January 5, 2010

High Efficiency Gas Furnaces are a Very Good Buy


Recently we had to replace a furnace in a rental. We paid about $2000 for the furnace and we didn't shop around for an efficient unit. Unfortunately rentals do not qualify for government energy savings tax credits or I'd have an extra incentive to get an efficient unit. Plus we were in a bit of a rush to get the heat back on considering its the winter. We really should have shopped around a bit more but $2000 seemed like a pretty reasonable price and honestly we rushed it. If it were my own home I'd have very likely gone for the high efficiency model.

In your primary home you can get a 30% tax credit from the federal government for a higher efficiency furnace so it can make getting the high efficiency unit a no brainer.

First Price example

Its a little hard to find pricing data on furnaces but I found a website that has some prices. Keep in mind this is just one example of prices and what you'll pay locally will likely differ. This is a discount website so their prices are lower than most I'm sure. So don't read much into the numbers please they are just for example sake. An 80% efficient 90k btu furnace is $833. To get a 95% efficient 90k btu unit you have to pay $1069. That is a $236 difference. You can get a 30% tax credit for the higher efficiency unit, so the government will pay $320 of that cost. With the tax credit the more efficient unit is actually cheaper.

80% unit = $833
95% unit = $1069 - 30% tax credit = $748.30

So the basic cost of the furnace itself is cheaper with the higher efficiency unit. Thats a no brainer to me. With the tax credit your out of pocket cost is lower for the better furnace so its the better option for sure.

Another price example

Costhelper says this about furnace costs: "Replacing an older gas furnace in a central heating system with a mid-efficiency (73-83 percent) unit when there's existing useable ductwork starts around $1,700 -$4,000, but depending on complexity and location can run $5,000 -$7,500 or more" and "A replacement high-efficiency (90-97 percent) gas furnace when there's useable existing ductwork starts around $2,500 -$6,000 but depending on complexity and location can be $7,000 -$10,000 or more."

The $1700 to $4000 range for mid efficiency and the $2500 to $6000 range for high efficiency is pretty broad range. But you're looking at a $800 to $2000 difference in the costs. Say you had a quote for $4000 for an 80% and a quote of $6000 for a 95% then thats a $2000 difference for the high end furnace. But with the tax credit you get 30% of the $6000 for $1500 (max credit). That makes the difference only $500.

You'll Also save Lots of Energy

Plus you have to remember the higher efficiency unit will save you heating costs as well. The 95% unit will save around 15% more than the 80% unit. So if your bill with the 80% unit would have been $1180 your 95% unit would be only $1000. Thats a $180 savings per year.

The energy savings are big.

Lets look at the savings long term. Consider this if you compare the cost of buying an 80% furnace versus a 95% furnace over 10 years:

80% furnace
purchase cost = $4000
Energy cost x 20 years = $1180 x 20 - $23,600
Total cost for 20 years = $27,600

95% furnace
purchase cost = $6000
Tax credit = -$1500
Energy cost x 20 years = 1000 x 20 = $20,000
Total cost for 20 years = $24,500

Savings over 20 years = $3,100

High efficiency gas furnaces are a great buy compared to mid or low efficiency units. Next time you're shopping for a new furnace make sure to look into a furnace with an efficciency rating >95% and take advantage of the government tax credits.

Photo by Brandon Stafford

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