There seems to me to be a lot of misunderstanding about contract maintenance. I think it starts with our bias against those appliance insurance policies that the stores promote. I never buy them either, as appliances like stoves and refrigerators almost never fail for the first three years- which is usually the length of the agreement they’re promoting. I’d rather take my chances.
But lift trucks are a completely different animal. They move and lift many tons of goods all day every day and, as a result, there are a list of “wearable” parts that you can count on that will need replacement. Many times, customers that are approached about the benefits of contract maintenance turn it down because they feel they are protected by the one or two year major component warranties. But the major components are seldom the problem in the first few years; it’s the predictable need to replace the wearable components- and they only have a 90 day warranty because the manufacturers know they will wear out.
The other misconception is that contract maintenance can’t be less expensive for the customer than traditional time and material service; that at best it’s a push and probably will cost more than taking my chances. But that’s also often not true because contract maintenance allows the servicing dealer the ability to schedule repairs instead of waiting to be called. With contract maintenance, we plan scheduled maintenance checkups and replace failing parts before they go. By doing so, the labor cost is lower than having to respond to breakdown calls and uptime is increased for the user to boot. It’s really a win-win.
Let’s use a practical example. Contract maintenance for a reach truck used for 1500 hours per year is about $250/month for 5 years. That fixed price includes scheduled maintenance at, in round numbers, $90 per. These should be done every 90 days and are needed to protect your warranty (like an oil change). That then nets out to $220/month. With a labor rate north of $125/hour plus a travel charge and the cost of the parts- how long would you think it would take to surpass the cost of contract maintenance with time and material? It’s a push in the first couple of years but a major cost benefit after that.
Here’s a summary of tangible benefits for a comprehensive maintenance plan:
- Lower overall costs over the life of the contract.
- Higher uptime as we provide planned intervals of maintenance and make repairs before parts fail.
- Cost protection from an unexpected major failure.
- Fixed monthly costs for the entire term of the agreement, regardless of parts and labor cost increases.
- Higher fair market value allowances at the end of a lease term- lowering monthly lease costs.
What do you think?