Why Oil Analysis Is So Important for Equipment Dealerships
Why Do We Require Equipment Oil Analysis?
Construction equipment is expensive, even if you buy it used. We all know that the older a machine gets, and the more work it does, the greater the chance that something will go wrong. As an equipment dealer, you encourage all your customers to adhere to regular preventive maintenance schedules. But are you encouraging them to include oil analysis in that regimen?
It’s a matter of ROI
Oil analysis gives you the best insight into the health of the engine and other components. It is both preventive and proactive – as long as it is done consistently.
Every manufacturer recommends service intervals for their equipment’s engine, transmission, hydraulics, final drive, etc. These are typically spans such as 500 hours, 2000 or 5000 hours. It could take 10 or 15 years to reach 5000 hours. That’s a long time to wonder how well components are holding up inside, where you can’t see.
The solution? Sample and analyze the oil every time you perform regular service. For instance, if you test the oil every 500 hours and you start to see wear materials in the oil at 1000 hours, that early detection could save thousands of dollars. Replacing a clutch or gear at this point might cost $1000-$2000. On the other hand, if you don’t “bother” with oil analysis and a component fails at 4000 hours, then you could be looking at $20,000-$30,000 in repair costs, depending on the component and extent of the damage.
That’s a very dangerous risk. By encouraging your customers to adopt regular oil analysis, your dealership is proving you have their back when it comes to helping protect their business and their bottom line. That builds customer loyalty.
Besides, adding oil analysis to a preventive maintenance regimen is simple and inexpensive -- just one extra step for the technician that takes about 10 minutes, and a sample kit that costs around $20. Compare that to the cost of parts and labor needed for untimely repairs, plus downtime, which gets longer and more disruptive with more extensive repairs. The ROI is obvious.
Here at ADI, we require oil analysis, too
As an insurance agency, we know that requiring oil analysis protects everyone – our business, your dealership, and your customer. Our goal is to work with customers to find the best solution. We know that’s your dealership’s goal as well.
So, when we’re asked to provide an extended warranty for a piece of used equipment, we require an oil sample. That gives us data regarding current wear rates so we have a more complete picture of the equipment’s health status. The machine can’t talk, and there’s no way to know what the previous owner did in the way of maintenance. For that reason, we may also request service records to learn as much as possible about the machine’s history.
Are we being overly picky? Not at all. Consider the following scenario:
A contractor purchased a small, used excavator, perhaps at an auction or from a private party. They wanted to purchase an extended warranty through their favorite dealership, so the dealer gave us a call at ADI. We asked to see an oil sample. At the 2000 hour service (the OEM’s recommended interval), the oil was drained and sampled. Everything was fine, except for the rear final drive, which showed visual metal particles.
That was a red flag, but perhaps the sample was bad – either the collection method was wrong or the sample somehow became contaminated. If we suspected the sample itself was at fault, we might suggest that the contractor go ahead and run the unit for another 40-50 hours -- about a week’s worth of work -- and then re-sample the oil.
In this case, however, the component was immediately pulled and disassembled for inspection. At this point, we had some options. Should we provide an extended warranty for this machine? A worn gear or bearing might cost around $1000 to repair. The contractor could choose to make that repair, and we could then issue the warranty with confidence.
If we insured the machine without repair and the contractor kept running it, ADI Agency could wind up paying for a $5000 repair instead later on. In this scenario, the contractor suffers, too. The extended warranty might pay for repairs, but it won’t cover the cost of downtime and other disruption caused by the machine’s absence.
It wouldn’t be prudent for us to fully insure a machine we know has an unresolved problem, so we might offer the contractor an extended warranty that excluded the suspect component. Or we might decline to cover the machine at all. Making the right decisions enables us to continue helping dealers and their customers protect their equipment. Oil analysis helps us make the best decisions for everyone.
OEM’s are also increasingly relying on oil analysis. If one of our ADI insureds has a hydraulic pump or rear-axle failure, for example, the manufacturer may ask for an oil sample. But, really, it’s too late by then – the damage is already done. That’s why regular testing is so important.
Dealers benefit in other ways
Requiring oil analysis is just one way ADI helps protect your bottom line and your customer, too. We partner with dealerships to offer 30-day, 90-day, or 1-year extended warranty policies on used equipment. Offering these policies is an easy, convenient, and profitable way to assist customers. That’s a good business practice, and it helps boost customer loyalty by reinforcing your reputation for customer care.
Your dealership probably sells used equipment. Because you understand the crucial importance of oil analysis, you can automatically test every machine you take in or buy yourself. If there’s a problem, you can fix it. And you now have a valuable additional selling point for that machine: it has been professionally vetted. Through ADI, you can also offer an additional side policy that covers the powertrain, as yet another sales incentive.
All these policies help protect customers from the cost of problems down the road. Regular oil sampling can help reduce the incidence or severity of those problems. That’s peace of mind – and that’s priceless.