Replacing a furnace costs $2,800-$6,500 for most homes. The price depends on efficiency rating, size, and whether you need ductwork modifications. A 96% AFUE condensing furnace saves $250-$400 annually compared to an 80% model, paying for the upgrade in 5-8 years. Federal regulations in 2028 will require 95% minimum efficiency, making high-efficiency models the smart choice today.
When to Replace vs Repair Your Furnace
Age matters most in the replacement decision. Furnaces last 18-25 years with proper maintenance. If yours is over 15 years old and needs major repairs, replacement makes more financial sense than fixing it. You're buying time on equipment already near the end of its lifespan.
Apply the $5,000 rule: multiply the repair cost by the furnace's age. If the result exceeds $5,000, replace it. A $350 repair on a 12-year-old furnace equals $4,200 (keep it). A $450 repair on a 16-year-old unit equals $7,200 (replace it). This formula accounts for the likelihood of additional repairs as equipment ages.
Frequent repairs signal replacement time. One repair every few years is normal. Multiple repairs within 12 months means underlying deterioration. Heat exchangers crack. Blower motors fail. Ignition systems wear out. Each repair buys temporary relief while your furnace continues aging. At some point, you're throwing good money after bad.
Rising heating bills indicate efficiency loss. Compare current bills to 3-5 years ago, accounting for fuel price changes. A 20-30% increase suggests your furnace is working harder than it should. Heat exchangers develop internal cracks that reduce efficiency. Blower motors slow down. Dirty components restrict airflow. Eventually, efficiency drops below the point where repairs make economic sense.
Uneven heating points to capacity problems. Some rooms stay cold while others overheat. The furnace can't distribute heat evenly anymore. This happens when blower motors weaken, ductwork deteriorates, or the unit is simply undersized for current needs. Replacement with properly sized equipment solves comfort problems repairs can't fix.
Understanding AFUE Efficiency Ratings
AFUE (Annual Fuel Utilization Efficiency) measures how much fuel becomes heat versus waste. An 80% AFUE furnace converts 80 cents of every gas dollar into heat, venting 20 cents up the chimney. Current minimum is 80% AFUE nationwide. Starting January 1, 2028, new regulations require 95% minimum in northern states.
The efficiency jump from 80% to 95% AFUE cuts heating costs by 18.75%. For a home spending $1,200 annually on gas heat, upgrading saves $225 per year. Over 20 years, that's $4,500 in savings. The furnace upgrade costs $800-$1,500 more than basic models, paying for itself in 3.5-6.5 years through fuel savings alone.
Mid-efficiency furnaces (90-92% AFUE) offer a middle ground. They cost $400-$800 more than 80% models while delivering 12-15% lower heating bills. These work well in moderate climates where heating demand is modest. But in cold regions where furnaces run 6-7 months yearly, the full jump to 95-98% AFUE makes more sense.
Condensing furnaces (95-98% AFUE) extract maximum heat from combustion gases. They cool exhaust so much that water vapor condenses out, requiring special venting. PVC pipe replaces metal chimneys. A condensate drain removes the water. Installation is more complex but the efficiency gain is substantial. In regions with $1.50/therm gas and high heating demand, annual savings reach $300-$450.
Sizing Your New Furnace Correctly
Proper sizing requires Manual J load calculations. Contractors measure your home, accounting for square footage, insulation R-values, window areas, ceiling heights, air infiltration, and local climate. These calculations determine exact heating requirements in BTUs per hour. Guessing or using rules of thumb leads to over or undersizing.
Oversized furnaces waste money and comfort. A 100,000 BTU furnace in a home needing 60,000 BTU will short-cycle, running for 5-8 minutes before shutting off. This prevents the ductwork from warming up properly. It also increases wear on ignition components and blower motors. You end up with uneven temperatures and higher equipment failure rates.
Undersized furnaces run constantly on cold days, struggling to maintain temperature. They never catch up when outdoor temps drop below design conditions. Constant operation wastes fuel and creates wear. Your home stays uncomfortably cool during the coldest weather. And you're burning extra gas trying to heat with inadequate capacity.
Common sizing ranges based on square footage and climate: 1,200-1,500 sq ft typically needs 40,000-60,000 BTU. 1,500-2,000 sq ft requires 50,000-80,000 BTU. 2,000-2,500 sq ft needs 70,000-100,000 BTU. But these are rough estimates. Poor insulation can increase requirements by 20-40%. Good insulation cuts them by similar amounts. Pay for proper load calculations ($200-$400) to get sizing right.
Single-Stage vs Two-Stage vs Modulating
Single-stage furnaces operate at full capacity until reaching temperature, then shut off completely. These budget-friendly models cost $1,200-$2,400 installed. They work fine in mild climates with modest heating needs. But temperature swings of 3-5°F are normal. You feel blasts of hot air followed by periods of cooling as the furnace cycles.
Two-stage furnaces run at 65% capacity most of the time, ramping to 100% only on the coldest days. This low-fire setting maintains more consistent temperatures with 1-2°F swings instead of 3-5°F. The furnace runs longer cycles, warming ductwork thoroughly and distributing heat evenly. Add $400-$800 to equipment cost but the comfort improvement is immediately noticeable.
Modulating furnaces adjust output continuously from 40-100% capacity. They match heat production to heat loss precisely, maintaining temperature within 0.5°F. These premium units cost $2,200-$4,500 more than single-stage models. Operating costs drop 15-20% because the furnace never overshoots temperature. They make sense for tight, well-insulated homes where precision matters.
Variable-speed blowers pair with two-stage and modulating burners. Instead of on/off operation, the blower motor ramps speed up and down smoothly. This creates quieter operation (under 50 decibels versus 65-70 for standard blowers). It also improves air filtration by running longer at lower speeds, giving filters more time to capture particles. Add $300-$600 to cost but gain substantial comfort and efficiency benefits.
Gas vs Electric vs Oil Furnaces
Natural gas furnaces dominate where gas service exists. Fuel costs $1.20-$1.80 per therm in most regions. A home using 800 therms annually with a 95% AFUE furnace pays $960-$1,440 for heating. Installation costs $2,800-$6,500 depending on efficiency and features. Gas burns clean, heats quickly, and provides reliable comfort.
Propane furnaces work identically to natural gas models but burn propane instead. They're common in rural areas without gas service. Propane costs $2.50-$3.50 per gallon ($1.75-$2.45 per therm equivalent). That same 800-therm heating season costs $1,400-$1,960 with propane. Higher fuel costs make heat pumps attractive alternatives in propane regions. But if you already have propane service, furnaces remain practical.
Electric furnaces use resistance heating elements like giant toasters. They cost less upfront ($800-$1,800 installed) and achieve 95-100% efficiency since all electricity becomes heat. But operating costs are brutal. At $0.14/kWh, that 800-therm heating season costs $2,520-$2,940 with electric resistance. Only makes sense in very mild climates where heating demand is minimal.
Oil furnaces survive in the Northeast and parts of the Midwest. Heating oil costs $3.00-$4.00 per gallon ($2.10-$2.80 per therm equivalent). Annual heating costs run $1,680-$2,240 for typical usage. Modern oil furnaces achieve 85-90% AFUE. They're reliable and powerful but require oil tank maintenance and delivery scheduling. Many oil users switch to heat pumps or propane when replacing equipment.
Installation Costs and Timeline
Basic furnace replacement costs $2,800-$4,200 for 80% AFUE models. Mid-efficiency 92-95% AFUE units run $3,600-$5,200 installed. Premium 96-98% AFUE condensing furnaces with two-stage or modulating burners cost $4,800-$6,500. These prices assume straightforward replacement using existing ductwork, venting, and electrical.
Condensing furnace installations add complexity. PVC venting costs $300-$600 to install through sidewalls or roofs. Condensate drain lines run $150-$300. If your old furnace vented through a chimney, expect $800-$1,200 additional for proper condensing furnace venting. This one-time cost provides decades of higher efficiency.
Ductwork modifications add $800-$2,500 to installation. Older homes often have undersized ducts or poorly sealed joints. Modern high-efficiency furnaces need proper airflow to perform correctly. Contractors should test duct sizing and seal leaks. Ductwork that loses 30% of heated air wastes your money regardless of furnace efficiency.
Installation takes 6-10 hours for straightforward replacements. Two-person crews complete most jobs in one day. Condensing furnace installations requiring new venting take 8-12 hours. Ductwork modifications add another 4-8 hours depending on accessibility and extent of work. Schedule installation during mild weather when heating isn't critical. October and April are ideal months.
Permits cost $50-$250 depending on jurisdiction. Contractors typically handle permit applications and inspections. Some areas require electrical permits separately. Factor permit costs into your budget. Skipping permits creates problems when selling your home and may void equipment warranties.
Choosing the Right Contractor
Get three quotes from licensed HVAC contractors. Compare equipment brands, efficiency ratings, warranty coverage, and installation scope. The lowest bid often skips important items like duct sealing, proper venting, or thorough testing. The highest bid may include unnecessary premium features or padding. The middle quote with complete installation details usually provides the best value.
Verify licensing and insurance. Every state requires HVAC contractor licensing. Ask for license numbers and verify them with your state board. Contractor insurance protects you if someone gets hurt during installation or equipment damages your home. Request certificates of insurance showing general liability and workers' compensation coverage.
Check references and reviews. Ask for three recent customers with similar installations. Call them. Ask about timeliness, cleanliness, communication, and whether they'd hire the contractor again. Search online reviews on Google, Yelp, and Better Business Bureau. Patterns matter more than individual complaints. Every contractor gets occasional bad reviews. Look for consistent themes.
Understand warranty coverage. Equipment manufacturers provide parts warranties ranging from 5-20 years depending on model. Registration is required within 60-90 days of installation. Labor warranties come from contractors, typically 1-2 years. Some contractors offer extended labor warranties for additional cost. Know what's covered and for how long before signing contracts.
Read the contract carefully. It should specify exact equipment model numbers, AFUE ratings, installation scope, total cost, payment schedule, permit responsibility, and completion timeline. Vague language like "high-efficiency furnace" isn't sufficient. You want specific model numbers matching quoted prices. Changes to the scope require written change orders with price adjustments.
Federal Tax Credits and Rebates
The Inflation Reduction Act provides tax credits for high-efficiency heating equipment through 2032. Gas, propane, and oil furnaces don't qualify for these credits. But if you switch to a heat pump during furnace replacement, you can claim 30% back on equipment and installation costs, capped at $2,000 annually.
A $6,500 heat pump installation qualifies for a $1,950 credit, reducing net cost to $4,550. Heat pumps provide both heating and cooling, often eliminating the need for separate AC. They're particularly attractive in propane and oil regions where fuel costs are high. The system must meet Energy Star requirements (typically 16+ SEER2 and 8+ HSPF2) to qualify.
Utility rebates vary by location and fuel type. Many gas utilities offer $100-$500 rebates for high-efficiency furnace installations. Electric utilities sometimes provide $500-$1,500 for heat pump conversions from gas or oil. Check DSIRE (dsireusa.org) for programs in your area. These rebates stack with federal credits when applicable.
Low-income households qualify for additional assistance. Weatherization Assistance Programs provide free heating equipment replacement to eligible families. Income limits vary by state but typically range from 150-200% of federal poverty guidelines. Contact your state energy office for program details. Many areas have waiting lists, so apply early.
Financing Your Furnace Replacement
Most HVAC contractors offer financing through partnerships with banks and finance companies. Rates vary based on credit score and term length. Promotional 0% APR offers typically last 12-24 months. Longer terms at 6-15% APR spread payments over 3-7 years. Compare financing offers carefully, including origination fees and prepayment penalties.
Budget Heating partners with Affirm, Sezzle, and PayPal Credit for flexible payment options. Affirm offers 6, 12, and 24-month plans with rates based on creditworthiness. Sezzle splits purchases into four interest-free payments over six weeks. PayPal Credit provides promotional periods with deferred interest. Most customers get approved online within minutes.
Home equity loans or lines of credit offer lower interest rates for homeowners with equity. Rates typically run 7-10% depending on credit and loan-to-value ratios. Interest may be tax-deductible (consult a tax professional). But you're securing the loan with your home, creating foreclosure risk if you can't repay. Use home equity financing only if you're confident in your ability to make payments.
Energy efficiency loans from utilities or local governments provide below-market rates for qualifying improvements. Some programs offer 0-3% APR specifically for HVAC upgrades. Payments sometimes get added to utility bills, spreading costs over 5-10 years. Income restrictions and property requirements vary. Contact your utility or city energy office for program availability.
Preparing Your Home for Installation
Clear the area around your existing furnace. Move storage boxes, laundry, and other items at least 4 feet away. Installers need space to work safely and bring equipment in and out. A cluttered workspace slows installation and increases the chance of accidents. Take 30 minutes the day before to clear the area.
Ensure clear access to your home. Installation crews carry heavy equipment (furnaces weigh 100-200 pounds). They need a clear path from the truck to the installation location. Remove rugs, furniture, or decorations blocking doorways and hallways. Protect finished floors with cardboard or drop cloths. Professional crews typically provide floor protection, but it doesn't hurt to add your own.
Secure pets and children during installation. Workers will be in and out of your home for 6-10 hours. Doors stay open. Tools and equipment create hazards. The safest approach is removing pets and children from the house entirely. If that's not possible, confine them to a room far from the work area. Communicate pet locations to installers so no one gets surprised by a protective dog.
Plan for no heat during installation. Even straightforward replacements leave you without heating for 4-6 hours. Condensing furnace installations with venting changes can take all day. Schedule installation during mild weather when loss of heat isn't dangerous. Have backup plans if temperatures drop unexpectedly. Space heaters work for small areas but can't replace whole-house heating.
Post-Installation Checklist
Walk through the installation with the crew before they leave. Have them explain the new thermostat if it's different from your old one. Understand how to change the filter (where it is, what size, how often). Learn where the emergency shutoff switch is located. Get the installer's card with the service number for any post-installation questions.
Register your equipment warranty within 60-90 days. Most manufacturers require registration to activate extended warranties. You'll need the model number, serial number, and installation date. Keep these written down somewhere accessible. Take photos of the data plate on the furnace for your records. This makes warranty claims easier if problems develop.
Schedule a follow-up inspection for mid-season. About 4-6 weeks after installation, have the contractor return to verify everything is working correctly. They should check that the furnace is cycling properly, temperatures are even throughout the house, and there are no unexpected noises or odors. Many contractors include this follow-up in the installation price.
Change your first filter sooner than normal. New furnaces release dust and debris from manufacturing that accumulates in the first filter. Check it after 2 weeks instead of the usual 30-90 days. Replace if dirty. This protects your new equipment and ensures proper airflow from day one.
Maintaining Your New Furnace
Annual professional maintenance costs $120-$180 and should happen every fall before heating season. Technicians clean burners, test ignition systems, check gas pressure, verify venting, test safety controls, measure temperature rise, and inspect heat exchangers. This maintenance prevents 80% of furnace problems and keeps your warranty valid.
Change filters according to type and conditions. Basic fiberglass filters need monthly replacement. Pleated filters last 2-3 months in clean homes without pets. MERV 11-13 filters go 3 months under normal conditions. Check monthly by holding the filter up to light. If you can't see through it easily, replace it. Cost is minimal ($15-$30) compared to damage from restricted airflow.
Keep vents and returns clear. Don't block supply registers with furniture or curtains. Never close more than 20% of vents even in unused rooms. This throws the system's balance off and reduces efficiency. Keep the return vent area clear. It needs to draw air freely. Blocked returns cause overheating and potential safety shutdowns.
Monitor for unusual behavior. Listen for strange noises (rumbling, squealing, scraping). Watch for yellow burner flames (should be blue). Note any gas odors or burning smells. Pay attention to frequent cycling or inability to maintain temperature. Address problems immediately. Small issues caught early cost $150-$350 to fix. Ignored problems escalate to $800-$1,500 repairs or complete equipment failure.
