or replacing them under warranty is a normal cost of business like rent, or materials or labor and so the business has to account for this normal cost.
And so even the initial price of any product has a very small sliver attached to the sales price to account for this cost. In other words, 100% of the customers pitch in a very small amount to allow for the replacement or repair of the less than 1% of customers who’s product fails.
There’s absolutely wrong with that. It’s “risk-sharing”; everyone pitches in a tiny amount for the benefit of the very few who suffer a loss. If that sounds like the principles of insurance, you’re right. And no one is better at the math needed to figure out what that tiny contribution the 100% needs to make is.
The point is simply this: warranties are never free. Ever.
If you’ve bought an electronic gadget recently you likely have been asked by the friendly cashier, “I can extend the manufacturer’s warranty from 1 year to 3 years for $14.95. Would you like to buy extended coverage?”
If you said “yes”, you essentially bought a small insurance policy. You gladly forked over $14.95 to let someone else assume the risk of the product failing. Of course, your $14.95 won’t buy an iPod, but a million other people said “yes” also, and so this pooling of risk will get you a new IPod if yours fails.
As we’ve said, there’s nothing wrong with extended warranties. There is a legitimate value in paying someone to assume your risk.
We’d like to simply make you aware of this process so you can decide whether this extended coverage represent a good value to you. The insurance industry is active in the HVAC business as well. The sales pitch goes a little like this: “You can differentiate yourself by offering longer warranties than your competitors. For a premium payment you can extend out the labor warranty to 12 years or more. And by paying for extended coverage, you have no risk. If there is a failure after your normal labor warranty, you simply bill us. Your customer gets no bill, and you don’t get stuck not getting paid.”
Of course, this premium payment is a normal cost and so it is built into the price that you—- the customer—- pay. For the third time we’ll repeat: there’s nothing wrong with that. If the total price you paid seemed fair, and represented a good value, and you’re happy with the extended warranty than all is well.
Our only objection is that we like the cashier asking us if we want extended coverage. We want to be able to choose. The alternative is to simply make the warranty 3 years—–and build the additional $14.95 into the price. When the extended coverage is lumped into the overall price you can’t see the true cost of the coverage; the additional “insurance.” There is often a perception that it’s free. But a warranty is never free. We don’t mind that the initial warranty cost is opaque. But if you’re offering us extended coverage we want to know what that cost is so we can choose to buy it or not.
At United Heating & Plumbing we’ve taken the approach that the cost of extended warranties should be clear and that you—the customer—-should be able to choose this additional coverage or not. Our standard labor warranty is 3 years. Many contractors still have the standard warranty of 1 year. We feel comfortable in assuming an additional 2 years of risk because we believe our processes produce much fewer failures. In other words, we provide a more reliable installation.
At the outset of this article that the manufacturer has a warranty of their own, and that warranty will be clearly outlined.
Like an increasing amount of HVAC contractors, we also have extended warranties. But we will break out this cost, and outline the coverages so you can decide for yourself if it represents a good value to your family.