All furnaces made in this country must have an annual fuel-utilization efficiency (AFUE) of at least 78 percent. This means that a minimum of 78 percent of the fuel is consumed in the process of heating your home. The rest escapes through the flue. The most efficient new gas furnaces, however, have an AFUE as high as 97 percent. Gas furnaces made in the early 1970s, by contrast, typically have an AFUE of only 65 percent, so replacing one of these older furnaces can make a significant dent in your fuel bill. Keep in mind that the AFUE rating does not factor in heat lost through ducts or pipes, which the Department of Energy says can account for as much as 35 percent of total heating energy.
Furnaces with an AFUE of 90 percent or better are called condensing furnaces because they condense the water vapor in exhaust gases to extract additional heat. According to ConsumerReports.org, a condensing furnace will cost about $1,000 more than a typical gas furnace with an AFUE of 80 percent. However, this does not include the cost of installation, which may require changes to the ductwork in your home. You will need to rely on the estimates you get from contractors to see how much more a high-efficiency furnace will cost upfront.
Of course, a high-efficiency furnace will also cost less to operate each year than a standard furnace. The EnergySavers.gov website offers a table for estimating how much you will save in energy costs each year by replacing your older furnace. For example, suppose you are replacing an old system with an AFUE of 60 percent. A new system that is 80 percent efficient will save you approximately $25 for every $100 you used to spend on heating costs in a season. A 90 percent efficient furnace will save you $33.33 for every $100. Whether the increased energy savings will recoup the extra up-front cost of the high-efficiency furnace depends on how much you currently spend to heat your house. This, in turn, will depend on such factors as the climate where you live, how well your home is insulated and your local utility rates. However, experts generally say that if you live in an area with harsh winters, such as the Northeast or Midwest, a high-efficiency furnace will pay for itself. In areas with milder winters, an 80 percent AFUE furnace may be more cost effective. The figures provided by the EnergySavers.gov site are only estimates, so make sure to ask your contractor to calculate the expected annual operating costs of different furnaces.
Of course, lower energy bills are only one reason to install a more efficient furnace. Cutting your home's energy use will benefit the environment, as well. According to National Geographic's environmental website TheGreenGuide.com, replacing an old heating system that is 56 percent efficient with a new system that is 90 percent efficient "will save 1.5 tons of carbon dioxide emissions each year if the house is heated with gas, or 2.5 tons if it's heated with oil." For those who are concerned about global warming, this factor may make a high-efficiency furnace a good deal even if it is not the most cost-effective choice.
To help offset the costs of purchasing more efficient heating equipment, the federal government offers a tax credit of up to $150. To qualify for the credit, a new natural gas, oil or propane furnace must have an AFUE of at least 95 percent. Some state governments and utility companies offer additional rebates or incentives for installing energy-efficient systems. The Energy Star website has a tool to help you find rebates and special offers in your area.