Reuben's Home Inspection Blog

Are High Efficiency Furnaces Worth The Extra Money?

January 12th, 2010 | 9 comments

In my blog about window replacements, I made it clear that you’ll never get a return on your investment by replacing windows.   So what about furnaces?  If you’re replacing your furnace, is it worth installing a high efficiency furnace?  We’ll see.

Reuben's Old Furnace

Reuben's Old Furnace

I’ve already compiled the data from my gas bills going back to 2004 on my Minneapolis home, so this should be pretty simple to figure out.

  • I use an average of 520 therms per year to heat my house.
  • The average cost of gas in my area has been $0.90 / therm, making my average annual heating cost $468.
  • The average life expectancy of a furnace is about 15 – 20 years.
  • My current furnace is 80% efficient, meaning that 80% of the fuel that gets burned is turned in to heat.  The other 20% disappears up the vent.
  • For this example, I’ll use a 95% efficient furnace, which also qualifies for a tax rebate.  This should give me a 15% savings per year, as compared to an 80% efficient furnace.

Saving 15% per year on my heating costs equals out to $70/year.  If the furnace only lasted 15 years, I would end up saving $1,050 over the life of the furnace.  Because I would qualify for the tax credit, I’d also get 30% back from Uncle Sam.

I’ll assume that the 95% efficient furnace costs about $4000, including installation, but I’ll get 30% back, making the total investment $2800.  The 80% efficient furnace would cost about $2000.   This means I would end up paying about $800 more for the high efficiency furnace, but I would easily recoup those costs over the life of the furnace.

That seals the deal – my next furnace will be a high efficiency furnace.   If my next furnace lasts longer than 15 years or if gas prices go up in the future, I’ll save even more money.  The more you spend per year on heating costs, the faster the payback period.  Besides saving money, using a high efficiency furnace is a green thing to do.

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9 responses to “Are High Efficiency Furnaces Worth The Extra Money?”

  1. bob petersen
    January 17, 2010, 7:41 pm

    a 95% furnace is 18.8% more efficient than an 80% one, not 15% :)

  2. Reuben Saltzman
    January 18, 2010, 4:59 am

    No kidding? How does that work?

  3. Scott Sherk
    January 29, 2010, 9:29 am

    The math is not quite there you use the # .90 cents a therm but what about the .18 cents a therm that you get charged for distribution cost that is a hard cost to you also the furnace does only last 15 to 20 years in a home the picture that you show is not a new furnace so for safty you would replace that furnace. The cost of a 80% is about 3000.00 installed making the diference only $1000.00 to $1500.00 differnce if you get the tax credit of $1200.00 back and add in a $225.00 rebate form Xcell enery and at least a $200.00 MFG rebate you would be giving away $500.00 in personal $ and overp[aying the utility company an exrta 16% every month even on your small bill that is $74.88 every year and for 20 years is $1497.60 not to mention that the furnace does run on elecrticty and a standard motor like the one you have in your old furnace uses the equivelent of 500 to 615 watts of power every hour and the new high efficency furnaces use the equivelent of 87 watts per hour. A properly size furnace fan will run over 3000 hours a year in cooling and heating if you run your fan to circ air it is even more that is 1200 KW per year and at .11 cents a kw that is an additional 132.00 a year extra x 20years is $2640.00 in utility over payment. I am trying to understand your math but you might be steering people to make a costly discion If I total up the real cost it would cost you over $5762.26 to not upgrade the 1000.00 to the 95% eff furnace. i did not even get into the multi stage savings so it would be even higher.

  4. Reuben Saltzman
    January 29, 2010, 12:28 pm

    Hi Scott, thanks for reading! I had a little trouble following some of your sentences… I couldn’t tell where some began and ended. That’s one long paragraph you wrote, but I’ll try to respond as best as I can.

    The math is not quite there

    I disagree – the math is right on. Maybe you mean to say there are more variables that I didn’t take in to account?

    you use the # .90 cents a therm but what about the .18 cents a therm that you get charged for distribution cost

    My distribution costs have been factored in to the equation. Check out this shot of a recent bill – my ‘Cost of gas’ for this billing cycle was $0.34391 per therm, plus $0.13679 for the ‘Delivery Charge’. My total cost per therm for this billing cycle was $0.48552 per therm, but this was a particularly low bill. Some are much higher… and they all average out to $.90 per therm.

    that is a hard cost to you

    Again, it’s factored in.

    also the furnace does only last 15 to 20 years in a home the picture that you show is not a new furnace so for safty you would replace that furnace.

    Why would I replace this furnace for safety? It’s safe the way it is.

    The cost of a 80% is about 3000.00 installed

    According to who? I was quoted $2,050 for an Armstrong 80,000 btu furnace, including installation costs.

    making the diference only $1000.00 to $1500.00 differnce

    Not so – the difference would be what I put in my blog.

    if you get the tax credit of $1200.00 back and add in a $225.00 rebate form Xcell enery and at least a $200.00 MFG rebate you would be giving away $500.00 in personal $ and overp[aying the utility company an exrta 16% every month even on your small bill that is $74.88 every year and for 20 years is $1497.60

    Huh? I’m not pickin’ up what you’re layin’ down.

    not to mention that the furnace does run on elecrticty and a standard motor like the one you have in your old furnace uses the equivelent of 500 to 615 watts of power every hour and the new high efficency furnaces use the equivelent of 87 watts per hour.

    I’m not using my old furnace as a comparison. New 80% efficient furnaces will have the same type of variable speed fans that high efficiency furnaces have. You’re comparing apples to oranges.

    A properly size furnace fan will run over 3000 hours a year in cooling and heating if you run your fan to circ air it is even more that is 1200 KW per year and at .11 cents a kw that is an additional 132.00 a year extra x 20years is $2640.00 in utility over payment.

    Again, you’re comparing apples to oranges. New 80% efficient furnaces have newer variable speed fans.

    I am trying to understand your math but you might be steering people to make a costly discion If I total up the real cost it would cost you over $5762.26 to not upgrade the 1000.00 to the 95% eff furnace. i did not even get into the multi stage savings so it would be even higher.

    If I were comparing a new high-efficiency furnace to an 80% efficient furnace with an old single-stage blower fan that costs $3000, sure… but that’s not the case.

    i did not even get into the multi stage savings so it would be even higher.

    80% efficient furnaces are also available in multi-stage.

  5. V W
    November 3, 2012, 9:34 am

    You did not factor in any cost construction cost to the house of upgrading from a 80 to 95% efficient furnace. I’m no expert, but from what I’ve heard, it is not plug and play. A 95% has special piping that needs to lead to the exterior of the house and furnaces that are not hear the exterior of the house will have significant more cost to construct this piping.

  6. Reuben Saltzman
    November 3, 2012, 12:23 pm

    V W – I factored that in to my equation.

  7. Duane Jaeger
    January 15, 2013, 8:28 am

    Thanks for this analysis! With the 80% phase-out deadline coming soon, I need to decide whether to to replace my still working fine 11 year old 80% furnace.

    Based on your numbers, I should run it until it dies. Maybe by the time I need it replaced costs for more efficient units will have come down.

  8. justin c
    May 11, 2013, 8:14 am

    The rate in which you recoup your money varies from house to house , temp that you find comfortable, how well the house is insulated, properly sealed, insulated and installed ductwork as well as a properly sized system plus more i know I’m forgetting. If you miss one of these factors it’ll take longer to recoup your money. I’m a hydronic installer but the same basic rules apply. I’ve actually talked customers out of installing a new boiler because the house was so poorly insulated the idea of me installing a 12k system was laughable. But for a situation such as yours I can hear my HVAC guy saying you need a single stage 90% + they’ve been around for ever and recommends service every one to two years depending on the cleanliness of the house, secondary filters , humidifier dehumidifier, how often the filter is changed or cleaned. I know this is an old thread but the public should know that high efficiency boilers, furnaces especially water heaters (for most people their not worth it) are not for everyone.

  9. Scott P
    December 30, 2013, 1:57 pm

    justin c – I am confused why a poorly insulated house would not benefit from a higher efficiency furnace. I was under the impression that if your house is poorly insulated you would need to run the furnace more often to keep it warm.

    Wouldn’t running the furnace more often to keep a poorly insulated house warm use more fuel? Wouldn’t a more efficient furnace use less fuel to provide the same heat? I would think the less insulation you have the more valuable a high efficiency furnace would be due to the need to run the furnace more often.

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