People are becoming more cautious when it comes to spending money — especially when a big-ticket item is involved.
So, when given the opportunity to save a few pennies and maybe kick the can down the road by opting for an HVAC system repair instead of a replacement, homeowners will go that route — at least, up until a certain threshold is met.
A new study conducted by the research unit of BNP Media, myCLEARopinion Insights Hub, done in conjunction with The ACHR NEWS, shows that homeowners are most likely to choose to replace their HVAC equipment rather than repair if the cost of repair is a minimum of 30%-to-50% of the cost to replace.
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THE TIPPING POINT: When it comes to making the decision to dish out the big bucks and buy new HVAC equipment, the majority of the homeowners in the survey first needed to know how that would compare to the cost of repair. (Courtesy of myCLEARopinion Insights Hub)
But according to several industry leaders who spoke with ACHR NEWS, a little education can go a long way when it comes to getting a homeowner to ditch an outdated, troublesome system, even if the cost to replace eclipses the cost of a temporary repair.
The Threshold
Martin Hoover, co-owner of Empire Heating & Air Conditioning in Atlanta, Georgia, and chair of ACCA’s board of directors, said that 30%-50% metric wasn’t surprising, but there are several criteria they use to advise customers when it comes to the age-old repair vs. replace dilemma.
“The age of the equipment is a big factor in making this decision,” Hoover said. “General condition, past frequency of maintenance, and service history all play a part.”
When having this conversation with a homeowner, Hoover suggests using hard evidence, like math, to help them come to a conclusion — in this case, the “12k” rule.
“If the age of the unit in years times the repair cost is equal to or greater than 12k, we will typically advise replacement,” Hoover said. “There are exceptions, of course, but this is the baseline we work from for residential and, in many cases, for commercial. The current quality of installation, ductwork, flue venting, electrical capacity, gas pipe sizing, and lineset sizing can all play a role in the big picture.”
In general, Hoover said, they have been seeing a slight uptick in repair over replacement over the last year.
However, there are ways to buck that trend.
Matt Marsiglio, of Flame Heating, Cooling, Plumbing, and Electrical, and also a member of ACCA’s board, said the key in this situation is thoroughly educating and informing customers about the increased savings offered by the higher efficiency equipment.
“I think overall, as an industry, we have to educate and inform our customers and let them make the decision from there,” Marsiglio said. “There will be times a customer makes a decision that may not be best, but at the end of it all, they know their financial position best.”
EDUCATION IS KEY: A contractor’s chance of selling new equipment versus doing a repair really depends on how well they educate the homeowner on potential benefits. (Courtesy of Getty Images / galinast)
Another interesting data set from the new repair vs. replace study shows a discrepancy when it comes to smaller shops: At 30% of the cost to replace, they are reporting replacement as the least likely option, whereas when it hits the 60% threshold, that becomes the most likely option.
Marsiglio said that is likely due to the amount of time they can afford to sit down with a customer before needing to take care of another customer.
“If all the options and facts are put in front of the customer, it is their decision — in smaller shops, time may not allow.”
More Insight into Getting Across the Finish Line
Prentice Lattinville is a senior HVACR technician with Iona University, but, as part of his start-up/side gig, he moves a lot of equipment. When it comes to homeowners, he said he usually finds the same thing before they are willing to buy new.
“I have to prove that this equipment is more efficient,” Lattinville said. “And like it says in the study, if I can't prove to them that it's 40% or greater, they typically just want to repair, if possible.”
Customers who don’t understand that newer, upgraded HVAC equipment is an investment that can save money in the long run via utility costs don’t want to incur that upfront cost. For instance, at Lattinville’s personal residence, he invested in improving the envelope of the house, foaming the attic, ductless heat pump, or basically reengineering the house.
But, he said, unless a person is familiar with the purpose of an energy audit or has undergone the advanced, upper-level HVAC classes, most of that means nothing to them — they’re just seeing that as an additional cost an HVAC tech is trying to push on them.
“It opens your eyes to the world. A normal homeowner doesn't (have access to that knowledge),” he said.
But if some of these metrics can be properly translated to the average consumer, they might start pulling the trigger at 30%, which Lattinville said he has seen. Especially with the costs of fuel and oil skyrocketing, the customer will start to see something with better energy efficiency as an investment.
“And they just think they have to eat that (cost). And that's like, no, no, no — if I could save you 20% here, 30% here, this helps you this way,” Lattinville explained.
In order to articulate some of these energy metrics, Lattinville suggests taking the right classes and also building a portfolio so you can point right to a specific house or building and say, “This is how much I save them by doing this.”
In Lattinville’s case, one of the projects he brings up is his personal home, as the work he did brought his utility bill from $600 to $93 in August. So by switching just two pieces of equipment and foaming, he was able to save 69% on energy costs — that’s the number that needs to be pushed if a homeowner is hesitant to replace instead of repair.
Being able to sit down and provide some real-world estimated savings is also a way to open the eyes of a homeowner, who may now be more willing to spend some money upfront to save down the road.
“I do really well with the ductless that I can prove with the COP ratings and the performance like that, using their electric bill. And say, ‘Look, this is where you can be, this is where it's at,” Lattinville said.
Once this point is finally driven home, Lattinville said he’s found opportunities to upsell, even when the cost to replace dwarfs repairs.
For instance, he said if he’s called for a bad a/c unit and all the ductwork looks good and the airflow measurements are adequate, he’ll pitch a heat pump, because it can provide that cooling and now there’s backup heat that doesn’t require fuel or oil.
CHANCE TO UPSELL: Once a homeowner decides to go with a replacement over a repair, pitching products like a heat pump to replace a traditional a/c unit can be successful. (Courtesy of Getty Images / Welcomia)
“I would look and say, ‘Hey, you can do a heat pump, because I can move the 450 CFMs. Now, if your oil goes out, or your propane runs out, or something happens and I can't get a part to shipping, there is still going to be heat,” he said.
And then there are add-ons and additional features like air purification and dehumidification, which play very well to homeowners who have allergies or other medical conditions — it all comes back to figuring out what’s important to the customer.
Lattinville said that was a lesson he learned from a mentor who had been in the industry for 40 years.
“You’ve got to know the product to sell to the customers, and if you guide them correctly, they'll pull the trigger,” Lattinville said. “You're the professional.”
Lattinville urges technicians to really invest in their own education to make sure they are providing homeowners with the correct data so that the system they are going to install works as advertised, and also spending the time to really get to know the units they’re installing.
But he also said to be prepared to run into the HVAC technician's newest nemesis — Google.
“Google, that's the worst thing that ever came out for guys like us,” Lattinville said, further explaining that now homeowners will equate their 10-minute search to a technician’s 20 years of field experience. “Google doesn't know our values of walls and windows and all these other things that can really help the homeowner. So it's a big lack of education in a market that needs the education.”
