How to Negotiate with Heating Contractors
By Chris Brooks
Installing a new central air conditioner is an expensive project -- homeowners routinely spend from $5,000 - $10,000. Yet, because homeowners do it so rarely, the purchasing process can be unfamiliar and quite stressful. In April 2008, FurnaceCompare.com conducted telephone interviews with 12 heating contractors that revealed interesting and useful information for consumers -- including the fact that YES, heating and cooling contractors do negotiate on contracts for big-ticket items. As one contractor said: "I think people realize that since the economy is slowing down, all of us have to be a bit more flexible. I don't mind if someone is trying to negotiate as long as they're being reasonable about it. As long as they know that I'm trying to run a business here, and I'm not going to work at my break-even point."
Another contractor told us that how hard people negotiate varies a lot: "If someone has lived in a house for 5 years, and they're planning to live there for a long time to come, they won't negotiate. However, if they're on a fixed income, they're going to negotiate hard. You can be $25 higher than your nearest competitor and still lose a contract -- that $25 could be a week's groceries for someone on a fixed income."
Assuming that you have already found a qualified heating contractor this article will guide you through negotiating a contract.
I. How do Homeowners Negotiate?
The most common negotiating tactic is for a homeowner to ask a contractor to match a competitor's lower bid. Contractors are used to hearing this request, and they reply with a stock response: "Are the two bids really comparing apples to apples?" In most cases this negotiating tactic is a dead-end for homeowners: they simply don't have enough information to answer the "apples-to-apples" question. Even if the equipment from two different bids is the same efficiency and the same capacity and the same brand, one contractor may install a lower quality "builder's model", and another may install a premium model.
A more promising approach is to ask your contractor to help you understand why their bid is higher than a competitor's. The cheaper contractor may have left out an important component! As one contractor said "If they have a substantially lower quote, it makes me wonder: did I put more in than I needed to? We kind of know how the bigger companies in our area bid, and our bid is usually right in there with the rest of them." Another contractor said that he knew of a company that was offering a 1.5-ton central air conditioner installed for $2088. However, the contractor always charged the customer hundreds extra in wiring, refrigerants, and other required parts.
Once you have a better understanding of why the two bids differ, here are a few ways to ask for a discount:
- Explain that you like the particular model that they're offering, but that it is outside of your budget. Ask them if they can work with you to stay within your budget.
- Explain that you expect to be a customer for a long time, and that (assuming you're happy with their work), you expect to pass their name on to friends and colleagues. But, price is important to you, and would they be willing to reduce their price by x%.
- Ask if they can reduce their price if you're willing to be flexible on when they install your equipment. You can also offer better payment terms, such as payment in cash upon successful completion of the job, rather than waiting waiting to be billed and receive payment net-30.
II. What can you Negotiate for other than Price?
Many contractors said that service and maintenance contracts were regularly on the table during negotiations. This has a hidden benefit for the contractor. As one company told us: "Smart HVAC companies do annual service contracts. It gets you into a customer's house so they remember you. If someone asks who does their furnace, they'll remember you, because you're in there every year." Another told us: "The service contract is very important. We'll throw in a service and maintenance contract for a year to help close the deal. On lower-end furnaces where price seems to be more of an issue, we'll do the deal, and then go back to them later for the service contract."
Another option with a hidden upside for the contractor is offering an extended parts and labor warranty to close the deal. Two contractors reported that manufacturers often reimburse their dealers for extended warranties on higher-end systems. Contractors simply pass these savings on to the homeowner.
A third option is to request free accessories such as air filtration systems and thermostats. (Contractors are often happy to include a free thermostat, as digital thermostats can be programmed to display the installer's contact information -- or even a periodic message suggesting that the homeowner should schedule a maintenance call!)
III. Does Negotiating on Price Negatively Impact the Homeowner's Relationship with the Contractor?
Some contractors reported a negative reaction to aggressive bargaining. A Colorado Springs contractor explained "there are some contractors that really try to undercut on price. Everybody ends up losing money, and it isn't worth it to compete with them." Another contractor said that he gets irritated when customers get very aggressive -- such as getting bids from seven or eight contractors and asking his company to match the lowest price.
However, most of the contractors simply saw negotiation as a normal part of their business. Several said that they tell their customers that they would negotiate if the shoe were on the other foot. Others even saw negotiation attempts as a positive! For example, two contractors told us that negotiating was an indication that the homeowner was serious about closing the deal.
Negotiation is a normal and accepted part of the process of buying new heating or cooling equipment. Get enough bids that you get a feel for the price range, and then ask your preferred contractors to work with you on price or accessories. Remember that your contractor has a business to run -- but also remember that you have a household to run as well!