How Much Does a Furnace Replacement Cost?

By: Brian Schutt  |  August 19, 2023

Updated Fall of 2023

As the combination of tariffs, manufacturing and materials impacts due to Covid, inflationary wage pressures increasing labor costs, we have revised the anticipated replacement costs for new furnaces and heating equipment below. These prices are meant to give a concept to pricing expectations, so you can be a more discerning shopper. Contact us for a free estimate if you’re in the Indianapolis area. 

With the extreme cold, we have been slammed with calls asking: How much does a furnace replacement cost? While it’s impossible to determine one specific furnace cost, below we offer several factors that impact the cost of new furnace, in order to make a more educated choice when faced with replacing your furnace.

What’s Your Energy Source?

The first thing to consider is where the energy for your furnace comes. The most common types of furnaces are powered by gas, which range from $3,500 to over $6,000 (depending on efficiency and size). If your home is all electric, you will most likely have a heat pump-air handler combination system. The heat pump is the outdoor system that functions like an A/C during summer, but reverses and is the primary heat source during the winter. The air handler is the indoor part of the system, and will have a backup “emergency” heat source that can be expensive to operate. Heat pump systems can range from $7,500 – $20,000 depending on efficiency and size.

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How Efficient are Your Furnace Options?

Furnaces with higher AFUE (annual fuel unit efficiency) are more efficient, but will also cost more at first. The more usage the furnace requires the quicker you will see a return on investment, and eventually will have spent less money because of the reduced operating costs.

Furnace efficiency is rated by percentages, with standard efficiency systems rated at 80 percent  —meaning 20 percent of the heat being generated gets lost through the flue. Newer models receive a rating of 90 percent or better, with some reaching 98 percent efficiency — resulting in lower utility costs.

What is the Size of Your Furnace?

Gas furnaces have a heat output that is measured in British Thermal Units (BTUs). Units with a higher BTU rating aren’t necessarily better for smaller homes, because they can hit your desired temperature too quickly and then shut off. This inconsistency can increase your energy bill significantly. Single gas furnaces typically start around 40,000 BTUs and get as high as 135,000 BTUs. Once a home exceeds around 5,000 square feet (and oftentimes even smaller), the home would move to having two systems rather than having the largest system.

How Much is a New Furnace?

This is completely dependent on the brand of furnace you choose to install, and the HVAC contractor you hire. Typically, a furnace installation will take the majority of a work day. Most residential heating and cooling contractors will have a 2 person team perform the installation. On average, the labor cost makes up about half of the overall price for the installation. Additionally, if the furnace installer finds that you need any repairs on ductwork or other components of your unit, installation costs may run higher.

These four things will affect the cost of installing a new furnace:

1. The Brand

This is entirely up to you and your budget. Once we understand your situation better, we can make a strong recommendation for which furnace brand works best for you. High-end brands are going to significantly increase the cost of your furnace replacement, and aren’t always necessary for long-term results.

2. Upgraded Features

Unless you live in very harsh winter temperatures, there is no need to go crazy with added features. Most furnaces come with everything they need in order to heat your home.

3. Location of Furnace

If your furnace is in a difficult spot to reach in your home, the installation time may take longer, which will increase your cost.

4. HVAC Contractor

Spend time researching HVAC contractors, speaking with them in person or over the phone and getting all of your questions answered about your furnace replacement. This will give you peace of mind knowing that your contractor is trustworthy and doing his or her best work for your home.

Pro Tip: Make sure to get a warranty in writing from your HVAC contractor. Ensure that it specifies exactly what gets covered, how long you are covered, and what the contractor will actually do to fix any issues you may experience.

The national range for a furnace installation is $2,500 – $6,000; however, this varies based upon all of the factors listed above. The most important thing you can do when preparing to replace your furnace is research. Home Advisor offers a nice resource on the average furnace replacement costs depending on your zip code.

If you’re looking for more information on the cost to replace your furnace and live in the Indianapolis area, check to see if you’re in our service area and give us a call at 317-203-8149. We’re happy to answer your questions about furnace replacement cost or furnace repair, and help in any way that we can.

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