How Much Does It Cost to Replace a Furnace?

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Almost time to buy a new furnace? Updating your home heating system can be a hefty investment.

If you’re wondering how much it might cost to replace that dusty old furnace, this post will help break down the costs.

We’ll discuss the cost of the unit itself, labor and installation expenses, warranties, and potential incentives and rebates that can help reduce costs. We’ll also look at alternative ways to heat your home and the price you can expect to pay for those.

New furnace unit cost

What type of system do you need?

If you’re interested in a natural gas furnace, these can cost $2,250 to $3,800 for an average model. Of course, if you get a higher end or super-efficient model, or if the installation will be complex, this price could rise.

Oil furnaces are far less efficient and can cost anywhere from $2,200 to $2,500. More efficient models can cost up to $10,000. These also tend to be much more expensive to operate and are dirtier than gas furnaces.

Electric heat can cost anywhere between $1,800 and $2,700 to install, but these aren’t a popular option. They usually don’t work very well in large spaces and can rack up energy costs quickly.

Efficiency weighs into the cost

How efficient your heating unit is will affect its cost. Generally speaking, it makes the most financial sense to get the most efficient model you can because of the decrease in utility costs over time.

Efficiency is measured with an Annual Fuel Utilization Efficiency (AFUE) rating. Older furnaces often have AFUE ratings around 80 percent, while many newer models come in around 90 to 95 percent. This 20 to 25 percent increase in efficiency can make a big difference in the long run.

Heating system size

Of course, getting the right size system for your home is very important. If you get a furnace that has a capacity to heat a smaller load than your big house, your furnace will run nonstop, you might never feel warm, and your energy bills will go through the roof.

Getting a furnace that’s capable of heating a much larger home than yours, on the other hand, will increase energy bills for the opposite reason. Your home will be blasted with too much heat all at once and the unit will shut off. You’ll most likely be uncomfortably warm, and then once the house cools down again, your system will kick back on full blast.

A good technician will be able to size your system accurately based on the heating load your house requires. The number of rooms in your house, the layout, insulation, and other factors weight into this.

Without proper load calculations, you could experience dramatic peaks and troughs in your heating costs.

Brand and zoning

Two more important factors that weigh into price are the brand of furnace and zoning for your house.

Different brands offer different features and benefits. Some things to look for in the brand you’re looking at might include

  • Variable-speed blowers
  • Blower motors
  • Air filtration
  • Heat exchanger
  • Venting

Zoned heating means calculations are made to place ducts and blowers strategically throughout the house for even heating from the basement to the second or third level of the home. Proper zoning can help you avoid hot and cold spots throughout the house.

Labor and installation

The labor and installation costs can vary a lot depending on the company, but it wouldn’t be surprising to pay around $75 an hour for the install.

Depending on how many technicians are involved and how complex the project is, and therefore how long it takes, your labor costs could add up to anywhere around half the cost of the project.


Knowing your options for warranties and extended service agreements can help to reduce the long-term costs of buying a new furnace. Having a warranty can save you from fronting the cost of replacement parts and labor from the manufacturer or a hired technician.

An extended service agreement with a service technician can help cover any costs not covered by your manufacturer’s warranty.

Incentives and rebates

Another reason to get a more efficient model is the reward of possible rebates and incentives. When you get an energy-efficient furnace, such as an Energy Star certified model, you’ll be eligible to apply for money back on your purchase.

These are often offered by your local utility company. They incentivize energy-efficient furnaces because of the reduced drain on the power grid.

Alternative ways to heat your home

The most energy-efficient way to heat your home is by installing a Dandelion’s geothermal heat pump system. It’s a two-in-one system that covers your heating and cooling needs for right around $18,000 to $25,000.

That’s a huge way to save on heating and cooling in and of itself. Beyond the package deal advantages of geothermal, you can also cash in on the 26 percent federal tax break on the cost of your system.

With efficiency ratings that blow traditional heating sources away, a heat pump is the clear economical winner. Apart from saving you money on your energy bills, geothermal is also the smarter solution for cleaner air and soil as a renewable energy source.

Not only can you feel better about not burning through resources and keeping things clean outdoors, but you can also rest assured that your indoors are cleaner and safer, too. No more burning oil or gas to stay warm. No more fumes. No more carbon monoxide risk.

You can also add equity to your home to increase its value, rather than simply installing a depreciating system to your home that burns money. So not only can you save money, you can also increase the chances of adding to how much you could earn back should you decide to sell one day.

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