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5 factors that drive furnace replacement costs and heat pump installation costs

July 13, 2023

Learn about the five factors that drive furnace replacement costs, heat pump installation costs and AC installation costs.



When it comes to purchasing or upgrading to a new air conditioning (AC) system, furnace or heat pump, some common questions that arise are, "How much should this new HVAC installation cost?" and "what are the average furnace replacement costs?" An HVAC bid can vary widely, ranging from a few thousand dollars to upwards of $15,000 to $40,000. Ultimately, the best solution for a home will be comprehensive - taking many features of the building structure and system into account. Understanding the sources of these costs is crucial for homeowners and businesses alike. In this article, we will explore the factors that influence the average furnace replacement costs, as well as the AC and heat pump installation costs, shedding light on the reasons behind the price range in the HVAC industry.

1: Equipment Type

The cost of a new system is significantly influenced by the type of equipment and technology incorporated. High-efficiency units equipped with advanced features such as variable-speed compressors, smart thermostats, and zone control systems tend to be more expensive. While these advanced technologies enhance energy efficiency, comfort, and control, they also contribute to the overall cost of the system.

2: System Capacity and Size

Properly sizing an HVAC system is crucial for optimal performance and energy efficiency. The size and capacity of the system required for a particular space can impact the AC or heat pump installation costs, or furnace replacement costs. An undersized air conditioning unit may not adequately cool the area, leading to inefficiency and discomfort. Conversely, an oversized system can result in short cycling and increased energy consumption - in fact bigger often isn’t better.

This is a common misconception - while “bigger being better” is true in many areas of life (e.g., slice of pie, profits, etc.) it isn’t true in HVAC. The right sized system for home may be much smaller than what’s currently installed.

To ensure the right-sized system, HVAC professionals perform detailed load calculations that go far beyond the rules of thumb. These calculations are vital and take into account factors like square footage, insulation, and climate conditions.

3: Solution Type: Ductwork and Installation Complexity

The condition of existing ductwork and the complexity of installation play a significant role in AC costs. When ductwork is undersized or in poor condition (with high leakage), it makes your system work hard. In fact, ducts leaking just 20% of the conditioned air passing through them cause your system to work 50% harder.

In some cases, ductwork may require repairs or modifications to ensure proper airflow and efficiency. Typical duct systems may lose up to 40% of your heating or cooling energy leading to an uncomfortable, and expensive, experience.

Challenging installation scenarios, such as multi-story buildings or complex architectural layouts, may require additional labor and materials, contributing to the overall AC or heat pump installation costs.

4: Quality of Components and Warranty

The quality of components used in an air conditioning unit, heat pump or furnace can affect its price. Premium brands that offer durable and high-performance components tend to have a higher price tag. Additionally, the warranty provided by the manufacturer or HVAC contractor can influence the heat pump installation costs or furnace replacement costs. Longer warranties typically reflect higher-quality equipment and services, providing peace of mind but also adding to the upfront cost.

5: Contractor Expertise and Service

The expertise and reputation of the HVAC contractor can also influence the cost of a new HVAC system. Established contractors with a track record of quality installations and exceptional service, may be more expensive for their expertise. However, working with the right contractor will ensure each home experiences proper installation, system longevity, and reliable after-sales service, making it a valuable investment in the long run.


Determining the installation costs of an AC system, or the average furnace replacement costs, involves considering several factors. Advanced equipment and technology, system capacity, ductwork requirements, quality of components, and contractor expertise all contribute to the price range of HVAC systems. By understanding these factors, homeowners and businesses can make informed decisions and select a system that meets their specific needs and budget. When it comes to AC costs, it's essential to consider the long-term benefits of energy efficiency, comfort, and peace of mind that a well-designed and professionally installed system provides. At Conduit Tech, we’re privileged to work with some of the best contractors in the country. If you’re a contractor interested in learning more about how we can support you in building the right solutions for every home, book a time to meet with us.