Getting Your Walk Away Money, Part 2

We previously discussed air infiltration heat losses with our homeowners and that became a financial concern. We know they burn an average of 1,000-gal. of oil per year. They are ready to invest in a new heating system and are interested in an estimate. You are but one of many who will darken their doorstep, and they're beginning to recognize that you are not one of the crowd. So far, you're the only contractor who even mentioned combustion-induced infiltration.

Is their existing 84,000 Btuh (gross input) appliance sized properly? It has met every winter's challenge but may be oversized. A heat loss analysis reveals the home has a 65,000 Btuh heat loss on a 10°F day. The appliance's net output of 65,520 Btuh is spot-on.

How quickly can we save them the 800 gallons at $5 per gallon to break even on their $4,000 difference in cost between the 87% and 93% efficient appliances we're proposing?

I use an Excel spreadsheet I developed years ago to project annual operating costs for gas, oil, electric and heat pumps. For oil, the formula looks like this (math inside brackets is done first):

(Heat loss/appliance efficiency) × (load run hours/Btus per gallon) × 0.77 × cost per gallon = annual operating costs.

Using a heating degree day map of the U.S., we can expect to have 2,250 run hours per each heating season in our area. At $5 per gallon and 78% net efficiency, we can project their next heating season will cost them $5,230.98 (1,046.196 gal.) if they stick with their existing heating system. If they choose the 87% efficient appliance, the cost will be $4,689.84 (937.968 gal.) and if they decide to invest in the 93% model, the heating cost will be $4,387.27 (877.454 gal.).

And here's where the rubber meets the road. A $4,000 tick upward looks like a brick wall when you're only seeing a 60.5-gal./year reduction in fuel usage. Let's use a sales tool to help the customer “see” the wisdom in the investment.

Suppose they invested that $4,000 in a 60-month certificate of deposit and were able to secure a 5% locked-in annual rate of interest. Their profit would be $1,128.14 (www.csgnetwork.com/cdyieldcalc.html). During the same 60-month period, the 93% efficient appliance will have saved 302.5 gal. of fuel oil, and if we allow for a 5% annual increase in cost-per-gallon, they will have saved $1,671.50. Unlike the CD, the investment in oil - their oil - yields immediate results by letting them keep more of their paychecks starting the day after the installation is completed.

Still not convinced that the 93% efficiency appliance is the better buy? Let's go back to that combustion-induced infiltration issue. The 87% efficiency model can be chimney or indirectly vented using stainless steel flue piping for the sidewall application. The 97% model uses direct vent sealed combustion. Having nursed many a home during frigid no-heat calls, I'm comfortable assigning a half-hour run time to each of those 160 complete air exchanges and that adds 40 gallons to our projected annual savings. Our five-year $4,000 investment in the 97% efficiency model now yields a $2,776.63 profit. Investing in a CD doesn't look so hot anymore!

If this is a furnace and the homeowners have central air conditioning, then I'm going to give them a teaser for upgrading to higher SEER. Add one more step: upgrading to a heat pump, which will give them a hybrid heating system. A 78% efficient furnace likely will have low-efficiency 6-SEER central air conditioning incorporated into the system.

Let's assume a 30,000 Btuh cooling load and 11¢/kWh. In my Excel spreadsheet, I use the following formula:

(Btuh rating/SEER) × (cost per kWh/1000) × hours of operation = annual operating cost, which indicates an annual operating cost of $440 with 800 hours of run time for our zone.

Upgrading to 13 SEER efficiency lowers the annual cooling cost to $203.08. But here's the really interesting sales hook: Although upgrading to a heat pump adds about $600 to the straight A/C replacement job, an 8.0 Heating Seasonal Performance Factor heat pump can save them more than $2,800 each year (if the cost per kWh remains at 11¢ and oil is $5 per gallon)!

But deregulation is coming, and unless your customer has been living in a cave, they've heard about it, yet they have no clue what it really means in (their own) dollars and cents. Deregulation of electric utilities in 2010 is expected to result in an 81% cost increase in Pennsylvania (according to Governor Edward Rendell's recent speech). Let's assume a 20¢/kWh rate following deregulation. That same 8.0-HSPF heat pump still saves more than $1,000 each heating season.

Just a few extra steps in your sales presentation can yield the walk-away-money you left on the table all those years. This is money your customers gladly will part with but only if you offer them an incentive that clearly demonstrates why the more expensive options are in their best interest.

Dave Yates owns F.W. Behler, a contracting company in York, Pa. He can be reached at 717/843-4920 or at [email protected].

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