Monday, November 2, 2009

Free Money Finance: How to Buy a New Furnace and Air Conditioner

Money saving post documents the benefits of critical thinking in replacing your furnace and air conditioner.

How to Buy a New Furnace and Air Conditioner

Ok, so this post isn't as much about "how to buy a new furnace and air conditioner" as it is "how we bought a new furnace and air conditioner", but I liked the former title better. :-) Anyway, this post will highlight how we recently got another purchase off our to-buy list when we replaced our home's old furnace and air conditioner with new ones. If you’re looking for some tried-and-true tips for saving money on a new furnace or air conditioner unit, this post is for you.


Our home is 22 years-old, a relatively young age for a house, but not so for a furnace and air conditioner. For years now we've had our furnace checked before the winter season and we've been told "it has one or two years left in it." This year, when the AC was checked, we were told it had a few (minor) issues and that the furnace "has something major wrong with it -- I wouldn't ever start it again." Whether or not it was in this bad of shape, we knew that the time to replace it was not that far off. And since the federal government is offering a $1,500 tax credit when a new furnace is purchased (with certain requirements, of course), we figured that this was the year to replace the unit and the AC as well.

Step One: Get Referrals

Several of our neighbors have been through the same situation recently, so we called them to ask who they used and would recommend. From their recommendations, we identified three local heating/cooling businesses that got the thumbs up. None of our friends used or recommended national businesses like Sears (not that I would have used them anyway, but I'm just noting the fact.)

Step Two: Invite Them Out

So we invited each of the three companies to come see our house (on separate trips, of course), give us their opinion, and quote on a new system. (FYI, this was in June/early July of this year, so we've been at this for awhile.) Here's what we received:

  • They all said that our current system was way too big for our home (162,000 BTUs). No wonder it sounded like an airplane was taking off every time it started up. :-)
  • They all recommended relatively the same furnace/AC set-up (95% efficient heater, 13-SEER AC, 100,000 BTUs -- heating is what's most important up here in winter country).
  • The first guy was a very slick marketer and was all schmoozy with us (at least I thought so, I'm sure my wife thought he was nice -- she's always seeing the good side of people). Anyway, his price was way over the top -- around $9,000 before the government tax credit. He also quoted $192 for annual check-ups.
  • The second guy seemed very informative and business-like. His pitch was different in that he would repair ANYTHING on the unit for ANY reason for 10 years if we committed to two annual check-ups totaling $278 (the others simply had basic manufacturer's warranties). His price for the units were $7,500 before the tax credit.
  • The third guy was the only one I wasn't there for. My wife really liked him because he would 1) talk to her in plain language and 2) tell us if we really didn't need this or that. His price was $7,400 before the tax credit and he had annual check-up costs of $135.

Step Three: Determine a Winner

After talking about it, we decided to go with guy #2 IF he kept the guarantee but would cut his annual service cost in half. I called him, told him he was neck-and-neck with the other guy and gave him our offer. He took it right away -- something that killed me since I knew immediately that I'd asked for too little. Anyway, the next step was for him to come out and give us a "firm estimate".

Step Four: Get a Firm Estimate (If the Original One Wasn't Firm)

So my wife set up an appointment and he came out to our house, made some more measurements, and counted the registers in our home. Then he left and we didn't hear anything back from him for two weeks. We finally called him and he said he'd lost our number. Yeah, right. Then he gave us his revised/firm cost and it was $8,700! Yikes! It was $1,200 more than what his original bid was (and notice how it was similar to the amount we'd gotten him to come down on the annual fee over 10 years?) With this sort of change, we decided to re-look at our options.

Step Five: Confirm Option #2's Price

We thought that maybe we'd misunderstood and that everyone had given an estimate rather than a firm number. So we called company #3 and asked if the $7,400 was a firm cost or an estimate. We were told it was a firm cost. But their number didn't have a whole-house humidifier in it, so we got that added in and their new number came up to $7,932 before the tax credit -- $800 (or over 10%) cheaper than the next closest competitor. So we decided to go with this company. Even if the guy we'd originally selected had come down in price (we didn't ask), we felt like we couldn't trust him anymore, so we decided to move on.

Step Six: Check References Again

We told the new company that we wanted to go with them but would like three references from them. They provided the names of current customers and my wife called and checked with them. Of course they gave rave reviews (we wouldn't have expected anything different), but with $8k on the line, we didn't want to leave any stone unturned. (FYI, this company also received the strongest positive recommendations from our friends, so we had good confidence in them already.) With this done, we decided to proceed with this company.

Step Seven: Set Up Installation

My wife called on a Tuesday and the installation was set for the next Monday and Tuesday. Good thing because we were entering October and cold temperatures were surely on the way soon.

Step Eight: Installation

Two guys came out and installed the furnace and AC over a two-day period. I was only there for a bit of that time (stopped home for lunch with the family and to see how things were going), but my wife reported that it was mostly smooth sailing (their work did uncover an unrelated house issue that we'll need to look at, but nothing major -- I think.)

Step Nine: Payment

I'll cover details of this in a minute, but after all the work was done, they wanted payment (of course.)

Step Ten: Set-Up

When I arrived home on Tuesday night, the system was up and running. I programmed the thermostat to be at the temps we needed when we are/aren't at home (it was a very simple exercise.) The system is soooooooo quiet -- we can't even hear it when it's on (very nice, indeed.)

Final Cost

There were actually several incentives offered by various entities that dramatically lowered the cost of the system for us. Here's what we'll end up paying after all is said and done:

  • $7,932 -- Cost quoted (gross cost)
  • -$175 -- Instant rebate from the manufacturer of our unit
  • -$1,500 -- Tax credit we'll receive from the federal government when we do our taxes this year
  • - $670 -- Series of three rebates offered by our local electric utility for the installation of energy-efficient air conditioners
  • - $300 -- Rebate offered by our local natural gas utility for the installation of energy-efficient furnaces
  • - $155 -- 2% cash back we earned by paying for the $7,757 net cost (total cost less the manufacturer rebate) with our Schwab Visa card
  • $5,132 -- Final net cost

Of course, we'll reap major benefits on the cost of utilities over the years to come as well, plus we were able to forego costs of repairing our old furnace (which probably would have been significant.) I'm not saying this further reduces the money we spent (it still cost us over $5k), but these were additional cost-related benefits of the new system versus the old.

My Tips

Here are a few things I would recommend for those of you buying a heater and/or AC unit:

  • Get recommendations from friends, family members, co-workers, etc. on who you should at least consider. And after you go through the process of picking one company, ask for more recommendations from their customers.
  • Get quotes up front (and in writing) and be sure the companies know they are one of several firms you're talking to -- that will have them keeping their pencils sharp.
  • Be sure all the quotes you get are apples to apples -- the units are the same and the prices are the same (with and without credits, rebates, etc.) This is a difficult task and requires lots of back-and-forth questions to the various companies.
  • Once you pick a "winner", call them, tell them you'd like to work with them, and ask if the price they quoted is the best they can do. In other words, try and negotiate their price down. We did this originally, but not on the second firm we selected, and we may have left some money on the table.
  • Either use a credit card to get cash back or negotiate a better price if you pay cash.

I'll probably give an update in late February or March comparing our heating bills and usage this year versus last year, so stay tuned to see how much the new unit actually saves us.

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Posted via web from David Bourbon