Residential HVAC warranties: Where is the value?
It’s important to understand manufacturer warranties and be able to identify how you can provide additional value to customers.
February 11, 2020 by Ian McTeer
You purchase a pair of pliers from your local HVAC supplier and discover the pliers don’t work for some reason. Regardless of whatever written warranty the tool may carry, the pliers should work as you might expect. Asking for and receiving a replacement tool at no charge is the basis of an implied warranty: the implication is the good should be of merchantable quality, it should function for its designed purpose and it should last for a reasonable time period.
It seems almost counter intuitive that a well-made product would even require a warranty: “buy my machine because it will never let you down,” a manufacturer could claim. Yet, there are so many components in modern HVAC machinery and controls that something could easily go wrong.
The adage commonly known as Murphy’s Law is a form of rubbish confirmation bias but its main tenant, “anything that can go wrong, will go wrong”, is firmly established in the minds of many consumers. Any given manufacturer would likely go out of business without a strong competitive product warranty well known to the marketplace.
Prior to 1975 all product warranties in Canada and the U.S. were very poorly defined leaving consumers in precarious situations far too often. It wasn’t uncommon to find the term “full warranty” in many product advertisements and documents. Consumers quickly found out that sometimes a full warranty might not cover any labour, travelling time, diagnostics, refrigerant or even shop rags. Shouldn’t a full warranty cover most, if not all, of those things?
Less dependable manufacturers were very aware that advertising a full product warranty might easily allow them a foothold in a very competitive marketplace. Ambiguous warranties created confusion and turmoil even destroying relationships between consumers and contractors.
What Happened in 1975?
While there isn’t really a direct upfront cost to offering a warranty, its value is really defined by how manufacturers or their agents act when a product fails. In 1975 the Magnusson-Moss Warranty Act (MMWA) was signed into law in the U.S. This bill created standards for written warranties, regardless of the industry, thus protecting consumers from the misleading or otherwise unscrupulous practices plaguing the market. MMWA requires that a “full warranty” means parts, labour, service and transportation of the product must be free of charge provided the consumer has performed any and all related duties within the specified timeframe of the warranty.
Limited Lifetime Warranty means a manufacturer will provide a replacement part(s) that failed due to a defect in manufacturing at no cost for the lifetime of the product. A subsequent purchaser may be entitled to the balance of the same warranty for a shorter time period since purchased by the original owner.
Limited Express Warranty is a written warranty that defines the length of time specific parts of a product will be covered for defects in material and workmanship under normal use and maintenance.
Starting in the late 2000’s some HVAC manufacturers opted for a registered warranty system. Left unregistered, the base limited warranty provides only five years coverage on specific parts (20 years on gas furnace heat exchangers) that fail due to workmanship and manufacturing defects.
A Registered Limited Warranty requires the warranty to be registered with the manufacturer within a set time period after start up (often 60 days) and the base five-year warranty may be doubled: parts go to 10 years, compressors in premium units might get 12 years of coverage, while a gas furnace heat exchanger gets a 20-year warranty once registered. Manufacturers want to collect installation information for not only marketing reasons, but for legal protection in the event of a product recall.
A registered warranty means the manufacturer can communicate directly with the end-user ensuring timely repairs can be made without relying on contractor installation records that may or may not be up to date.
Our Canadian provinces have individually harmonized the requirements of Magnusson-Moss into provincial consumer protection laws. As with the MMWA, provincial legislation does not require a manufacturer to offer a warranty only that any warranty offered must comply with current legislation. However, express (written) warranties are specific legal contracts that identify who is covered and what the company will do in the event of a failure. There are many exclusions, here are just a few:
- Limited warranties do require end-user input, the product must be maintained and not forced to operate outside its normal function
- Labour is rarely covered unless specifically mentioned in the contract and typically applies to certain parts and repair functions tabulated separately
- Filters, fuses, fluids, corrosion, abrasion and appearance items are often not covered
- Typically, no coverage for parts supplied by others, improperly installed parts, used parts or damaged parts
- Products exposed to flooding, fire, lightning, misapplication or serviced by unqualified personnel
- Transportation of goods, service calls or diagnostic time
- Products re-installed at another site
- Cost of regular maintenance
Manufacturers make further disclaimers such as the company will not be liable for any incidental or consequential damage and that the express warranty included with any product exists in lieu of all other warranties expressed or implied. Since the warranty is a contract between the manufacturer and the end-user, no other party can modify or nullify the terms and conditions; for example, a technician cannot void someone’s warranty for any reason. A technician could, for example, refuse to replace a part at no charge on an in-warranty unit citing any of the published exclusions contained in the warranty. The primary takeaway is that HVAC warranties cover defects in material and workmanship, that’s all.
Long limited warranties make consumers feel more comfortable buying a product, but HVAC service contractors would prefer a shorter time frame in order to profit from parts sales. Extending the manufacturer’s registered limited warranty to cover additional labour costs, for up to 12 years in some cases, could prove to be a beneficial sales tool thus providing the contractor with an additional revenue stream and revenue from part mark-ups that otherwise may not have existed.
However, historically speaking, extended warranties, especially those offered by third parties, have a less than stellar reputation given reports of provider bankruptcies and claim rejections. Indeed, the Consumer Council of Canada released a study last year and executive director, Ken Whitehurst, said, “they [consumers] don’t understand how it’s being sold, they don’t understand the complex agreement, they don’t understand how the agreements are financed and secured.”
Whitehurst goes on to say, “that many [warrenties], if not most of them, are of questionable value, but there are some that are of value in some circumstances.”
I’d argue that extended warranties sold through HVAC manufacturers do provide value and necessary consumer protection in these days of $1,000 circuit boards and very expensive inverter drive compressors.
Geothermal System Warranty
A geothermal system often consists of a warranty package that may include the ground heat exchanger, indoor components and factory-approved accessories. The ground heat exchanger, or loop, must be properly specified and installed by competent drillers or loop installers using materials such as high density polyethene pipe (HDPE), which carries its own 50-year warranty.
I’ve seen quality loop installers offer limited 10-year warranties that cover materials and workmanship related to the installation of the loop including the header and grouting.
But perhaps the greatest expense, namely excavation and site remediation or any other consequential costs not related to parts and material, are not covered. Assuming the loop is pressure tested and flushed correctly, this potential horror-show should never become an issue.
One Canadian manufacturer of geothermal heat pumps offers this limited warranty on newly-installed equipment:
- Five years on heating and/or heat pump starting on date of installation
- Five years on factory-supplied or approved thermostats, electric heaters and pumping modules
- Ten years on sealed refrigerant circuit components such as the refrigerant to air/water heat exchangers, reversing valve body and metering device and the compressor
- Five years on parts or accessories that are factory-installed
- One year on other accessories purchased separately from the geo unit manufacturer.
- Sealed refrigeration system components qualify for five years of labour coverage.
- Extended warranty is available.
And, according to a schedule published by the manufacturer, some labour will be paid to “authorized personnel” for repairs to specifically listed components for two years from the date of installation
Regardless of the limited or extended warranty coverage for an HVAC product, contractors can benefit from offering extended warranty coverage along with a maintenance program. Regular maintenance is a must, not only to assure the product performs at peak efficiency, but also to maintain warranty coverage.
A geothermal unit contractor should consider amortizing the longest possible extended warranty into his or her offering. The service plan might include a fee for a yearly tune up or monthly payments that could include a couple of yearly visits. Key plan offerings should include all services that tend to preclude warranty problems, such as:
- Servicing by licensed technicians
- Coil and blower wheel inspection
- Filter maintenance
- Data collection
And may include bonus features like:
- Priority status for emergency service
- No overtime charges
- Discounts on diagnostic fees and repairs not covered by warranties
- Discounts on parts out of warranty
Since I’m not a lawyer, I’d urge contractors to be fully aware of the so-called fine print contained in written warranties and to be sure all customers are aware of their obligations.
Manufacturers make mistakes and things go wrong with processes, but that’s why we do what we do.