Why Does It Cost So Much To Install A Furnace? And 3 Ways To Cut Costs

Are you replacing your furnace and feeling sticker shock? That's not surprising these days and why many ask, "Why does it cost so much to install a furnace?"

The decisions you make on what, how, and who will install your new furnace make a big impact.

DP why does it cost so much to install a furnace

Installing a new gas furnace  requires planning and research. The four main considerations that drive the cost up of a furnace installation are the furnace efficiency, furnace features, when you buy and the quality of the installing contractor. The upfront price of the furnace and the installation cost are both significant, but if you choose wisely, there are ways to save and get your money’s worth in the long run. 

You'll probably be surprised to learn that the cost of a new heating system has little to do with which brand you choose.

Over the past 30+ years, I've sold and installed most major brands of furnaces. They're all pretty similar with regards to price and build quality.

That's not to say that some don't try to make themselves "look" more expensive with marketing. Manufacturers believe that if they're perceived as being more expensive, people will think their products are better. Contractors often use this excuse to justify why they charge more than other contractors. However, it’s simply not true.

So when people ask, "why is it so expensive to replace a furnace?", it boils down to your choices in four important areas.

  • Furnace Efficiency
  • Furnace Features
  • When To Buy A New Furnace
  • Picking The Contractor

So let’s take a closer look at the areas that do affect new furnace cost and ways you can save money.

#1 Furnace Efficiency

According to the US Department of Energy, furnaces and broilers’ efficiency is gauged by its annual fuel utilization efficiency (AFUE) shown in percentages. The higher the AFUE percentage of a furnace, the more warmth it can produce from each unit of gas heat.

As an example: A 90% AFUE yields 90 BTUs of heat for every 100 BTUs of natural gas it consumes.

It is mandated by the regulatory commissions such as Federal Trade Commission for manufacturers to display on plain sight their products AFUE for consumers to compare between models whether they would want a standard efficiency or high-efficiency furnace.

Standard Efficiency vs. High Efficiency Furnace

There is a long battle between standard efficiency and high-efficiency furnaces. You might ask: “Why even choose? High-efficiency should be better, right?”

Not always. Basically, similar to the sizing of a furnace, the furnace efficiency should be tailored for you depending on your home’s unique requirements.

A standard-efficiency gas furnace offers 80% to 85% AFUE, and the remaining 20% or 15% of heat is lost as waste exhaust. It specifically utilizes open combustion so it can draw energy from natural gas. 

80% efficient furnaces are the cheapest to buy and will vent similarly to a furnace from thirty years ago. One drawback is that they're usually louder than the 90% models. They're not noisy but they're louder than their 90% big brothers.

Meanwhile, a high-efficiency gas furnace gives you 90% to 95% AFUE or can even go as high as 98.5%. A furnace with a 90% AFUE might cost $500-$1,000 more than a comparable unit with an 80 percent AFUE. Higher efficiency furnaces also produce an acidic exhaust gas so they will need to be vented with PVC pipe to the outside of your home and not use the chimney.

How To Cut Costs With Furnace Energy Efficiency

When it comes to determining how efficiency will affect a new furnace cost, it’s best to choose based on your climate. The colder your climate, the better off you’ll be with a 90+% high-efficiency gas furnace. But just because it's more efficient doesn't mean that it's the right choice for you.

Don't spend the extra money if you don't need too.  The initial extra expense will be returned in utility savings within three to seven years. But if initial cost is the biggest factor for you then no matter where you live, a standard-efficiency gas furnace is a good choice.

#2 Expensive Furnace Features

There are a few added features on certain models that effect the cost of new furnace. The two features most often pushed are two stage furnaces and variable speed furnaces.

These features can be complicated so we won't go into them here but if you want to know more read these two articles.  Is A Two Stage Furnace Worth It? and Are There Benefits to a Variable Speed Furnace?

How To Cut Costs From Furnace Features

Most features will increase the initial cost of furnaces considerably and they will continue to be expensive to maintain. They're designed to be difficult to repair once they've broke down and ridiculously expensive once the warranty runs out.

One of my biggest complaints about these features is how little they impact the comfort in your home. They talk big in the marketing but few homeowners notice any difference in comfort. 

A homeowner with these features will experience costly repairs and a much shorter equipment life. Any wonder why manufacturers and contractors are offering incentives and discounts on them?

#3 When To Replace A Furnace

You might think this section is all about the secret month or time of year to buy a furnace when it will be cheaper. The truth is that doesn't really exist.

Prices for furnaces are affected by two factors. Manufacturers and HVAC contractors. Neither has a reason to lower their price during any season. Most manufacturers increase their product price at least once a year. And demand stays pretty steady throughout the year which gives little incentive for price drops.

HVAC Contractors usually have more work than they can handle all year so they have little reason to drop their prices. Although they may say that they do.

How To Cut Cost By Timing Your Furnace Installation

There really isn't an "off" season per se but there can be some benefits of replacing your furnace in the Spring/Summer seasons.

One major mistake homeowners make is buying a furnace after the existing one is already showing signs of wearing out. Some even wait until their old furnace has stopped working completely before searching for a replacement. BIG MISTAKE!

Waiting until the last minute—when you really need a working furnace—will increase the likelihood that you'll make a decision you’ll regret. If you're so desperate for a quick fix, you won't have time to consider your options.

Careful planning and research are essential when buying a furnace, and more importantly, picking a contractor to install the furnace. This should save you from being forced into buying a furnace that is too expensive yet does not fit your needs at all. It can also prevent you from being swayed by marketing tactics by scheming manufacturers and cunning contractors.

Of course, not every furnace manufacturer and HVAC contractor is out to get you (not all, but there are a handful!) But you have a good chance of being easy prey to crafty salespersons if they detect your urgency to buy a furnace. Some will even jack up the price knowing you need a new furnace right away.

On average, a furnace lasts between 15 and 25 years. Some gas furnaces can last 35 years, but those are the exceptions, definitely not the rule.

As your furnace begins to near the end of its life expectancy, start spending some time researching your options. Start making inquiries about trusted contractors in your area.

While you should spend some time researching specific new furnaces and the energy efficiency choices that are available, the majority of your research time should be focused on the contractor.

#4 The Contractor Cost

If you have read our article on the best furnace brand, you already know that we debunked the idea that there is actually such a thing. All brands are in equal standing as they have almost all the same parts and are even sometimes produced by the same HVAC giants.

The most significant thing you can decide on and would impact how long your furnace will last is your contractor. No matter how expensive and high-end your choice of furnace is, if you have not given much thought to who will install it, you are already setting yourself up to fail.

A highly skilled and experienced contractor, on the other hand, can give you a quality installation on a "no-name" brand and get you a reliable furnace that can serve you for many years. They will calculate and size the unit and the ductwork properly according to your home heating needs, so you won’t have to be pushed to buying a bigger more expensive furnace or get stuck in an undersized duct system.

A furnace is unlike any other appliance in your home. Buy in any other appliance and you'll plug it in and watch it go. But that's not true with a new furnace.

This equipment needs to be installed properly. Then it needs to be set up to make sure it operates as designed. All of this needs to be done by a contractor that knows what they're doing.

Hiring an experienced company to replace your furnace will save you time and money. It's also the part where I see people making the most common mistakes.

Here’s an example: Contractor #1 prices a furnace installation at $3000. Contractor #2 prices the same job at $4500. Most people would be quick to conclude Contractor #2 is trying to rip them off. Often though, the lower priced contractor is cutting corners. Leaving out proper design, labor and materials.

These cuts remove what would have improved your furnace’s performance, reduced future repair costs, and extended its lifespan. Contractor #1 is really taking advantage of you.

Prices vary widely because they depend largely on the quality of the installation job. But just because a contractor is priced higher doesn't necessarily mean they're giving you better quality of work.

It’s hard to find the best contractor. Many people choose a company with the snazziest marketing or the one with the lowest price. Both tend to leave people frustrated.

So it bears repeating: Finding a quality contractor is the most important factor for the overall cost and quality of a furnace installation.

How Much Should It Cost To Install A Furnace?

Once your gas furnace reached that 20-30 year-old lifetime, you do not have to wait it out until it develops aging problems and malfunctions. Take advantage of the time you still have to explore for a replacement that would fit your budget, instead of frantically searching for a new gas furnace when it fails in the middle of winter.

Factoring in the installation cost, you are looking at $3,500 and $8,000 for equipment, ductwork, labor, and other materials.

Needless to say, a new gas furnace is pretty costly and would dictate how your overall home comfort will be for the next 12 years or so. “Choose wisely” may be almost an understatement.

Conclusion

It doesn't matter when you buy a furnace or even the brand, cost will be determined by the furnace efficiency, furnace features and the installing contractor. But pay most attention to your choice of contractor.

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