Rising repair costs and high energy bills are often the first indicators that it’s time to replace outdated HVAC equipment, especially if the building systems are reaching 15 years of age. Older equipment not only costs more to operate but it tends to break down more often, and the unplanned repairs can have a negative impact on profitability, productivity and cash flow.
The idea that helping building owners control these unexpected costs could help them build their own business appealed to Brad Crawford and Tim Buford of Crawford Services, Inc. in Dallas, Texas. The owners of the rapidly growing HVAC and plumbing mechanical contracting firm elected to help customers replace aging equipment by offering financing opportunities from Lennox Industries, part of Lennox’ Continuous Comfort Planned Replacement program.
“The financing program is very appealing to customers, and it’s an excellent marketing tool for us, because customers don’t have to add to capital expenses with an ‘out-of-pocket’ payment for new HVAC equipment,” said Brad Crawford. “With financing, they can plan to pay an established dollar amount at regular intervals over the term of the lease, instead of paying the entire purchase price upfront.”
Brad Crawford recommended the Continuous Comfort program to Chris Hill, the owner of Pinnacle Graphics in Addison, Texas. Hill liked the flexibility it offered, and elected to finance $40,000 in HVAC upgrades for his facility.
“We like the fact that we can manage our cash flow better through a lease arrangement versus an immediate capital expense,” Hill said. “We were able to improve our indoor comfort, reduce our energy consumption and add peace of mind with a preventive maintenance agreement with one low monthly payment.”
The typical cost of replacing a condenser coil on a 7.5-rooftop unit is $3,500. Add two compressors at $5,000 each, and the immediate repair costs for cooling equipment begin to approach the total cost of replacing an entire unit. Installing new equipment with extended warranties eliminates those concerns, and it helps organizations that couldn’t operate without conditioned air.
“In a sluggish economy, a property manager may not be producing adequate cash flows due to declining tenant occupancy and rent compression, says Gary Whitford, service manager for Crawford Services. “When old A/C equipment breaks down or needs to be replaced, it is difficult to have the upfront cash to be able to replace it. With the Lennox financing program, customers can set a manageable cost to be spread over a period of time.”
Crawford’s customers who are financing also include the owner of a large multitenant site, and a multifamily building owner. The contractor is also presenting the Lennox financing program to potential customers with HVAC equipment needs ranging from $5,000 to over $1,000,000.
“Building owners and property managers appreciate the lease-to-own program because it allows them to choose the term length and payment amount for their HVAC work that aligns with their cash flow and the desired investment return on their properties,” Crawford says. “They can also include extended warranties and maintenance plans in the lease to develop a total cost of ownership model.
“For instance, the customer can select the optimal Lennox equipment for their application, add a 10-year parts and labor warranty and a two-year maintenance plan, and then select a payment term between 24 and 60 months with a $1.00 buy-out at the end of the term. A $10,000 total purchase of Lennox equipment and services can result in a five-year lease-to-own plan for as little as 232.50 per month,” he says.
With HVAC leasing, the customer will own the equipment as if they had purchased it outright. Leasing new equipment eliminates many problems inherent with older equipment, such as emergency service calls, high cooling bills and comfort complaints, and helps companies achieve a lower total cost of ownership with reduced utility bills through high-efficiency equipment.
In many cases, financing allows property managers and building owners to free up company cash by eliminating the large down payment on equipment and immediately reducing their energy bills. With the energy savings and reduced maintenance expense, buyers can own new, high-efficiency equipment with money left over, even after making the leasing payments.
Installing newer, ENERGY STAR® qualified equipment – like the Energence rooftop unit with efficiency ratings up to 17.0 SEER – can reduce energy expenses hundreds or thousands of dollars per unit each year. New equipment can also improve cooling, heating and ventilation.
The benefits of Lennox’ HVAC financing for building owners include:
There are several benefits for contractors, as well. These include better scheduling opportunities, reduced billing paperwork and receipt of payment within 24 hours of job completion. Whitford said, “The financing program is another tool that allows Crawford Services to better serve our customers and separate ourselves from our competition.”