How will you’re local conditioning company will process your air conditioner’s warranty? Get a peak “behind the curtain” on exactly how we structure our AC company’s processes and a transparent take on what an AC contractor thinks about the strengths and weaknesses of a typical AC warranty.
Don’t forget to subscribe to the show on iTunes or Stitcher to get automatic updates
Links & Items Mentioned In This Podcast
- Ask us a question by visiting kalosflorida.com/questions and be featured on our next episode!
- What is included in a typical air conditioning warranty
- Parts warranties vs. Labor warranties
- Issues and misconceptions about AC Warranties
- Specific issues to air conditioners in Florida
Do you have questions? We can help! Fill out the form below:
Hello, hello! Welcome to the second episode of Kalos Radio. I’m your host, Sean Blackburn. We are so excited to have you guys here with us. We appreciate you tuning in and we’ve got a lot of content to get through today so we’re going to jump right in here.
Understanding any warranty can always be tough especially when you don’t know a lot about the product to begin with. Warranties on air conditioning units are no exception. Recently at Kalos, we’ve had quite a few questions on what an air conditioning warranty covers, what it doesn’t cover and what are the benefits to having it at all. We sat down with our co-founder, Bryan Orr, and our service manager, Nathan Orr, and they’re going to walk us through some of these questions that you guys have submitted to us and we’re going to go over those directly with you guys today. Make sure you listen all the way until the end. We’ve got a unique way for you guys to submit some questions in case you have any more so we’d be glad to have you guys know how to do that and get them in here. Without further ado, here we go.
Bryan Orr: We’re going to be talking today about the warranty issue that exists in the air conditioning industry. We are running into it more and more as we move forward so let’s start by just talking a little bit about what different types of warranties there are on air conditioners and why the issue exists in the first place.
Nathan Orr: Pretty much with air conditioning or basically anything, you have two warranties that were combined together to present a complete warranty where everything would be free which would be where both the parts are covered and the labor so effort of putting in the parts is covered. Pretty standard warranty on that would be 10 years for something like that for the manufacturer on all of their parts so every component is covered. But by covered, they don’t mean that they cover anything except saying, if you file over our paperwork, we will ship you a specific part that you have diagnosed as failed and credit you if we agreed that it was failed.
Bryan Orr: Let’s first hone in on that. There’s that type of warranty and then the other type is what would be called a labor warranty. What is a labor warranty?
Nathan Orr: A labor warranty would be something that includes everything, all of the labor manpower necessary to replace that part. Technically, neither of those warranties cover things like backend effort or anything like that or any shipping cost or processing fees or smaller components necessary to affect the repair. Although a lot of companies end up just eating that cost.
Bryan Orr: All right. Let’s look at a typical situation and I think a lot of times the brand gets rope into it like, oh, this is associated with being a Trane or a Carrier or a Lenox or a Goodman or whatever, but my experience is that I don’t know that any of them have really different policies as far as how it’s handled practically speaking so it really doesn’t matter what brand air conditioner you have installed as far as what I’ve seen. Have you seen it differently?
Nathan Orr: No. I mean the industry standard seems to be kept sort of across the board. The only difference though would be is just the expediency with which they could get you your warranty parts is really the only difference that I’ve seen.
Bryan Orr: Right and that’s been my experience. I’m talking like I don’t know, but I know the answer to these questions as well, but it’s easier to do this as a conversation. Let’s give a scenario. Let’s say that we have a system that is three years old. It doesn’t matter what company, but the terms of the warranty was a one-year labor warranty and a 10-year warranty on all parts. What does that mean?
Nathan Orr: That means any parts on that unit, the manufacturer, if one was failed would be obligated to give you one of the exact same one free of charge, but it would be required at that point for somebody to find out what’s wrong which would not be covered and then install whatever it was wrong, file a warranty claim for whatever was failed and then install it.
Bryan Orr: I think the thing to clarify here is that regardless of manufacturer, when there is a part’s warranty, all the manufacturer does is provide the part if the contractor can prove that the part has failed and sufficiently fill out all the paperwork required to do the warranty claim. All of the additional expenses associated with the contractor doing all that work, the contractor can and should charge for because the part’s warranty is the manufacturer’s warranty correct?
Nathan Orr: Right that’s correct. The manufacturer is literally only warranting that specific piece that has failed. That is the only thing that they’re going to warranty on it.
Bryan Orr: Right so anything else required; the fuel, the overhead, the labor, the processing charges and sometimes even shipping, they’re not gonna cover that.
Nathan Orr: A common question that comes up is you have a part that leaked and so the refrigerant door or other materials have been lost because of that, is that covered? The answer to that is “no” because the actual materials themselves didn’t fail, they’re just no longer present. The only thing covered is the part. Even though it’s at fault, that’s just the way it works. That’s the industry standard.
Bryan Orr: I think that’s the gray area because the problem that we run into is the reality in what people are told and when you call, manufacturers sometimes are divergent. An example would be; we had a compressor that fails. In order to replace the compressor that has burn out, you have to do some additional steps. You have to install suction dryer and then return it and remove the suction dryer. You have to put in all new charge in the system in order to make sure it’s not contaminated and the liquid line dryer as well. There are these additional steps that are costly, but the manufacturer doesn’t cover that. The manufacturer just says the compressor has failed? Here’s the compressor and they hand it to us and now we have to, not only install the compressor, but we have to return the old one so physically, someone has to make sure that old compressor gets sealed up and returned. We have to make sure all the paperwork is done and the manufacturer doesn’t cover any of that. I don’t know any manufacturer that does. Do you?
Nathan Orr: No. It is one of those things that’s funny that they don’t because they have requirements of what they want you to do. If you ask them what should I do when the compressor burn out? They’re going to list all of these things that they don’t cover. That is just the way it is because why did it fail. They’re covering it under a manufacture defect warranty that as far they’re concerned, may not or may not have even been the cause of it failing and so that’s sort of their gray area. We cover a part that’s failed.
Bryan Orr: Yeah. The problem that we run into is a real common one so let’s talk about the most common scenario that we see. In Florida, we have tons of capacitor failures. I’m sure that anyone who has lived in Florida for more than five years or so on the house has probably either had a capacitor fail on the air conditioner or know someone who has had a capacitor fail on the air conditioner, just very, very common. The question is why? We don’t really know. We suspect it has something to do with our temperatures in combination with the fact that our power isn’t super consistent, but again, that’s all just guessing. They just fail all the time is what we know. We have this situation where even on newer systems, you have these capacitors that are failing. We go out to a house that’s three years old. Whether we installed it or whether someone else installed, it makes no difference. At this point, it’s outside of the labor warranty from the installer. It’s within the manufacturing warranty of the manufacturer. We go out and we find that capacitor has failed. What do we do? A capacitor is not an expensive part. It’s not something where the part itself cost a lot of money. The cost associated with installing it is mostly the installation and then testing of the system once you’ve installed it making sure that it’s strapped in properly and then testing everything, making sure it’s working so we charge. Our standard fee for a capacitor is $79. When you install this capacitor now, someone is going to say, okay, well, my unit is under warranty which is technically true. It’s under a part’s warranty, but the issue that we have is, is that the cost of doing the warranty processing, meaning returning the old part, getting the new part, filling out the forms, all that is greater than the cost of the part by the time you figure out the labor that it takes to keep track of all that and do it because human being has to do that in order for the manufacturer to give us a new part. The other problem is, is that manufactured parts are inferior to the ones that we install. They fail all the time and this is true. I haven’t found a manufacturer who installs a capacitor that I like so we use this USA made capacitors largely and they seem to do a little bit better. The issue comes down to this, what are we supposed to do. You as a technician, what do you normally experience as far as the pushback that customers have when it comes to the understanding of how this works with the part’s warranty.
Nathan Orr: The misunderstanding isn’t necessarily unreasonable especially if they had the capacitor replaced by you in the past previous to purchasing a new unit. The pushback is always harder if you were the one that installed it and so you installed it, 10-year parts, one-year labor, you had replaced the capacitors in the past for $79, they have one that fails two years into the new system, you come out, replace it and say that will be $79. Typically, people don’t think anything of it because $79 is not an expensive repair. It’s less than they were expecting so they’re fine. They get back later, they just put all their invoices together, while they do, they look back through, I had a capacitor replaced before. Let’s see how much that was. It’s $79. This is $79. Something is wrong. They must not have realized that I had a part’s warranty on this. They must just have forgotten that. I think typically where the aggravation comes from is that certainly, they feel like they should be charged less even if it’s a miniscule amount less, even if it was $77 as opposed to $79. They feel like there should be at least some reduction in cost because it has a part’s warranty. It’s typically where the pushback comes from. My parts warranty isn’t good for anything then. You sold me the system, you said that it’s a 10-year -old part’s warranty, used that as a selling feature, but now, you’re telling me that my warranty doesn’t do anything at all. It’s an issue where I’m very sympathetic to the concern. The problem is I feel the impetus to be really honest about what’s going on as opposed to kind of making up a story and saying, oh yeah, it’s under warranty and this is just the cost for XYZ or kind of tricking my numbers or whatever, making my regular capacitor more expensive so that way, the warranty capacitor looks cheaper or something like that. There are a lot of things you could do. Let’s give a scenario. Let’s say we installed a unit and three years goes by and they call us out at 9 o’clock on a Saturday and we go out there and we find that it’s a bad capacitor. We have every good quality capacitor pretty much known to men on our truck. We go to customer and we say it’s $79. The truth is, is that $79 is to pull our capacitor off of our truck and put it in. That’s it. Now, is that unfair? The truth is, is that if we were to go to the manufacturer’s process, here’s how it would go; we would say, okay, you have a bad capacitor, I’m going to order one from the manufacturer, they’ll ship it to me, I’ll come back and install it. The cost for that is going to be probably two hours labor by the time we get it and come back and do the warranty processing and everything. Now, your capacitor that would have been $79 if I would have just pulled it up the truck is now going to be about $160 and you’re not gonna have it fixed until tomorrow at the earliest. Who’s gonna want to do that? Nobody. The problem is, is that explaining that on every single situation is difficult because then the perception is well, you’re warranty isn’t worth anything. The truth is, is that it’s only on these cheap parts that it’s even an issue because let’s say that you had a motor module that was failed. We don’t keep motor modules on the truck because they’re kind of specific parts, but if we did, the cost of the part is quite expensive and so you’ll probably be paying $500 or $600 for that. It turns out that we can order it from the manufacturer. We can get it and it’s gonna be significantly less currently for the installation and processing and the motor module we’re charging, I think 185. The warranty does you a lot of good in that position.
Nathan Orr: That part would typically be somewhere between $400 and $600 just for the part. Installed with a mark up or anything, you’d be looking at somewhere around 700 bucks at least.
Bryan Orr: Right. That’s where you stand to really save with the warranty and so then the question is, is the warranty on the capacitor worth nothing? It depends on how you look at it. The truth is, is the only reason it’s an issue is because we don’t charge more than we need to for capacitors. If we charge a lot more for regular capacitors, then we could afford to market down and do the whole process, but the truth is, is that really, we are just factoring in labor. We’re not putting a huge markup on the parts and there’re a lot of questions that even are associated with that because sometimes selling a capacitor may only take 20 minutes by the time you install and test it. The truth is, is that we’re looking at averages when we do all this sort of thing. We have to look at what’s the average time to install and test.
Nathan Orr: There is also a cost of our warranty because anytime you do a repair, if the same problem occurs within a year, there is no charge whatsoever and so because a capacitor is a high-fail item, you’re installing and you also have to cover the number of times within a year if that capacitor does fail on average so it’s just a cost of doing business with a common-fail item.
Bryan Orr: Right. We have to factor that into our pricing, but from an industry standard standpoint, our pricing is actually quite low when it comes to the smaller parts. That’s really the issue is that you can do a mark up, mark down and kind of work the system in order to have fewer complaints. What we choose to do is just be honest about it that look, what we’re doing when we go to a system that’s three years old and it’s under a manufacturer part’s warranty, we’re just pulling a part off of our truck and putting it in and charging it for it and it’s a good part and we do a good job. We test it and everything is fine. It’s not expensive and the reason why we do that is because the other option going through all the hurdles, it would cost you more if we quoted it, that’s just the truth, it just would.
Nathan Orr: It’s an annoying thing that time costs money, but time costs money. That’s just the way that it works whether it’s a technician or somebody in the office. It doesn’t matter. If an actual human being has to do something, we do have to pay them.
Bryan Orr: Basically, the whole point of this recording is just to make clear our intentions. We want to charge as little as possible and still make our profit margins which our stated goal is to make 10% net profit and we’ve never done it to this point. I think our best year, we made like 4% in the service department. We’re really not looking to take advantage of anything. We do know about the warranties. We do use them whenever it makes financial sense to use them for the customer. Any kind of major repair, compressors, boards, motor modules, motors, laundry list, reversing valves, all kinds of parts that makes sense to go through the manufacturer warranty process and then just do it that way where you’re just paying for labor in order to get the part and install it. Like we said before, all the manufacturer does is just hand us the part and say, you do everything else and so we have to charge for what it takes to do everything else.
Nathan Orr: It’s just there is this sort of an idea of a break even with a system. There’s a cost which is probably about 140, 150 bucks, but if the repair is less than at going through the warranty process, it’s going to probably cost you more. That’s just sort of the way that it works. Once you break that threshold then it saves you money, but for these relatively minor repairs, annoying as they can be, there isn’t a great way of handling that.
Bryan Orr: Because the consideration isn’t just price, it’s also speed. The ability to do a repair right now is also a factor if it’s something like a capacitor. There are only a couple of parts like that. Capacitor or contactor, those types of things, but maybe a minor wiring repair, maybe a sequence. It’s really expensive small parts that are a quick win. They can get your air up and running right now versus having to wait for a factory part and so who’s not going to make that decision. The problem is what really gets sticky is when someone gets on the phone with the manufacturer. Again, this is regardless of the manufacturer. It doesn’t matter. You get on the phone to manufacturer and say, hey, I had someone else out and they charged me XYZ for this part and they’ll say, oh, that was under a part’s warranty. True, but they don’t tell you the whole story, the fact that they don’t bridge the gap in between actually finding the part that’s failed and getting the part back on that side. They’re not paying for any of that. They’re just handing the part over. As an installer, we factor into our pricing that first year of labor warranty where we do cover everything because the truth is, if something fails in the first year, more often than not, it’s probably a mistake. Something probably wasn’t done right. Who knows? But generally speaking, it’s some sort of error on the installer’s part. After that, the installer doesn’t have any responsibility to that equipment other than you try to enforce the manufacturer’s policy as much as it is physically reasonable for the sake of the customer.
Nathan Orr: Right. Basically, what it comes down to is when someone gets on the phone with the manufacturer. They don’t care if the provider loses money. That doesn’t matter to them at all because while we are their customer, some of the time we’re their customers and I’m sure servicing equipment that we don’t even sell. They don’t really have any obligation to make us look good so all that they’re going to try to do is make themselves look good which is fine.
Bryan Orr: To look at and essentially, they’re just looking at the terms of the warranty and they’re going to read back the terms of the warranty. They help you understand what’s covered and what’s not covered, but they don’t help you understand the actual cost associated with a contractor doing work because that’s the thing. It’s not that we’re trying to make a windfall profit on anything like this. It’s that we’re trying to not lose money. That’s really in our business and in most small businesses. You just can’t lose money doing things. You can’t do anything consistently if that loses money without having to deal with that at some point. Warranty is a huge issue in our industry and it’s getting worse because we have this issue with capacitors. That’s the biggest one. There’s been a couple, but most of them are related to capacitors and the complaint is always the same. Why am I paying the same as someone who has a non-warranty system for this capacitor and the answer is because if we did it under warranty, it would be more expensive because the cost of doing all that stuff that we’re supposed to do is relatively great.
Nathan Orr: Yes.
Bryan Orr: I’m glad you’re with me. As always, if you have any questions about that, the best way to get a hold of us is to email us at firstname.lastname@example.org. That’s the best way because everybody in the office gets that and then we will be happy to respond to you. Thank you so much.
Sean Blackburn: All right so there you have it. Thanks guys! We really appreciate you guys tuning in today and we hope that helped clarify some of the questions that you had. We realized that there might be some specific things that you guys might have questions on so always feel free to give our office an email at email@example.com.
What we’ve actually got today is something that I’m pretty excited about and we’re gonna have links to this in the Show Notes down below. But we’ve actually got a way that you can be featured on the next Kalos Radio podcast. Now here’s how you’re going to submit your questions that you might have. Head on over to www.speakpipe.com/kalosservices. What you can do is you can actually take any computer, laptop or possibly even mobile phone and you can leave us a voicemail and you can be featured on the next Kalos Radio podcast. Feel free to include any questions about warranties that you might have or what you can do is ask about anything air conditioning, pool heating, electrical, whatever questions you might have, we’ll make sure that we try to answer it. We hope that you guys find that to be an interesting and cool way to kind of interact with us on the show. I’m really excited about seeing how that plays out.
Once again, thanks for listening and we hope that this has been another example of how we provide Simply Great Service.
More questions? Make sure to sound off in the comments or leave us a Voicemail. If you do, you might end up on our Podcast!