In response to maintaining unpaid warranty work on equipment sold to their customers, Ag Info Tech, a precision farming dealership in Mount Vernon, Ohio, decided to shift its policy in 2015. Former CEO, Tim Norris, realized the need for a change when he weighed the costs of maintaining manufacturer’s warranties.
“With just making service trips, my fuel expenses last year were almost $50,000 and my depreciation was probably another $50,000, and that doesn’t even include insurance,” says Norris. “Often we were making 2-3 trips to the farm — one to diagnose the problem and pull the equipment, and another trip to bring the repaired or new item back and reinstall it.”
Norris’s first step was to approach manufacturers to see if there was any way to reimburse the costs of maintaining the product warranty. While the repair of a unit under warranty is usually covered, the dealer may not be able to recoup time, labor and fuel costs, along with possibly supplying the customer with a temporary replacement.
“We tried to work with one manufacturer to get them to either pay us for service calls on equipment that is under warranty or create an extended warranty that we could sell to the grower that would pay for our service work on claims,” says Norris. “We didn’t have any luck with that.”
Taking a page from a similar program developed by another company, Norris decided to implement a dealer provided extended warranty. The program is built in such a way that it not only offers a mutually beneficial warranty that can add to the dealer’s revenue, but it also covers the dealer’s costs regardless of customer participation.
“We’re giving growers the opportunity to pay 15% of the hardware cost at the time of sale for the extended warranty,” says Norris. “It extends the 2 year manufacturer warranty out to 3 years and promises to replace any faulty units with a new one off the shelf immediately.
“If a customer chooses not to purchase the warranty, we will charge them for labor if we have to come get the unit for a claim.”
To implement the plan, Norris informed his customers and is now attaching the option to every new quote. He also created a form for new customers to accept or decline the extended warranty, so they can express their consent to labor charges should they decide to opt out.
Norris is confident that the plan will justify itself in several ways. Upfront, there will be the extra 15% of revenue at the time of sale, but there will also be savings.
Instead of having to make several trips to the customer’s farm, his precision specialists can just make one — replacing the faulty unit with a new one right away, thus saving time and fuel costs. Also, provided that a repair is possible, Norris thinks that he’ll be able to recapture additional costs by selling the faulty unit as used “factory refurbished” equipment to another customer.
Norris is hopeful that the program will provide savings and revenue for the dealer, but he admits that it may take time.
“Right now, I am figuring that I’ll have to replace 1 in 10 displays within the 3 years which would net us out 150% of the purchase price,” says Norris. “I’m a bit concerned about the GPS units though. Some units may be non-repairable — and if the manufacturer can’t tell me how they will handle unlocks for that year when they are outside of the warranty, that could be problematic.”