Should I Buy a High-Efficiency Furnace?

by Steve Lander
High-efficiency furnaces save energy but cost more.

High-efficiency furnaces do a better job of transferring the heat they generate into your house instead of up their chimneys. This results in you using less energy to run them, potentially lowering your heating bill. In exchange for their ability to save you money, they're more mechanically complex and more expensive. Determining if they're worth installing depends on how you'll use them and on your priorities.

Furnace Efficiency Ratings

The U.S. Department of Energy has been setting Annual Fuel Utilization Efficiency ratings since 1987. As of the date of publication, any furnace sold in the United States must be at least 78 percent efficient, and most are 80 percent or better. High-efficiency furnaces are those that are at least 90 percent efficient. Given two furnaces of equal heat output rating, usually measured in British thermal units, the efficiency tells you how much heat goes into your house and how much goes up the furnace's chimney. If a furnace that has 40,000 BTU is 80 percent efficient, it means 32,000 BTUs go into your house and 8,000 BTUs go up the chimney. With a 95-percent efficient furnace, you get 38,000 BTUs of heat with only 2,000 BTUs going up the chimney.

Efficiency Boost vs. Output

To understand how much a high-efficiency furnace can, or can't, save you, look carefully at the manufacturer's claims. For example, the 95-percent efficient furnace is 75-percent more efficient than the 80-percent efficient furnace, because it's losing 75 percent less heat up the chimney. On the other hand, it only gives you 18.8 percent more heat and, as such, only reduces your energy bill by up to 18.8 percent.

Calculating Savings

If you know what you're currently paying for heat and you know what your current furnace's efficiency is, you can calculate how much you'll save by buying a high-efficiency unit. For example, if you currently spend $1,000 per year on heat with an 80-percent efficient furnace, you're getting $800 worth of heat and $200 worth of waste. To find your savings, divide the increase in efficiency by the new furnace's efficiency -- divide 15 by 95 if you are considering a 95-percent efficient unit. Your savings will be your bill multiplied by the savings percentage -- roughly $158 in this instance.

Payback Periods

To find your payback, divide the savings into the extra cost of the high-efficiency furnace. For example, if you could install a 80 percent furnace for $5,000 or a 95-percent efficient unit for $6,500, you'd divide the $158 in annual savings into the extra $1,500 to find that it will take nine and a half years for you to break even on the more expensive and more efficient furnace. When you calculate your payback, talk to your utility or your dealer to see if there are any special rebates that lower the cost of a high-efficiency furnace. If you can get a $1,000 rebate on the high-efficiency unit discussed here, your payback period on the $500 net cost would drop to three years and a couple of months. Then again, if conserving energy is important to you, you may also choose to buy a high-efficiency furnace simply as a matter of personal preference.

About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

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