Used Construction Equipment Warranty Programs for OEMs

After the steep financial fall in 2008, distributors in the heavy construction equipment industry find themselves trying to get rid of older inventory in order to bring in newer iron. A trend is forming where Heavy Equipment Manufacturer’s and Dealers alike are turning to construction equipment warranty as a sales tool to promote these older units and try and get them out the door.

As we near the end of Q3 in 2013, this will prove to be a viable strategy for OEMs pushing for a strong Q4. This will give them a chance to give that extra sense of confidence and peace of mind to buyers of their equipment. The fact that their dealers don’t have to go to their customers and sell a unit model year 2009 as-is, is very attractive. Dealers too, will appreciate the boost of confidence from their OEMs in that it will more closely align their strategy to be competitive in today’s business environment as well as gain market share.

Putting together a quality, used construction equipment warranty program is not as simple as you would think. Considering that some of these units have been sitting at OEM or dealers lots for a period of time now, companies that provide these specialty programs are leery of taking on too much similar risk. To that point, below are some helpful tips for both OEMs and Dealers looking to put a program together to start a sales initiative:

Helpful Hints in gaining a competitive USED CONSTRUCTION EQUIPMENT WARRANTY PROGRAM:

• Have a list of the year, makes, models and serial numbers for the units you are looking to develop a used construction equipment warranty program for

• Determine if you have repair history and claims history on the units you are looking to put into the program

  • This information is extremely helpful in providing a program and one that has had a sharpened pencil from the underwriter of the program
  • Sometimes that information may not be available, be prepared for a cautious approach from the program underwriter

• Determine if you will be able to get oil samples from the units

  • If you are able to get oil samples as well as unit claim and repair history, you will receive the BEST POSSIBLE PRICING OUTCOME

• Consider running your used program in conjunction with a new construction equipment warranty program

  • This will allow the program to spread risk across both new and used equipment and is looked at much more favorably by program underwriters
  • Try to get a 50-50 mix if not more heavily weighted on the new

• Think about putting the used program on all the units you are looking to sell

  • Provides comfort to the program underwriter that you are not looking to cherry pick “DOGS” and develops a level of trust between you and them which, = BETTER PRICING

This is a great starting point to consider if you are an OEM or dealer looking for that little extra competitive advantage. Seem like a daunting task? Why not work with a provider who understands and specializes in this market? This will enable you to transfer this risk off of your balance sheets for this program while, at the same time, providing favorable terms for both you as an OEM as well as your customers (whether they be the dealer or end user)!

If you are a dealer looking at a program. Keep in mind that having your own construction equipment warranty program provides you with more control over your internal operations. There are many advantages dealers can realize by putting their own branded construction equipment warranty program together for their customers and foregoing the option of the OEM program but that is for future discussion. Make sure to check back on a post exclusively written for dealers on this topic. Happy selling!