Discussion:
I am getting my first service contracts

I am getting my first service contract customer. The guy wants a guarenteed maintainence agreement does anybody know if there is a template to outline covered or non covered items?
Thanks
  • Posted 16 Apr 2014 09:50
  • Discussion started by Dave T
  • New Jersey, United States
Showing items 1 - 6 of 6 results.
This type of agreement has been around for a long time. The key to your success in offering this type of agreement is how you calculate the monthly charge which needs to take into consideration the type of truck (Gas, LPG, Diesel, Electric etc) as well as the quality and durability of the truck, cost of parts, cost of labor, the severity of the application (clean warehouse, good or bad floors, used inside or outside or both etc), are the drivers trained well, do they have assigned trucks or not, distance from your service facility, if it is an electric truck do they have an adequate charging area and practice good battery usage (watering them when needed, not over discharging them etc.). What are the manufacturers suggested service intervals? How long and what is covered during the warranty period? What is covered and what is not (as was mentioned in a earlier post, usually abuse or improper use of the truck that results in damage is not covered. In many cases wheels and tires are not covered either. If you represent a major lift truck OEM, they should have some information that can help you in your calculations. If you do not represent an OEM you will have to approximate how many labor hours and parts dollars will be needed for breakdown repairs, PM's, travel time etc. The other cost is inflation. If you calculate your costs in today's dollars how much do you anticipate those costs increasing over the subsequent years of the contract? Inflation has been relatively low in recent years however that may not be the case going forward. A guesstimate would be 3 to 3.5% per year.
The other thing to make sure you do is to reserve a percentage of the money that you will collect in the early years of the contract to cover the higher maintenance costs that will occur in the later years. The more of these types of contracts that you sell will help you spread your risk out providing you have done the calculations correctly. There will always be some of these agreement that are winners and some that will be losers. The idea is to have more winners than losers!
As to contracts, if you represent a major OEM, they probably already have standard contract that you can use. If not, the best thing is to hire a lawyer to make sure you wind up with an agreement that will protect you and be fair to your customer.
At the end of the day full maintenance contracts can be (and usually are) profitable if they are managed properly. They also help prevent you competitors from taking the business away from you during the contracts duration.
I wish you the best with your customer!
  • Posted 23 May 2014 03:37
  • Reply by sport05
  • United States
Sport05
in my end of the world we call that a TM&R contract, generally setup for 5yrs or 10,000 hrs whichever comes first.
It generally covers all maintenance and repairs except for customer abuse, warranty or tires. There are certain high wear items it will not cover like brake shoes, batteries etc. unless it is a defect causing the failure.
As far as a form contract? i'm pretty sure these are tailored to each manufacturer criteria on a case per case basis but from what I've seen they are fairly similar across the board.
I'm not privy on how these contracts are calculated but i'm pretty sure the cost per month, the estimated maintenance and repairs are pre-calculated into what the customer pays per month and probably at a discounted flat rate.

Now if you are not a dealer that has the capitol to cover this or have factory backing i would not enter into this agreement as an independent service provider because in some cases i have seen situations where the job application was very hard on the trucks and there were alot of failures (not abuse) that created alot of repairs on the trucks and the cost was extensive over time. A case such as this would be financially devastating to you in the long run.
  • Posted 21 May 2014 20:35
  • Modified 21 May 2014 20:51 by poster
  • Reply by swoop223
  • North Carolina, United States
You've been swooped!
swoop223@gmail.com
The full service contracts is a bit special issue.
We have some number of them and usually in the contract, the range is strictly defined.
In your case, till the end of the factory warranty, the situation is pretty safe. You make the inspections, dealer makes the repairs.
If dealer claims the misuse or overwear, you can refer to this.
The other situation is when the units are after warranty.
There will be always some risk, but it's worthwhile to take it.
Simply specify the terms in the contract. What is excluded from monthly rate (like steering axle, when the terrain is rough, etc.)
We have elaborated the monthly rates for different trucks, applications, periods etc so now it's a routine.
The rates are based upon the factory data and experience, but the basics is that the total monthly rate (inspections and repairs excluding tyres, batteries, big attachments), for standard, not very "cruel" application (like in-out cold-store) shouldn't exceed x 2,5 rate for normal factory defined inspections.

It means, that if the monthly rate for inspections is 100$, the full service rate shouldn't exceed 250$.
  • Posted 21 May 2014 19:44
  • Reply by Karait
  • Poland
I know your deepest secret fear...
J.M.
How'd you make out w/ this? I'm working with a similar situation- Thanks
  • Posted 15 May 2014 23:27
  • Reply by bbforks
  • Pennsylvania, United States
bbforks (at) Hotmail (dot) com
Customers love technology- until they have to pay to fix it!
Nothing like that. I have a customer who purchased 4 new machines and he wants a guarenteed maintenance program. IE for ****$ I will maintain his vehicles for the length of finance and cover anything other than driver abuse and factory warranty, but it is a grey area on what we deem driver abuse and BEYOND NORMAL wear and tear. I know dealers offer these contracts because this is where the customer got the idea it gives the bean counters a fixxed budget so to say I guess anyway.
  • Posted 16 Apr 2014 22:16
  • Reply by Dave T
  • New Jersey, United States
What is a guaranteed maintenance agreement? Sounds like an I win you lose type of agreement.
  • Posted 16 Apr 2014 21:32
  • Reply by duodeluxe
  • United States
duodeluxe

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