How much does it cost to install an oil furnace?
Even though it is becoming less and less common as a residential heat source, an oil-fired furnace is still a good investment in your home and can increase your HVAC system's power and efficiency. Although oil furnaces aren't as efficient as gas or electric options, they tend to cost between 10% to 25% less and still provide a strong heat source. The size and power of the furnace depends on the size and age of your home.
For a 2000 square foot home, the average cost of an installed oil furnace falls in the $3000 - $5000 range.
- Parts: A typical oil furnace costs between $500 and $2500, based on size, brand, and efficiency and can heat a house that is around 2000 square feet or less. Larger houses will require larger furnaces in the $3000 - $4000 range. Furnace efficiency is measured by the annual fuel-utilization efficiency (AFUE) rating, measured as a percentage of how much of the energy becomes heat. The higher the AFUE, the more expensive the furnace. Most oil furnaces range from 80%-90% AFUE.
- Labor: Expect to spend $1000 to $1500 on labor costs. This price could move higher if the heating system needs to be reconfigured to work with the new furnace or if you are moving from a different heat source, like natural gas or propane 1, to oil.
- Removal and disposal: In most cases, you'll need to remove the old furnace. Labor and disposal fees can run you another $600 to $1000.
Enhancement and improvement costs
- Extra features may lower your monthly energy bill, but they tend to cost more when the furnace is purchased and installed. Popular features include variable-speed blowers 1 that move air slower when less heat is needed and variable heat output that automatically adjusts the heat output.
- Additional furnace components, such as a HEPA air cleaner or humidifier, can be added to a standard gas furnace. These features improve air quality and breathability but will cost an extra $400 - $800 per item and can be harder to coordinate with oil furnaces than with natural gas or propane 2 furnaces.
Additional considerations and costs
- Different types and levels of insulation can help extend the life and power of your furnace. Old or thin insulation can allow heat to escape more quickly, which works against your furnace. If you need to replace or add insulation to your home, plan to add an additional $2500 to your budget.
- Although purchasing and installing an oil furnace is cheaper than other energy options, maintaining it can be much more expensive. The U.S. Energy Information Association estimates that heating a home with an oil furnace can be up to three times as expensive as using a gas furnace. Maintaining an oil furnace is also largely dependent on the availability and price of oil in your area.
- Before spending the money to have a broken or faulty furnace completely replaced, hire a specialist to test the furnace and see if the problems are repairable. Investing in a tune up could save you thousands of dollars if the current furnace can be repaired.
- Replacing the furnace or reworking the HVAC system requires a permit in most states. Check with your HVAC specialist for specific guidelines in your area.
- You may be eligible for a tax credit depending on the efficiency of your new furnace and the age of your home. Credit amounts and requirements change every year, so check with an HVAC specialist or accountant for the most recent local information.
Cost to install an oil furnace varies greatly by region (and even by zipcode). To get free estimates from local contractors, please indicate yours.