When you face the reality that your HVAC system won’t last forever, or it’s already bought the farm, the best thing you can do is make sure that you take your time and make a good purchase — getting the quality and the price that you want. We have written several articles on choosing the best equipment, choosing the best contractor, and a variety of other important things to consider when purchasing a new HVAC system (link to main center). This article will help make sure that you negotiate like a pro and get a great deal and a great long-term relationship.
Figure Out What You Need
You’ll find that every company you talk to has their own tactics for getting the sale. Some will go for the big sale — telling you that you need to replace all your ductwork or do other major modifications including air purification, etc. Other companies won’t seem to take any time with you and just offer a price and run out the door. Your ideal company will take the time to listen to you and understand your needs and the needs of your home for optimizing comfort and efficiency. When you feel you are talking to an expert that has your best interests in mind, work with them to determine exactly what you need and don’t need. This should become the basis for the system you are asking everyone to quote out.
Get Several Estimates
This isn’t new information. Since the beginning of time the common wisdom is 3-5 estimates. Realistically there is nothing wrong with that, but it’s definitely time consuming. If you have someone you trust, then you can get away with just getting one backup estimate to double-check the numbers from the person you trust. Even if you don’t get a second estimate, it never hurts to tell the company you are working with that you are getting several estimates. That alone will help to make sure your pricing is fair.
Knowing What’s a Fair Price
The first key to negotiating is knowing what a fair price is. Establishing a fair price for an HVAC replacement is a little more difficult than pricing a car or a new TV. We’ll help you figure out a fair price by outlining the costs that would go into a typical system replacement. We’ll use a “split” a/c and furnace installation for example.
|Cost of Sales||$500||$4,400|
|Misc Supplies and Consumables||$100||$4,900|
|Price Including Gross Profit||45%||$8,083|
You’ll notice that the price at the bottom includes a gross profit of 45%. Most contractors need to hit gross profit margin averages of between 45 and 55% to make an actual profit and stay in business. That being said, during certain times of the year — contractors are willing to reduce their margins a bit to keep their crews running and the revenue flowing.
The Actual Negotiation
Get yourself revved up and spend 20 minutes in front of the mirror repeating: “I’m a strong, powerful negotiator and I will get the best deal.” Only kidding.. I mean you can do that if you want to, but I doubt it will help. However, it is important to understand that negotiating doesn’t make you a bad person, and in this industry it’s almost expected.
You’re ready to negotiate when you have defined your project and have a list of exactly what you want, something that looks a bit like the following:
Outdoor Equipment Model
Indoor Equipment Model
Description of Ductwork Needed
New Equipment Pad
1 Year Labor Warranty
Additional Job Details or Accessories
Once every company knows exactly what you’re looking for you can get quotes that compare apples to apples. Or at least as close to it as possible. Now you can look at the price differences between companies and get a feel for the spread. In a perfect world the companies you feel will have the best service also would tend to have the highest price, but that’s not always the case. HVAC dealers get different price breaks from the equipment manufacturers, so better companies might also be able to get you better deals. When you decide which company you would ideally like to work with, now it’s time to horse trade. We suggest a simple approach such as — “I really like your proposal, but from my research and other quotes the price seems a bit high.” “I’m going to be making a decision later this evening, and I’d like to have your best price before 5:00.” It is likely they will want to feel you out as far as what price will work, but the best negotiating tactic is to be clear that you are going to make a decision on a variety of factors, but you’ll need the contractors best price to do that. Give them a little time to come up with it, but normally the price you’ll get back is the lowest price they are willing to do it for. It may not be the lowest price out of all the quotes you receive, but better contractors know their value and know their cost structure and won’t give away their work. A few dollars extra for the right company will often be worth every penny.
Not Going Too Far
It’s important not to be too aggressive in your negotiating. As we pointed out earlier, it isn’t quite like buying a car where once you drive off the lot you don’t have to see the dealer again unless you want to. A big part of buying an HVAC system is the installation, the configuration and the support. You may get a good deal by negotiating down to the last nickel, but if you erode the goodwill with your contractor if anything comes up in future they aren’t going to be too excited about helping you with it, and in fact, they might be looking for a way to stick it to you later.. Get a good deal, but also be fair. Remember you’re building a relationship, not a transaction.
You’re now armed with a lot of inside information on how to get the best price on your new HVAC system so it’s time to go get em’ tiger. Make us proud when you flex your negotiating muscles. We have lots of other helpful information in our HVAC Replacement Center if you have other questions or concerns regarding your HVAC replacement project.