Profit Guaranteed

A few years ago, my 1998 Ford Explorer stalled in traffic.  I had it towed to my mechanic’s shop and called my mechanic to let him know it was coming.  As soon as he could get the vehicle in to look at it, he told me that it needed a new alternator.  I was expecting that.  What I didn’t expect was the price he quoted.  His price for labor was not the surprise, but the cost of the rebuilt alternator was shocking.

I had already looked online to check out the price of alternators so that I could know how much repairs might cost.  A 1998 SUV with 260,000 miles requires research to determine if I want to repair the auto or have it junked.  The price of a rebuilt alternator quoted by my mechanic was almost twice what I saw online for the same part.  We had a discussion.

He told me that the price was more than I had expected because he places a warranty on all parts and service.  If I wanted to install it myself, he had no problem with that, but he would not sell or replace a part without the warranty.  Back in the 1970s I replaced a starter on a 1958 Ford station wagon.  It had a V-8 engine and I had to either drop the suspension or lift the engine off its mounts to install the new starter.  Okay, maybe it wasn’t that bad, but it was a horrible event – it took me days to replace that starter.  I like Fords (See The Green Latrine), but my experience with self-maintenance on the make is not pleasurable.  I paid the mechanic’s price.

We needed some plumbing work done recently.  Estimates were probably six times more than what I thought I was going to have to pay.  All estimates included labor, parts, and warranty.  “Can you break it down?”  Short answer, “No.”  “What if I don’t want the warranty?”  The answer is always the same.  “It’s in our policy.  You have to receive the benefit of our warranty.”  Isn’t that nice!  To me, benefit would mean that my parts and service are guaranteed, and I shouldn’t have to pay for the company’s screw up or faulty parts.  That’s not how it works in today’s world of business.

The practice of including warranties in the price of a part, product, or service is becoming more of the norm.  Wouldn’t it be nice to know how much that warranty costs the company providing the service?  Try to obtain a breakdown of 1) parts; 2) labor; and 3) warranty sometime.  You won’t get it.  Worse, that warranty comes with a sales tax.  However, the good news, you are told, is that the warranty is free.  Huh?

The windfall of money not spent on warranties after the warranty period expires becomes income for the seller or service.  There must be a better way of reporting to customers than the present procedures.  There are statutory laws covering warranties (no pun intended), and there is a “Financial Accounting Standards Board (FASB) that regulates business finances. For example, the FASB requires warranty issuers to provide financial reports to customers. In particular, warranty issuers must disclose:

    1. their method for establishing liability for product failures
    2. their financial accounting for each reporting period including their:
      1. starting balance
      2. subtractions for warranty payouts
      3. increases from newly issued and pre-existing warranties and
      4. ending balance”

I could have asked about this information, but what do you do when you are in dire need of a part to get your vehicle back on the road, or your furnace blows up in your face and you need to replace it?  Besides, I’m sure the information on a financial report is filled with lots of actuarial goobligock making it difficult to understand.

I could have made a complaint to the Better Business Bureau, or the Consumer Protection Office of the Iowa Attorney General.  I could have developed legislation that would address the problem I have with businesses that tack on mandatory warranties[1].  I doubt I could get it introduced, much less get it enacted.

As I have purchased items in the past where the clerk smiles and says “this product comes with an extended warranty for five years that costs only . . .”  That’s as far as I let them get with the offer.  My answer is always ‘no.’  Does the manufacturer believe the product is that bad that it must offer a warranty beyond the one provided?

Let’s get real, I guess I just wanted to bitch about this.  Nothing’s going to get better for the consumer in this area of business law.

[1]   A mandatory warranty or maintenance agreement is a contract that comes with a product and is included in the total selling price. Under a mandatory warranty, your customer does not have the option to purchase the product without the warranty. Examples include standard manufacturers’ warranties that come with new vehicles, computers, electronic devices, appliances, and auto repair shops’ parts-and-labor warranties on repairs.


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