Tuesday, March 8, 2016

The Economics of Fixing a Furnace

I don’t bother to insure against costs I can handle, such as fixing a furnace. However, a recent experience has me re-examining the motives of furnace service companies.

For the first time in about 6 years my furnace stopped working. The house was getting cold fast and I wasn’t inclined to be cost-sensitive. I was prepared to pay double to get it fixed Sunday evening instead of waiting until Monday morning. It’s no fun to get hit with costs at unpredictable times, but at least I had saved plenty of money over the years by not buying a service contract.

Back when I decided not to pay for a furnace service contract, I had reasons. The main reason was that insurance is expected to cost more than just paying as you go. The second was that I figured furnace repair companies would be more responsive to a paying customer who created profits instead of service contract customers who just create costs when they have furnace problems.

My wife picked a furnace repair company and called. She was asked “you don’t have a contract?” and told “we’re really busy.” Apparently all their workers were out doing yearly furnace cleanings. It was clear that taking our money was an inconvenience. She got off the line without a promise that they’d send someone.

This definitely challenged my thinking that the profit motive would have repair people rushing out to my home. Maybe regular furnace cleaning and inspection is a lot more profitable than actually fixing furnaces. Or maybe the working level person who handles the scheduling is paid by the hour and doesn’t care if the business is profitable. Whatever the reason, I thought maybe getting my furnace fixed will be harder than I thought.

At that point, the furnace actually started working again for a half hour or so before quitting again. It was then that we thought of checking the warranty. It turned out it was still under warranty, and we got it fixed for free that night. That’s a happy ending this time, but I still wonder about the motives of the company that didn’t want our money.

I’ve had similar experiences with my pool. It’s tough to find people to do repairs at any price. They all want to do pool openings and closings that pay them well and require little skill. For years I paid a company to do the openings and closings just because they would also do repairs as necessary. When they started dragging their feet on repairs, I dropped them and did the openings and closings myself.

I still have no intention of paying for a furnace service contract, but I have a new challenge. I need to see if there are businesses that actually focus on doing furnace repairs instead of just doing inspections and cleanings. I have a similar need for a pool repair company.

13 comments:

  1. I had a similar problem a few years ago. All the service techs were out doing yearly cleanings and their schedule was fully booked for days. They did slot me in, but I had to wait a few days. Luckily it wasn't too cold outside. I think many of these companies rely on their yearly contract customers business, so one off service calls have to be a secondary priority.

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    1. @Greg: I can only assume from this that cleanings are more profitable than doing repairs.

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  2. It seems to be a gamble with any kind of service company working at your home. And it can be rather perplexing when you are willing to hand over many hundreds of dollars worth of work, with the promise of other future work, but they flake out.

    I originally tried a few different companies that employed service contracts or flat rates for visits that ended up taking less than an hour anyway. I found they are definitely more responsive if you have a service contract (didn't actually have a contract, but they gave me contract like service for a limited time due to a new HVAC purchase) and they aren't as helpful or the repairs weren't performed quite up to par.

    I see where they're coming from. I work as a service tech in a different industry but every customer with a contract is almost always above anyone else, probably why we don't have much none contract work anymore. Any non contract work is automatically a "charge" call, which is basically lumped in with the rest of the workorders where it's something the customer should be able to do on their own but are too lazy to do, for example. So effectively the lowest priority. Those token charge customers are peanuts compared to all of the yearly annuity money. It's kind of different in my job though. We deal primarily with large corporate customers.

    Anyway, I later tried a furnace service company that was charging an hourly rate. It seems to be one of the few ones left locally. Anyway, they ended up costing less since the repairs usually don't take all that long, actually performed a competent repair the first time, and on top of that, showed me what to do to possibly avoid the problem next time and maybe fix it myself.

    Furnace has been fine since then but I've given their plumbers some other work.

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    1. @Anonymous: The best I can figure is that furnace service companies are very different from each other, and I need to find a good one. The same goes for pool service.

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  3. Another way to self-insure would be to have a few auxiliary electric heaters, so you can pay through the nose for hydro but be able to keep the house from getting too chilly (or even freezing)
    BTW: A powerful but uncontrolable electric heater is an oven with the door ajar...

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    1. @Anonymous: That sounds like a good way to deal with delays in getting my furnace repaired. So, if I find a furnace service company that does good work but is busy, I'm set.

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  4. I had similiar difficulties the last time we had a furnace die. Except now the deal was everyone wanted to sell me their furnace as part of the repair work.


    Then I moved to a house with no gas, we heat exclusively with wood. No more furnace breakdows! Screw the furnace industry! Viva la revolution!

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    1. @Glenn: That's one way around the problem :-)

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  5. You could always move south, and then only worry about getting A/C repaired? It's easier to live with a broken A/C system in the heat than a broken heating system when it is -30C outside.

    The issue seems to be that repair services in general are nowhere to be found, as are small job work as well. Everyone wants the big money, but no one wants the smaller jobs.

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    1. @Alan: I've thought about moving south, but I'd much rather be in Canada during our summer.

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    2. Mourning MJ;
      It is called PM or preventive maintenance or a service contract for those who have absolutely no idea how to maintain whatever system is being discussed. Whether or not you get good PM maintenance is another question.
      I would presue that with a service contract on a heating system they would change filters, air & fuel as necessary, clean burner air intake, inspect adjsut the fan strap and adjust the start mechanism for the unit. It should be done at least once a year, preferably before a failure, which is the idea behind PM. Pretty well anyone can change an air filter but to have a fuel filter on hand and the necessary tooling and/or recuperation of used oil is something else. PM could also stand for Peace of Mind at least until the unit craps out on you.
      A lot of city slickers do not even know how to go about painting there abode so PM for them is either a good thing or a necessary evil.
      As to the service companies well they do not like down time so you can not blame them for wanting to "sell" their time even if it is for the lowly service contract. And they will rightfully give priorty to those customers that have agreed to those contracts. That is business. Being a "loyal" customer should give one some expectation that you will be prioritized over a "new" customer that may or may not become a yearly money bag..IMHO

      RICARDO

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  6. I don't know about loyalty to customers as a service motivator. I do wonder, as Michael James found in his quest for a furnace repair why the usual motivation of 'profit' is not as effective . I speculate that businesses (other than a sole proprietor with maybe one helper, and maybe even then) are systems and gravitate to anything systematic, like maintaining a stream of income from any number of service contracts. The company simply becomes set-up and predisposed to systematically do this one thing, and events outside of this are perceived as disruptive and even problematic, even to the point of negating profit. It's kind of like the company (system) is running the company (i.e., itself) rather than the owner(s), who I think if they understood this would do whatever was necessary to step in and counter the negation of profit, rather then themselves being subsumed by the 'system'. If you give this speculation any credence, I just want to add that this 'systemization' is not otherwise a bad thing, as it supports the main activity of the company, maintaining service contracts.

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    1. @John: That makes a lot of sense, especially in cases where nobody with an equity interest in the business is close to the decision-making that takes place while speaking to actual customers.

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