The TRUTH About Furnace (and A/C) Pricing
Prices are one of consumers’ top concerns when replacing their old furnace or A/C. We look at the real factors that affect what you’ll pay for your new heating & cooling system.
One of the top things homeowners want to know when they’re in the market for a new furnace or air conditioner is “what’s it gonna cost?” (Heck, there’s a reason this site is called FurnacePrices.ca!)
A new furnace or A/C is a major purchase, and it’s not something the average person buys every day, so it’s not surprising the typical homeowner isn’t sure what to expect, especially with the volume of brands and models available.
And of course, everyone wants to make sure they’re getting a good deal.
Variables Affecting the Cost of a New Furnace
Like most home renovation jobs, there are many variables that can affect the final cost, including:
- The brand you choose
- The model you choose – efficiency rating, type (single-stage, multi-stage, etc), features, and so on
- The size of the unit (depending on the layout and square footage of your home)
- Factors relating to the installation like whether you’re replacing an old unit or adding a new one, how old your current unit is and whether any venting and other upgrades are needed to meet modern building codes, whether it’s a conversion (i.e. from oil to gas, for example).
- Where you live. Different areas can vary by the number of companies in the city and how competitive it is, if you live in a more rural area and they have to travel further to service you, that may factor into the price. Local permits and regulations may also vary by municipality.
- Which company you deal with. Every company is different, and each one has their own costs, pricing structure, number of staff & overhead, and so on.
“But what’s the REAL price of the unit?”
People often want to know the “real” price of a furnace or A/C model… I can’t count the number of emails and comments we’ve received angrily exclaiming “I don’t care what the installed price is, tell me what the REAL unit price is!!”
However even “list/unit” prices are not always the same for different distributors & contractors, as these can vary based on several factors like the volume of units the company buys, and who they’re buying them from. So two HVAC contractors may in fact be paying different prices for the same unit.
And similar to car makers, furnace and A/C manufacturers typically don’t sell directly to consumers.
Different manufacturers often have different distribution structures, so a local contractor may be buying units directly from the manufacturer, or often from a large authorized regional distributor (an intermediary, basically), or in some cases, they may buy them from another dealer or contractor.
For instance, this would allow two smaller contractors to buy together and get a better unit price since the order volume is higher. Or sometimes a newer contractor might not yet be an actual ‘authorized dealer’ for a particular brand, since this process can take time depending on the brand, so they’ll temporarily buy some stock from another company.
Also this doesn’t automatically mean the largest companies will have the lowest prices because although they may buy higher volume, they also tend to have more overhead, spend more on advertising, etc. Whether the company is large or small, it’s a delicate balancing act with many factors at play.
“How much are companies making on the installation?”
Another common thing consumers want to know is how much the company or contractor is actually making on the whole deal, hoping that they’ll be able to negotiate a “fairer” price if they have this key piece of information.
“How much of the quoted price are they pocketing just for installing the unit?”
The reality is that this varies of course, but some people use 50% as a general rule of thumb, which may be accurate in some cases and wildly off in others. HOWEVER, regardless, it is important to realize that the labour portion of the cost covers many things, it is not all profit.
In addition to the company’s fixed costs – which they have to pay no matter what – including insurance, licensing fees, vehicles and associated costs (fuel, commercial insurance, maintenance), technician salaries, office or storage space, administrator (to help with client support, paperwork, etc), phones & utilities, advertising & marketing, and so on, the company also has to cover costs related to each install.
Beyond the cost of the unit itself, there may be a range of other parts and labour required during the installation. And good technicians are always in demand and therefore don’t work for cheap.
Every home is different, and sometimes unforeseen costs part way through the installation can eat into the company’s narrow margins and even cause the company to lose money in the end. Because a price has already been agreed upon at this point, the contractor will typically absorb this cost.
In fact, it’s not uncommon for companies to occasionally install a furnace or A/C at a price that provides virtually no profit, simply to cover their fixed costs, keep their staff paid, and keep the whole machine running, so to speak.
HVAC contractors also need to cover the cost of future servicing covered by the labour warranty
Finally, because any company worth their salt will provide some form of labour warranty, this means that they also must account for a certain number of service calls and repairs that they will have to cover the cost of.
Now I’m not suggesting that everyone in the HVAC business is living hand to mouth and barely scraping by. Well-run companies, and hard working staff can certainly earn a comfortable living.
I’m simply hoping to illustrate that the price breakdown can be more complex than it appears, and consumers should avoid the temptation of thinking that if a company paid let’s say $1500 for the unit, and quoted $3500 to the customer, that it means that they’re trying to rip you off and will be walking away laughing with $2000 of pure profit.
The pie is split up into many pieces, but this allows good companies to retain high-quality staff and cover other important costs (like insurance, licensing, etc) so that they can deliver top notch service, good ongoing support – in short, heating & cooling solutions that Canadians and their families can depend on.
That being said, there are certainly companies out there who will charge whatever they can get away with, so this highlights the importance of dealing with reputable companies, with fair and transparent pricing.
Why looking for the absolute lowest price is not always the best course of action
Beware of really low prices…
- Especially suspiciously low ‘advertised prices’. Certain companies may advertise very low prices, but keep in mind the actual price you get quoted will almost certainly be different. Anyone can advertise “Lennox furnaces for $1800” but in all likelihood, prices like these – if actually available at all – are only for the most basic of installations, on a low end unit, and do not factor in added costs that are likely to appear by the time you get the actual estimate.
- Or these prices may be factoring in government or utility company rebates that you may or may not qualify for, and in any case will be applied for and reimbursed after the installation.
- All this means is that you should take advertised prices with a grain of salt, since you’ll virtually never get a firm price until a company can actually do an in-home estimate to assess the labour and parts required for your particular home. If you saw a home renovations company advertising a kitchen makeover for $5,000, it would be obvious that the final price would vary based on many things. Upgrading your heating and cooling system is no different.
- If a price is very low, will the company spend the added time necessary to deliver quality workmanship, which is crucial to a reliable and long-lasting system? If a company is offering prices that seem too good to be true or are well below the norm, ask yourself how they’re making that profitable… are they cramming in more jobs a day than usual to make it viable, overworking their installers, or using cheaper and less-experienced technicians, for instance?
- Are they using cheaper, lower quality secondary components, or a used or refurbished unit? So for example, even though the main unit is supposed to be 98% AFUE, because it’s paired with a less efficient coil, the true efficiency may be lower.
- Is this company reliable? Are they fully insured, and fully licensed? These things cost money… there’s a reason established companies have somewhat higher prices. Will they be there to help if there’s an issue or a service call is required in mid-January?
- Is it some guy working out of his car? Hey, everyone’s gotta start somewhere but just be aware that you typically get what you pay for.
The bottom line is that like any home contracting job, the cost of upgrading your heating & cooling system can vary considerably based on your home, your current system, what your needs are, what you buy, and who you deal with.
It’s natural to want to make sure you’re not getting ripped off, and get your money’s worth. Unfortunately, no one on the internet is going to be able to give firm and accurate prices without having a professional conduct an in-home estimate.
This is why we’ve partnered with reputable local distributors and contractors to provide free quotes to Canadian homeowners.
Founder of FurnacePrices.ca.
During his years of working closely with HVAC professionals, Simon has gotten a unique inside look at how the industry operates, allowing him to share this unique perspective to help Canadians make informed buying decisions when replacing their heating & cooling systems.
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