Heat Pump vs Furnace: Which System Costs Less to Run?

Heat pumps and furnaces differ in cost and efficiency, depending on your home’s climate and energy prices. Here’s a quick breakdown to help you decide:

Heat Pumps: Best for moderate climates. They use electricity, are energy-efficient, and cost less to run in mild winters. However, they lose efficiency in extreme cold and may need backup heating.
Furnaces: Ideal for colder climates. They generate consistent heat, typically using gas or oil, and maintain efficiency in freezing temperatures. Operating costs vary by fuel type, with gas being cheaper than electricity.

Quick Comparison

Feature	Heat Pump	Furnace
Energy Source	Electricity	Gas, oil, or electricity
Efficiency Rating	SEER2 (14.3+)/HSPF2 (7.5+)	AFUE (90%+ for high efficiency)
Best Climate Zones	Moderate climates	All climates
Annual Cost	$1,436 (Maine example)	$3,015 (Maine example)
Lifespan	15–20 years	20–30 years
Repair Costs	$200–$2,500	$150–$2,000

Key Takeaway: Heat pumps save money in milder climates, while furnaces are better for extreme cold. Rebates and tax credits can make heat pumps more affordable upfront.

Basic Functions: Heat Pumps vs Furnaces

How Heat Pumps Move Heat

Heat pumps operate by reversing the refrigeration cycle, transferring heat rather than creating it. They pull heat from the air, even at temperatures as low as -15°F (-26°C) ^[1]. While electric furnaces need between 10,000 and 50,000 watts of power, heat pumps typically use only 1,000 to 7,500 watts to deliver the same heating performance. This difference has a direct impact on energy use ^[1].

The system works continuously, cycling through an outdoor condenser, indoor evaporator, compressor, and expansion valve. This process makes heat pumps a cost-effective option, especially in areas with milder winters.

How Furnaces Create Heat

Furnaces, on the other hand, generate heat through either combustion or electrical resistance. Gas furnaces, the most widely used type, burn natural gas in a sealed chamber to heat air, which is then circulated throughout the home ^[3].

Recent advancements in furnace technology have improved efficiency and lowered operating costs. These include:

Sealed combustion and condensing technology for heat recovery
Variable-speed blowers to regulate airflow
Multi-stage burners for adjustable heating output
Electronic ignition systems that replace traditional pilot lights ^[3]^[9]

Since furnaces generate their own heat, they perform consistently no matter the outdoor temperature, which influences their overall cost structure.

Energy Use and Weather Effects

Heat Pump Performance by Temperature

At 47°F, heat pumps are about 3.5 times more efficient than electric resistance heating. However, as temperatures drop to 17°F, their efficiency decreases to 2.5 times ^[1]. Modern cold-climate heat pumps handle extreme conditions much better, continuing to work effectively even at temperatures as low as -13°F ^[11]. When outdoor temperatures fall below 35°F, most systems switch on backup heating. This shift can increase energy consumption by 30-50% during cold periods ^[13]. In areas like Minnesota or Maine, where sub-freezing temperatures are common, this added energy use can lead to noticeably higher energy bills.

Furnace Performance by Fuel Type

Furnaces, unlike heat pumps, maintain consistent efficiency regardless of outdoor temperatures. However, the type of fuel used plays a major role in operating costs:

Gas furnaces: Even with lower AFUE (Annual Fuel Utilization Efficiency) ratings, gas furnaces perform steadily. For instance, a furnace with 95% AFUE uses 1 therm of natural gas per hour at 30°F, which increases to 1.5 therms per hour at 0°F ^[5].
Electric furnaces: These are typically more expensive to operate due to higher electricity rates ^[12].

One advantage heat pumps have is their ability to maintain higher indoor humidity during winter. This makes homes feel warmer even at lower thermostat settings, potentially cutting heating costs by 5-10% compared to furnaces ^[14]. This added comfort and cost savings make heat pumps an appealing option in milder climates, especially when properly sized for the home.

Monthly Energy Bills Compared

Energy Prices: Electric vs Fuel

The cost of running heating systems largely depends on local utility rates. On average, electricity costs $0.14 per kWh nationwide, while natural gas prices are around $1.05 per therm ^[7]. This translates to electricity costing about $0.04 per 1,000 BTU, compared to $0.01 for gas ^[1].

Thanks to their efficiency (COP 3.0), modern heat pumps lower operational costs to roughly $0.013 per 1,000 BTU, putting them on par with gas furnaces ^[11]. For homeowners, this can mean annual savings of $500-$900 compared to electric furnaces ^[1].

Heating System	Cost per 1,000 BTU	Average Monthly Cost (2,000 sq ft home)
Heat Pump	$0.013 (with COP 3.0)	$100-$200
Gas Furnace	$0.01	$50-$150
Electric Furnace	$0.04	$130-$300

Heating Costs by Region

Heating expenses vary widely across the U.S. due to differences in climate and energy prices. For example, on the West Coast, Oregon’s winter heating costs average $1,304 for heat pump users and $1,107 for those with gas furnaces ^[8]. The region’s mild winters allow heat pumps to operate efficiently for most of the season.

Time-of-use electricity rates can further influence costs for heat pump owners. During off-peak hours – late night to early morning – operating costs can drop by 30-50%. By programming heat pumps to pre-heat during these times, homeowners can reduce expenses by 20-30%.

On the other hand, propane furnace users face steep heating bills. They spend an average of $4,819 per winter season – more than three times the cost of running a heat pump ^[8]. This stark contrast is driving many homeowners in areas with high propane prices to consider switching to heat pump systems.

Heat Pump Vs. Furnace – Which is BETTER?

Repair Costs and System Life

When considering total ownership costs, it’s important to factor in repair expenses and how long the system will last.

Regular Service Costs

Heat pumps need servicing twice a year – once in spring and once in fall. The annual maintenance costs typically range from $100 to $250^[7]^[8]. In contrast, furnaces only require one yearly checkup, which costs around $80 to $200^[7]^[8].

Interestingly, a 2024 NAHB study found that while heat pumps have higher annual maintenance costs, they require 22% fewer major repairs over time.

Here’s a quick look at typical repair costs:

Repair Type	Heat Pump Cost	Furnace Cost
Minor Repairs	$200-$600 (refrigerant)	$150-$250 (ignitor)
Medium Repairs	$400-$600 (reversing valve)	$400-$1,500 (blower motor)
Major Repairs	$1,000-$2,500 (compressor)	$500-$2,000 (heat exchanger)

Expected Years of Use

Heat pumps generally last for 15 to 20 years, while furnaces have a longer lifespan of 20 to 30 years^[1]^[10]. Efficiency also varies over time – heat pumps maintain about 80-85% of their efficiency after a decade, whereas high-efficiency furnaces only lose 3-5% efficiency over 15-20 years if properly maintained^[2].

Warranties can help reduce repair costs:

Furnaces: Most manufacturers provide 20-year to lifetime warranties for heat exchangers.
Heat Pumps: Compressors are usually covered by 10-year warranties^[1].

Geography also plays a role in repair costs. For example, fixing a heat pump in New York City can cost 30-50% more than in rural areas of the Midwest due to higher labor rates^[15]. Climate conditions further influence system lifespan – heat pumps in mild climates often outlast their expected years, while those in extreme climates may need more frequent servicing. These regional differences in maintenance and repair costs align with the earlier discussed variations in energy expenses, making the choice of system highly location-dependent.

Green Impact and Cost Savings

Environmental considerations and available incentives play a big role in reducing long-term costs, beyond just operational savings.

Emissions Comparison

Heat pumps offer a cleaner alternative to traditional furnaces, especially in areas with greener electricity grids. A study by the Rocky Mountain Institute shows that heat pumps can cut carbon emissions by up to 50% compared to natural gas furnaces in most parts of the U.S.^[1]. In states with cleaner grids, like California, the difference is even greater – heat pump users emit 70% less CO2 than those relying on gas furnaces for similar heating output^[2].

For example, an ENERGY STAR-certified heat pump in a region where 50% of electricity comes from renewable sources can slash emissions by 75% compared to a standard gas furnace. As power grids continue to adopt cleaner energy, this gap is expected to widen.

Available Money-Saving Programs

The Inflation Reduction Act of 2022 has introduced generous financial incentives for upgrading to energy-efficient heating systems. Homeowners can take advantage of:

Up to $2,000 in tax credits (30% of the system cost) for high-efficiency heat pumps
A $600 credit for ENERGY STAR gas furnaces
Up to $8,000 in rebates for heat pumps through income-qualified programs^[4]

State-level programs add even more savings. For instance, Massachusetts offers a $1,200 rebate, while California’s TECH initiative provides up to $3,000^[5]. Some utility companies also pitch in, with rebates reaching as high as $3,000 for heat pump installations. Duke Energy, for example, offers $600 for high-efficiency heat pumps^[6].

"The combination of federal, state, and utility incentives can reduce the upfront cost of a heat pump system by 50-80% for eligible households", according to a Carbon Switch study. "With these incentives, the payback period for switching from a gas furnace to a heat pump can be as short as 2-3 years in many regions."

Some utilities even provide zero-interest financing or bill credits for using heat pumps during off-peak hours. As carbon tax incentives and rebates expand, the financial benefits of choosing low-emission systems are likely to grow even more.

15-Year Cost Breakdown

Purchase vs Running Costs

When looking at the total cost over 15 years, both the upfront price and ongoing expenses matter. Heat pumps generally cost more initially, ranging from $3,500 to $20,000, while furnaces fall between $2,000 and $24,000, depending on their type and efficiency^[1]. For example, a $10,000 heat pump costs $4,000 more upfront than a $6,000 furnace. To make up for this higher initial cost, heat pumps need to deliver enough savings through lower running costs. Federal and state incentives, as mentioned earlier, can help reduce these upfront expenses.

Cost Examples by Location

Long-term savings depend heavily on where you live, as climate and local infrastructure affect operating costs. These 15-year projections align with the regional trends seen in monthly energy bills.

In the Southwest, for instance, the average annual cost to operate a heat pump is about $890, while a gas furnace costs around $1,250^[16]. In colder regions, like Minnesota, the numbers shift: heat pumps cost $1,890 per year compared to $1,650 for gas furnaces^[16].

Fuel prices also play a big role in long-term costs. If natural gas prices rise by 20% over five years, furnace operating costs increase by the same percentage. Meanwhile, heat pump costs stay consistent^[16].

Another factor to consider is ductwork. Ductless heat pumps avoid the $3,000 to $5,000 expense of installing new ducts, making them $2,000 to $5,000 cheaper overall when ductwork is required for a furnace setup^[3].

Conclusion: Making Your Choice

Key Cost Factors to Consider

When it comes to long-term expenses, three main factors play a critical role:

Local climate: This affects how efficiently your system operates. Heat pumps perform better in areas with moderate climates, often saving more money compared to electric furnaces.
Energy prices: These heavily impact overall costs. For instance, in 41 states, natural gas furnaces are cheaper to run when using ENERGY STAR certified systems ^[5].
System efficiency ratings: Higher ratings mean lower operating costs. Heat pumps with an HSPF2 rating of 9.0 or higher are ideal for suitable climates, while furnaces with an AFUE rating of 90% or more help cut down on fuel use ^[2]^[4].

Choosing the Right System for Your Climate

Your local climate and typical energy bills can guide your decision. Here are some recommendations based on regional conditions:

Climate Zone	Suggested System	Cost-Saving Reason
Moderate Climate (Pacific Northwest, Southeast)	Heat Pump	Performs well year-round
Extreme Cold (Northern Midwest, Alaska)	Furnace	Maintains efficiency even in harsh winters
Mixed Climate	Hybrid System	Combines the advantages of both systems, as seen in Midwest cost trends ^[8]

Don’t forget about the financial incentives available. Programs like the Inflation Reduction Act offer $2,000 credits for heat pumps, and state rebates can go up to $1,500, significantly lowering upfront costs ^[5].