Quick answer: Compare a heat pump with a furnace using the same home, comfort needs, and cooling plan. A heat pump can provide heating and cooling; a furnace quote may cover heating alone. The lower heating bill depends on your electricity price, gas price, and the heat pump’s performance in your climate—not simply on which machine has the higher efficiency number.
A $7,000 furnace quote and a $14,000 heat-pump quote are not enough to make the decision. Does the first leave an aging air conditioner in place? Does the second include electrical work and backup heat? Before comparing the totals, ask both contractors to price the same finished job.

Start with a comparable installation quote
| Scope | Heat pump proposal | Furnace proposal |
|---|---|---|
| Heating and cooling | Indoor and outdoor equipment, controls, backup plan | Furnace plus any air-conditioning work needed during your comparison period |
| Home-specific design | Heating load and low-temperature capacity | Heating load and appropriate furnace output |
| Installation extras | Circuit/panel work, refrigerant lines, condensate, ducts, permits | Venting, gas piping, condensate, ducts, permits |
| After installation | Commissioning, labor warranty, service terms | Commissioning, labor warranty, service terms |
Use the contractor quote comparison guide to separate firm prices from allowances. If one bid leaves electrical work “as needed,” get an allowance or a separate electrician’s estimate before treating it as the cheaper option.
The two efficiency numbers mean different things
A furnace’s annual fuel utilization efficiency (AFUE) describes useful heat output relative to fuel input over the heating season. A 95% AFUE assumption means 0.95 units of useful furnace heat per unit of fuel energy; it does not include every loss between the equipment and each room. See the Department of Energy’s furnace methodology.
For the heat pump, coefficient of performance (COP) compares heat delivered with electricity consumed in the same energy units. Our worksheet uses an assumed seasonal effective COP, including backup heat in the modeled electricity use. It is not a guarantee or a label rating. Ask the contractor for a climate-specific energy estimate, low-temperature capacity, and the expected backup-heating share.
HSPF2 is a standardized seasonal heating rating; SEER2 describes cooling efficiency. Neither number should be entered directly as COP. DOE explains the ratings and why climate matters in its air-source heat-pump purchasing guide. A cold-weather design also needs enough output on the coldest design days, not merely an attractive annual average.
Compare the heating energy cost with your own rates
Use the marginal electricity and gas rates you would actually pay for the added usage, including variable delivery charges and applicable taxes. Keep fixed monthly service charges separate. Your whole-home bill includes other uses, so dividing it by floor area is not a heating estimate. Start with how to read your electric bill.
Worksheet formulas:
Furnace fuel cost = annual heat output needed in Btu ÷ (100,000 × AFUE as a decimal) × dollars per therm.
Heat-pump electricity cost = annual heat output needed in Btu ÷ (3,412 × effective COP) × dollars per kWh.
The energy conversions are 100,000 Btu per therm and approximately 3,412 Btu per kWh; see EIA’s energy-unit reference. Use the same output boundary for both options. Distribution losses, furnace blower electricity, and any heat-pump auxiliaries omitted from your COP estimate need separate adjustments.
| Electricity / gas rate | Furnace | Heat pump |
|---|---|---|
| $0.12/kWh; $2.50/therm | $789 | $352 |
| $0.18/kWh; $1.50/therm | $474 | $528 |
| $0.30/kWh; $1.50/therm | $474 | $879 |
The middle row is a useful warning against assuming that a heat pump must cut the bill. At $0.18/kWh and $1.50/therm, the heating-energy break-even effective COP is about 3.34. At COP 2.0 the modeled heat-pump cost rises to about $791; at COP 4.0 it falls to about $396. Ask which seasonal performance estimate is credible for your actual equipment and location.
What happens to the higher installation price?
Suppose matched, complete quotes are $11,000 for a furnace-and-air-conditioner option and $14,500 for a heat-pump option. These are hypothetical quotes, not reported market prices. The heat-pump premium is $3,500. Using the first rate scenario above gives roughly $438 in annual heating-energy savings, so simple payback is about eight years. Using the middle scenario gives no heating-energy payback because that heat pump costs more to run.
That calculation is only a first pass. Add any difference in cooling energy, maintenance, repairs, financing and fixed utility charges. If you keep gas for cooking or hot water, do not count the entire gas customer charge as savings. Compare both choices over the same period and account for equipment that would need replacing partway through it. A simple payback is not a promised equipment life or investment return.
Three situations that change the decision
Your furnace works and the AC is young. Compare repairing or retaining the present system with replacing it now. The entire new installation cost matters; an efficiency premium against equipment you did not need to buy is not the right baseline.
Both heating and cooling are due for replacement. This is the cleaner comparison: price a complete furnace-plus-AC option against the complete heat-pump system, then evaluate local operating costs and comfort.
Your home needs substantial cold-weather backup. Ask how much heat the compressor supplies at the local design temperature, when backup starts, and whether it is electric resistance or a retained furnace. A dual-fuel proposal needs separate electric and gas operating hours; do not give all delivered heat the compressor’s best COP.
Already own a heat pump and want to understand a winter bill? Use the overnight setback and morning recovery cost worksheet before assuming that a lower night setting saves money. It separates a scheduling question from an equipment-replacement decision.
Treat incentives as confirmed funding, not a discount label
For equipment placed in service in 2026, do not subtract the former federal Section 25C heat-pump credit. The IRS states that 25C is unavailable for property placed in service after December 31, 2025. State and utility programs are separate: verify current funding, income rules, equipment eligibility and any required preapproval with the program administrator.
Show the full amount due to the installer and the timing of any verified reimbursement separately. A rebate paid later does not reduce the cash needed on installation day. Our home energy upgrade budget guide explains how to keep that distinction visible.
What to bring to the final quote review
Bring 12 months of utility usage, the age and condition of both existing systems, and your expected ownership period. Request an itemized scope, load calculation, low-temperature capacity and backup assumptions, permits, commissioning checks, exclusions and labor warranty. Have the contractor show the annual cost at today’s rates and at a less favorable rate or efficiency assumption.
If the savings disappear under a modest change, comfort or equipment condition may still justify the project—but it should not be sold to you as a certain bill reduction. If the present furnace only needs assessment, start with the furnace inspection guide.
If that assessment leaves you choosing between a major repair and replacement, use the furnace repair-versus-replacement worksheet to normalize the diagnosis, safety findings, work scope, and out-of-pocket totals.
Sources and calculation notes
Sources checked September 21, 2026, U.S. Eastern time: DOE furnace and heat-pump purchasing guidance, EIA energy units, and IRS credit termination guidance linked above. All dollar quotes, energy prices and operating scenarios are Homestria illustrations. Figures are rounded after calculation. This guide does not size equipment, evaluate a particular home, or replace an on-site assessment.









