Why Do Warranty HVAC Repairs Seem to Cost So Much?
My HVAC unit is still under warranty but my service company just told me it would still cost a lot to fix. Why is that? Shouldn’t it be free? We’ll explain the economics of HVAC warranty repairs in this helpful article.
We don’t hear it all the time, but we do hear it a few times a year, and it’s important to make sure homeowners understand what goes into the cost of a warranty repair. (Just as a side note, we get it. Without a full understanding of what goes into a warranty repair it might seem expensive.) We hope this article will help you understand everything that goes into a repair so you’ll appreciate our service and our fair and reasonable pricing.
Why is there a charge at all?
You might be used to auto warranties where problems within warranty won’t cost you anything. Your factory auto dealer is still charging for the work, but they are invoicing the manufacturer for the work, so they still get paid. HVAC dealers do not get paid anything from HVAC manufacturers for warranty repairs, they only (eventually) get reimbursed for the cost of the parts, so let’s walk through what the costs are to make a warranty repair.
Warranty Repair Step by Step
- Diagnostics – Diagnostic charges for most companies are $95-$125. This cost really does nothing more than cover a small contribution to overhead, the cost of the person answering the phone, the cost of filling the gas tank (and auto wear/tear), and the first 20 minutes of the service call.
- Part Ordering – Once a repair is identified, the part has to be ordered from a distributor. They don’t all have ecommerce sites, and there is often a significant hold time (especially during hot and cold days), so it costs us money to be on the phone making the order.
- Part Pickup – When the part is located, we have to go get it. Maybe it’s 20 minutes, from wherever the tech is coming from, maybe it’s more. Once you get to the counter, again you’re waiting. Maybe it’s 5 minutes, maybe it’s 20.
- Drive Time – Once the part is picked up, we still need to get back to your house. Unless you live near downtown where most of the distributors are located, it’s going to be at least 30 minutes more drivetime to get back to your house, not to mention any other coordination at the office for scheduling etc.
- Installation – Of course once we have the part it will take some time to install. Sometimes it goes easily, sometimes it doesn’t. Rusted bolts, broken wires, secondary problems. These things all create complications we have to allow for.
- Secondary Warranty Reserve – We have a great reputation because we stand behind our work. What happens if a second unrelated problem pops up within a few days or weeks of the repair? Will you accept this is a new problem and agree to pay another diagnostic and another repair cost? Of course not — which means in these situations we may spend a lot more money repairing your hvac system on our dime.
- Warranty Part Filing – We don’t just get a magic check from the manufacturer. We have to bring the part back to our warehouse and store it for 60-90 days (depending on the manufacturer). We have to file a warranty claim and then we have to wait 30-45 days to get paid back for the part (assuming we were able to properly jump through hoops that are not designed to make it easy). All this costs time and money.
- Overhead and Profit – Call us crazy, but we’d like to make a small profit at the end of the day. It costs a huge amount of money to pay for insurance (business insurance, health insurance, auto insurance), facilities, software, general and administrative expenses, etc, etc. At the end of the day, we make a tiny profit on every $100 of work we do. Like $5. Lots of work for $5 🙂
As a summary — let’s pretend that the repair goes smoothly and the actual repair takes 30 minutes to 1 hour to complete. Including diagnostic, there are approximately 4-5 hours of work to support that 1 hour repair. If the total repair costs $500, at the end of the day we might make $25 in profit. If you don’t think that’s fair and we should charge less — we don’t agree with you at all. We of course want your business, but we can’t work at break-even or at a loss and continue providing great service. It’s certainly understandable if you want to call around, but you’ll find our prices are very reasonable for the high quality of service we provide.