If you need new heating and air-conditioning equipment, you want the best possible price on the highest-quality replacement. If you want to add central air conditioning or extend a heating or cooling system, it is even more important to make the right decisions.

How well a new system performs, and how much it costs, depends heavily on how carefully you think through the design.

Use our ratings of area heating and air-conditioning contractors to identify several top-rated candidates and invite them to your home to offer written proposals. Ask each to explain whether it would be desirable to have more than one separate heating or cooling system and more than one thermostat, whether you’d benefit greatly from features such as variable speed blowers, how ducts will be run, where and how a condenser unit and the blower will be mounted, how to access equipment for maintenance and filter replacement, and other design questions.

Good answers to these questions will affect how much noise you hear; how quickly and uniformly your home is cooled or heated; how troubled you’ll be by drafts; energy consumption; how disruptive the installation process will be; how much closet, attic, or outdoor space the system will require; how disfiguring the ducts and air-supply registers will be; and maintenance.

Ask each company which makes and models of equipment it will install, and their capacity, energy efficiency, and sound ratings. Most companies can offer equipment at several different quality levels; ask them to explain the pros and cons of the alternatives.

Getting the Right Size

Make sure that the equipment you buy is the proper size for your home. Undersized units won’t efficiently heat or cool spaces, but bigger is definitely not always better. Oversized units cost more and cycle on and off constantly, thus boosting utility bills, making more noise, requiring more frequent maintenance, and dying sooner.

The size of heating and cooling units is described as their capacity. For furnaces and heat pumps, capacity is the amount of heat a unit can generate as measured in British thermal units (BTUs). For air conditioners (and heat pumps operating in cooling modes), capacity is measured in BTUs but expressed as the amount of heat the units can remove. The capacity of cooling units is usually described in “tons,” where one ton equals 12,000 BTU—for example, a 36,000-BTU air conditioner is a “three-ton unit.”

If you have expanded your home, or finished a previously un-air-conditioned space, or your old equipment didn’t sufficiently heat or cool all parts of your home, companies should perform a load calculation to determine the right size of equipment to install. (If you are only replacing old equipment that had adequately heated and cooled your home, new calculations probably are unnecessary.)

When calculating equipment size, in addition to taking into account your home’s square footage and the size of the previous equipment, an installer’s proposal should consider the area’s climate, the home’s insulation levels, air leakage levels, and the energy efficiency of the equipment options. Companies should perform load calculations using the Air Conditioning Contractors of America’s “Manual J” to size equipment and “Manual D” for significant ductwork.

Getting Energy Efficiency

More efficient equipment costs more money. For many homeowners, concern for the environment and worries about finite energy sources are sufficient motivation for laying out extra cash; but for those more concerned with personal dollar cost, three other factors sweeten the pot: lower power bills, utility rebate programs, and tax incentives.

The energy efficiency of heating and cooling equipment is measured in a number of ways, depending on the type of equipment and/or its function.

  • Furnaces (both gas and oil) are rated by annual fuel utilization efficiency (AFUE). AFUE ratings for new furnaces range from 80 to about 98, higher being more efficient. The simplest way to explain the AFUE rating is to say that a furnace with an AFUE rating of 90 uses 90 percent of its fuel efficiently and wastes 10 percent.
  • The efficiency of both air conditioners and heat pumps in cooling mode is measured by seasonal energy efficiency ratio (SEER). For new central air conditioners and heat pumps, SEER ratings range from 13 to about 21, higher being more efficient.
  • The efficiency of air-source heat pumps in heating mode is measured by heating season performance factor (HSPF). New heat pumps range from 7.7 to about 10, higher being more efficient. The efficiency of heat pumps falls as outside temperatures fall; when the outside temperature drops below 33°F or so, the energy efficiency of most new models is usually low enough to require another heat source to maintain the desired temperature inside the home. One solution is to equip the heat pump with a backup electrical resistance heater, even though this means that when it’s cold you’re in effect heating your house with a very large electric space heater, and your electricity bill could skyrocket. An alternative, commonly used in areas with colder winters than ours, is to back up a heat pump with a furnace. These configurations, referred to as “hybrid” systems, rely on a heat pump to heat the home until it can no longer do so efficiently, at which point a furnace takes over.

Since energy prices fluctuate so unpredictably, it’s difficult to accurately predict how much energy-efficient heating and cooling systems will save. But even if you calculate energy savings based on recent energy prices, you’ll probably find that you can significantly reduce utility bills—especially heating costs—by installing more energy-efficient equipment.

It makes sense to calculate whether energy savings will offset the higher price of more efficient equipment, but doing this math isn’t easy. Every home is different, and any formula has to take into account the size of the area to be heated and/or cooled, insulation levels, temperature settings preferred by occupants, whether a programmable thermostat will be used, and other factors. It is possible to perform these calculations using available software after entering a lot of details—more work than most contractors providing free installation estimates are willing to do.

Contractors can help by estimating what percent off utility bills you’ll save with various types and models of equipment, for example, Furnace A versus Furnace B. You can then calculate your energy bills for the year and determine how much you’d save with each unit. Ask highly rated companies to provide these estimates and then compare their claims, asking for clarification when they provide conflicting information.

If you’re uncomfortable with ballpark estimates and want to know exactly how much you’d save by spending an extra $1,000 on a more efficient unit, several software tools can estimate these savings. While you practically need a degree in engineering to operate some of them, others are quite user-friendly, and some can be downloaded or used online for free.

One free tool is Home Energy Saver, a program of the Lawrence Berkeley National Laboratory.

Another software program we like is REM/Design. The software costs $500, but (as of this writing) a full free 90-day demo version was available for download. It is one of the few software programs that wouldn’t require an MIT grad to show you how to use it that could perform accurate, meaningful analyses.

On the table below we show, for an illustrative home in the Bay Area, our estimates of how energy costs are affected by the purchase of new equipment with varying energy efficiency ratings. Cost figures are based on recent energy prices, available tax incentives and utility rebates; they don’t take into account inflation or foregone interest on money invested in equipment.

Here’s a summary of what we found:

  • For furnaces, because the resulting energy savings fairly quickly “pay off” the extra cost, it makes sense to pay extra for a more efficient furnace, compared to buying a minimally efficient 80 AFUE model. Including the federal tax credit, a 95 AFUE furnace would cost only $600 more than an 80 AFUE model, and the energy savings you’d get from installing the efficient 95 AFUE model would pay off its extra cost in only about two years.
  • In this area it usually doesn’t make sense to pay more for a highly energy efficient air conditioner rather than a basic unit.
  • The high upfront cost of most heat pumps and the relatively high electricity rates here in California make heat pumps less financially desirable than gas furnaces.

A few additional points:

  • When comparing models, it’s important to understand that features such as variable-speed blowers and two-stage burners that reduce energy usage won’t be reflected on their models’ efficiency ratings because ratings are determined while equipment operates at full capacity. A variable-speed blower, for example, usually runs at a constant low speed to maintain the correct temperature, increasing speed and energy use only as needed. If you are comparing the energy efficiency of two different units with similar energy-efficiency ratings—one with variable-speed capability and the other without—the one that can run at variable speeds will use less energy. The same is true when comparing furnaces that have one- or multiple-stage burners. It’s difficult to assess exactly how much energy these features save, but a reasonable rule of thumb is to assume that two-stage burners and variable-speed blowers each decrease furnace energy waste by about 10 percent and increase corresponding SEER/HSPF ratings by 1.0 to 1.5.
  • Investing thousands of extra dollars in ultra-efficient equipment makes no sense if your home is drafty or poorly insulated, or your thermostat is pegged on Tahiti during the winter. Before upgrading your equipment, make sure your attic is well-insulated and seal up easy-to-fix leaks. Our article on home insulation will help get you started. The best way to cut home energy costs is the most obvious one: Dial down your thermostat, and get and use a programmable thermostat.
  • Be wary of salespeople who use calculators to provide on-the-spot dollar-figure savings: These estimates are often overly rosy. Heating and air-conditioning manufacturers enthusiastically provide contractors with handy formulas and devices that dramatically overstate the case for upgrading to more efficient equipment, since doing so means more customers are likely to replace older equipment with new equipment—the most expensive new equipment—rather than repairing what they have or opting for less expensive new models. If an estimate of annual savings seems too good to be true, it probably is.

Getting Quiet

The sound rating of equipment is measured in bels or decibels, with lower ratings being quieter. Compared to equipment made 15 years ago, almost all new units are astonishingly quiet.

Getting Dependable Equipment

Consumer Reports recently began rating manufacturers of major heating and air-conditioning equipment for reliability, based on repair histories it obtained from its member surveys.

In its most recent report on furnaces, Consumer Reports found few manufacturer-to-manufacturer differences, with the two largest manufacturers, Carrier and Trane, having the same repair rates.

Manufacturer-to-manufacturer differences were more apparent for central air conditioners and heat pumps. Consumer Reports estimated that the average failure rate for five-year-old units is more than 20 percent for central air conditioners.

For central air conditioners, the best-performing manufacturer was American Standard (20 percent failure rate); the worst-performing was Amana (30 percent rate). Carrier (24 percent) and Trane (21 percent) scored just slightly worse than top-rated American Standard.

For heat pumps, American Standard scored best for failure rate (31 percent), and York rated worst (50 percent). Carrier (38 percent) and Trane (37 percent) again scored fairly well.

In addition to checking out Consumer Reports’ independent ratings, ask top-rated companies for their recommendations; after all, good companies won’t want to install equipment that breaks down often.

But keep in mind that it is widely agreed in the industry that the quality of equipment is much less important than the quality of its installation. As one contractor told us, “It just doesn’t matter too much. If I take the time to install the equipment properly, I can put in the biggest-piece-of-junk furnace and make it hum for 20 years.”