When Is The Best Time To Buy A New AC Unit?

Name: Magic Touch Mechanical
Price range: $$

September 2, 2017

Carrier, Trane, Lennox AC Rebates – Should You Wait?

It’s pretty much guaranteed that the major air conditioning manufacturers like Carrier, Trane, and Lennox are going to offer manufacturer rebates in their “shoulder seasons”. Here in Phoenix, AZ our shoulder season is mid-September through mid-November. This is the time when people aren’t typically using their central air conditioning or heating.

The HVAC business is definitely seasonal and cyclical. This is one of the reasons I decided many years ago that my company, Magic Touch Mechanical, was going to take a “whole-home approach” to energy efficiency and comfort, and offer other products and services like insulation, shade screens, pool heaters, fireplaces, energy audits, etc. It’s also the reason we do commercial refrigeration and kitchen equipment repairs – which is not seasonal.

But when you build new AC units for a living, what choice do you have but to offer some sort of incentive to consumers in order to get them to buy your products when they don’t need them as much, right? That’s why you can rest assured they’ll all have some form of rebate in the Fall or Spring (depending on what part of the country you are in).

There is one exception: Goodman Air Conditioning, owned by Daikin doesn’t typically offer consumer rebates. Their market approach is a little different than companies like Trane, Carrier, and Lennox, in that they are more of the high volume, low margin leader – the Walmart of air conditioning and heating if you will. This has its place in the market, but that’s for another post

Should You Wait for AC Rebates from Manufacturers Before You Buy?

It’s important to note that if you are in the market for an entry-level unit, the manufacturers seldom include their “basic” units in their AC Rebate Programs (although I have seen it happen from time to time). These units typically have the lowest profit margin for the manufacturer (similar to the way Goodman goes to market with their whole lineup), so there’s no room left for deeper discounts. For example; in Phoenix, AZ the lowest efficiency unit available is rated 14-SEER (Seasonal Energy Efficiency Ratio or Rating). All manufacturers offer “competitive” base models for the price conscious consumer. If that’s what you’re after, you can buy anytime without the fear of losing out on something, as these entry level units are seldom included in the rebate programs.

Since most homeowners today are concerned about high energy bills and/or are looking for a new AC unit that will provide more even room by room temperatures – more often than not they are looking at mid-range efficiency to high-efficiency air conditioning systems that do typically qualify for the AC rebates. That’s because models that offer a higher SEER rating are typically more feature-rich and include things like 2-stage or variable speed compressors, variable speed blower motors, etc. If your new AC unit installation is a planned replacement, then the answer is maybe (read on to find out why).

If it is not planned, and you need to replace your AC system because it is no longer working, you may not have the luxury of waiting depending on the weather.

The Truth About AC Manufacturer Rebates They Don’t Want You to Know

Do you really think Carrier, Lennox, Trane, American Standard, etc. are giving up $1,000, $1,500, or whatever that advertised rebate is? I can assure you, having owned one of the highest rated AC Companies in Phoenix (technically, we are located in Mesa, AZ) for over 20-years – they are not!

The manufacturer typically picks up 50% of the rebate cost, and the HVAC Contractor picks up the other 50%. The major HVAC equipment manufacturing companies have annual revenues in the billions…rest assured their bean counters are not losing money on rebates, they are simply keeping sales consistent in the slower periods. They project the amount they will pay out in rebates, how many units they will sell annually, and roll a little of that rebate money into every unit sold.

A medium to large contractor will have annual revenues in the millions…and handle their participation of the rebate in the same manner the manufacturers do. A small contractor (less than a million in annual revenue), would wind up priced out of the market on every sale this way since they don’t sell enough units to spread it as thin. These contractors have two choices; roll the whole amount into that specific job, or absorb all or a portion of it. Either way is not good for the small contractor or the customer.

Let’s look at the Lennox Air Conditioner Rebate program that starts two days from the time I’m writing this. The highest rebate available is $1,600. Of that, Lennox pays $800 and the contractor pays $800. For simplicity let’s say the normal price of that HVAC System and all the items needed to qualify for the rebate total $10,000.

The small contractor has to either sell that same system for $10,800 or chance going out of business by absorbing that much loss too many times. Either way, not a good thing for the company or the customer.

The medium to large contractor might install 10, 20, or 50 times as many units annually and can roll in a few dollars to every unit sold (like the manufacturer did) so that during the rebate period, that $800 has already been paid for, and now they can sell that same unit for $9,200.

In six to eight weeks when the consumer gets their rebate check for $1,600:

The consumer paid $10,000 NET for the system he/she bought from the small contractor
The consumer paid $8,400 NET for the system he/she bought from the medium to large contractor.

Why should the consumer care if the small contractor had to absorb the rebate, if they are the same price as the larger contractor?

After restaurants, contracting businesses have the second highest business failure rate. What good are any warranties, maintenance agreements, etc. if the contractor is out of business when you need them to honor them? Or, when you find out down the road that there was a problem with the workmanship or materials the contractor installed, they went bankrupt, and you are last in line (aka never) to collect? It happens all the time.

By no means am I suggesting there’s anything wrong with being, or doing business with, a small contractor – twenty years ago that was me, and I operated the business out of my house, we all have to start somewhere! I remember how hard it was to compete with the larger companies before we were one ourselves like it was yesterday.

My point is; yes there can be some advantage to waiting until the AC Rebate Programs start – but it depends who you buy from, as you could actually wind up only getting ½ of the rebate you think you are!

Do Air Conditioning Companies in Phoenix, AZ Jack Up Their Price for a New AC Unit in the Summer?

I see the posts on Facebook! Everyone assumes the worst time to buy a new AC unit is in the middle of an Arizona summer. I’ve seen comments on groups I belong to where people say things like; “AC Companies prey on you in the summer because they know you’re desperate”, or “they jack up their prices in the summer”, etc.

To that I say; if you feel like your AC Contractor will “prey on you”, you are definitely doing business with the wrong company – or you haven’t been loyal to a company that has treated you fairly, and jump from company to company chasing the lowest price tune-up, and therefore you don’t have anyone around to treat you right when you need them!

Any smart businessperson that’s been around a long time knows that it’s much less expensive to keep a good customer than it is to acquire a new one, and – that the lifetime revenue from a long-time customer charged a fair rate, is much greater than charging more money one or two times. For those two reasons alone, a company owner would be foolish to jack up prices when their clients rely on them the most – because they need those customers when business is slower, not when it is busier!

In fact, using Magic Touch Mechanical as an example: We sit down every October and plan our entire next year. We project how many units we will sell, and what type, how many rebates we will participate in, etc. We have two decades of historical data to rely on so I can tell you, shy of a natural disaster or economy collapse, we usually can calculate this properly almost to the dollar. We even know almost to 1%, how much the manufacturers and suppliers cost will increase each year.

We then sit down and figure out our pricing…for the entire year. Our pricing will remain consistent throughout that whole year. It behooves us to keep our pricing as competitive as possible so we can continue to grow our business – not charge more than our competitors!

Will You Lose Out If You Buy a New AC Unit Outside of the Rebate Period?

I’m writing this article on Friday, September 1^st. Yesterday, our “summer sale” of $1,000 off a split heat pump or air conditioning system ended. On Monday, the manufacturer rebates start. Give or take about $200, a customer who bought a new AC unit from Magic Touch this summer will pay about the same they would if they bought the same unit during the rebate period!

Since I know some of our own customers will read this article, any of them that have bought multiple units from us at different times of the year can attest to this. This is by design. When there is no manufacturer AC rebates going on, our company sale is going on…and all of this is planned the prior year.

We simply stock-up for the busy season in order to take advantage of bulk pricing and then pass that savings along to our clients via a sale.

About the only difference the customer should experience when buying a unit (from a good, ethical company) in June vs. October is: It’s going to take longer to install a unit in a 140-degree attic than in an 85-degree attic. Period.