Are Extended Warranties Right For Your Construction Equipment Dealership?
Every piece of construction equipment is a major investment for your customers. And they all have a budget to mind. Naturally, they approach the question of extended warranties from a should-I-or-shouldn’t-I standpoint. Is it going to be worth the cost?
As a construction equipment dealership, you can help your customers make the best decisions about extended warranties. There’s an added comfort level when purchasing a new machine, because it automatically comes with a warranty from the OEM. But what happens when that warranty expires? It’s a simple fact that the older the machine gets, the greater the likelihood something will go wrong.
Peace of mind may not be a tangible asset, but worrying about untimely breakdowns simply puts more pressure on already-harried contractors. You can help customers alleviate those worries by providing information and options regarding extended insurance coverage.
Considering the pros and cons of extended warranties.
The original warranty always comes from the OEM. Coverage will vary from one manufacturer to another, and some OEMs don’t offer extended coverage, at least not on all types of construction equipment.
Warranties – both standard and extended – cover material defects and workmanship but not misuse, accidents, acts of God, etc. They cover repairs made in the shop, so if construction equipment has to be repaired at the job site, you’ll pay extra for the mechanic’s extra time and mileage. Standard warranties cover a set time period, usually 12 months but sometimes several years, and sometimes they have an hours limit as well.
Extended warranties are usually based on specified time or hours, whichever comes first. They are available in different coverage levels, giving your customers a range of options for each machine. Encourage them to contemplate each of these questions, to determine the value of extended coverage:
Do they typically do their own repairs in-house? This is often the case with operators who work at very remote locations, but most general contractors and municipal equipment managers rely on their dealership.
How extensive are their in-house capabilities? Newer construction equipment is far more complex than machines manufactured before 2007. There’s a diminishing rate of return for contractors to maintain appropriately equipped shops and skilled technicians to handle these repairs, increasing the value of extended coverage for newer equipment.
The newest engines with Tier 4i or Tier 4 Final certification are especially complicated, with exhaust gas recirculation and selective catalytic reduction systems, diesel particulate filters, etc. Who will deal with these systems once the federally-mandated 5-year/3000-hour warranty runs out?
Do they have an adequate supply of back-up equipment to cover their jobs if a machine is out of service? If not, they’ll have to rent equipment from you to fill in. Extended warranties can include loaners, and that could be more cost-effective, especially during peak times when time truly is money.
And here are a couple of questions for you. Do you have a rental fleet? Do you sell used equipment? Since most OEMs don’t offer extended warranties for those, you’re just as vulnerable as your customers if a machine breaks down. Extended coverage can save your day just as it can save theirs.
Protect My Iron® has you both covered.
Your dealership can offer extended coverage directly to customers via a third-party underwriter, through ADI’s Protect My Iron® program. It’s an extended insurance product specifically created for construction equipment dealerships, developed by people who have extensive experience in both construction and insurance. They understand what matters most to your as a dealer and to your customers.
Protect My Iron® isn’t just a piece of paper. It’s a comprehensive program that includes variable coverage levels and proprietary Warranty Connect software that literally ties all the parties together in real time. You, your OEM and your customer have access 24/7 to claims tracking, invoicing and detailed reports. Customers can house all their warranty-related data in one place.
Beyond functional support and peace of mind for your customers, Protect My Iron® gives your dealership another way to extend customer relationships and enhance your reputation for dependability. And it gives you another revenue source. It’s something to consider.