Should I Finance My HVAC System Replacement? Pros and Cons of 5 HVAC Financing Options

 

 

Replacing your home’s AC or heating system is a significant investment that almost every homeowner faces sooner or later, often resulting in a financial strain. The need to upgrade or replace a failing unit brings up crucial considerations about payment options.

Many people grapple with deciding whether to finance the new system or pay for it outright. This decision isn’t just about the immediate financial impact but should also involve considering the long-term benefits and potential savings of a more efficient system.

With over seven decades of experience in the HVAC industry, Mattioni has successfully guided thousands of homeowners through the complex decision-making process of HVAC financing, ensuring they make choices that best suit their financial situation and comfort needs.

An HVAC system that’s running at peak performance is vital for maintaining a comfortable and healthy living environment and can significantly affect energy costs. So, upgrading from an older system that’s experienced a drop in performance will provide substantial savings and noticeably improved comfort.

In this article, we’ll thoroughly explore the various financing options available for HVAC systems, evaluating the pros and cons of each. By the end, you’ll be equipped with the crucial information needed to make a decision that aligns with your financial decision and comfort needs.

 

The Cost of HVAC System Replacement

The cost of replacing an HVAC system varies greatly based on many factors, including the size of the home, the type of system, and any additional features or upgrades.

• Central AC installations range from $6,000 to $20,000
• Furnace installations range from $5,500 to $14,000
• Heat pump installations range from $12,000 to $25,000

Regardless of the final price, financing can relieve the short-term financial burden of an HVAC installation and allow you to get set up with a new system that’ll provide your home with a refreshing level of comfort.

Let’s look at the financing options available that can alleviate the financial burden and help you install a new AC or heating system in your home:

 

Financing Options for Heating or AC System Replacement

Spreading out the cost of an HVAC system replacement over time makes the expense more manageable. There are several financing options available to homeowners:

 

1. Personal Loans

These loans can be obtained from banks, credit unions, or online lenders and offer a lump sum amount that can be used as funds to cover the cost of a new heating or AC system. Personal loans typically have fixed interest rates and repayment terms ranging from 2 to 7 years.

 

Advantages of Using Personal Loans for HVAC Financing

• Immediate access to funds can help get your new heating or AC system installed sooner.
• Fixed interest rates mean your monthly payments will remain consistent over the life of the loan.
• No collateral required, unlike home equity loans or lines of credit, personal loans are usually unsecured.
• Flexible repayment terms allow you to choose the repayment period to balance monthly payment amounts against the total interest paid.
• Potential for lower interest rates for borrowers with good credit.

 

Disadvantages of Using Personal Loans for HVAC Financing

• Potential for higher interest rates for borrowers with lower credit scores.
• Loan fees may be included with some personal loans. Be sure to read the fine print.
• Strict repayment schedules are set at the time of the loan and don’t change, even if your financial situation changes.
• Impact on credit score resulting from debt accumulation, increased credit utilization ratio or potential missed payments may occur.

 

Assessing Using a Personal Loan for HVAC Financing

Taking out a personal loan offers a practical solution for many homeowners that immediately allows you to install a new heating or cooling system. By not missing any monthly payments you’ll protect your credit score, so personal loans that include no initial fees and affordable monthly payments should be considered if needed.

While personal loans provide flexibility and immediate funds, another option homeowners frequently consider is leveraging the equity in their homes.

 

2. Home Equity Loans or Lines of Credit (HELOCs)

These are popular options for significant home improvements, including HVAC system replacements. These options leverage the equity you’ve built in your home, providing access to substantial funds. However, home equity loans and HELOCs come with their own pros and cons.

 

Advantages of Using Home Equity Loans & HELOCs for HVAC Financing

• Lower interest rates compared to personal loans and credit cards are typically offered by home equity loans and HELOCs because they are secured by your home.
• Larger loan amounts are available through this option, again because they’re secured in the value of your home. If you need a more extensive HVAC installation, or multiple systems, then this option may be particularly beneficial.
• Tax deductibility may be available on interest paid on home equity loans or HELOCs for home improvement projects.
• Flexible repayment terms are offered, allowing you to balance the monthly payment amount against the total interest paid.

 

Disadvantages of Using Home Equity Loans & HELOCs for HVAC Financing

• The risk of foreclosure may come into play if you default on your loan. Be sure to choose comfortable repayment terms you can handle.
• Costs and fees often come with these loans, including appraisal fees, closing costs, and annual fees.
• Variable interest rates are usually associated with HELOCs, which can fluctuate based on market conditions.
• Reduced home equity limits your financial flexibility and accessible money in the future.
• Complex application process can slow down your HVAC installation timeline.

 

Assessing Using Home Equity Loans & HELOCs for HVAC Financing

This option is attractive due to lower interest rates, larger loan amounts, and possible tax benefits, but it comes with some serious risks including the potential for foreclosure. Carefully consider your ability to repay the loan as the terms dictate before moving forward with a home equity loan or HELOC.

Many homeowners may be drawn to using a home equity loan or HELOC, but it’s worth considering financing your system purchase directly through your HVAC installation company.

 

3. HVAC Manufacturer or Contractor Financing

Many HVAC manufacturers and contractors offer financing plans, often with promotional rates or deferred interest. These plans can be convenient as they are tailored specifically for HVAC purchases and installations. At Mattioni, our offerings include a 12-month interest-free payment plan on all purchases, so be sure to explore the financing options of any contractor to ensure you’re not missing out on a better option.

 

Advantages of HVAC Manufacturer or Contractor Financing

• The convenience of financing directly through your HVAC company leads to quicker approval and installations.
• Promotional rates are frequently offered by manufacturers and contractors, such as 0% interest for a certain period.
• Flexible terms are typically available, allowing you to balance monthly payments with total interest paid.
• Specialized financing options, including extended warranties, maintenance packages, or future discounts, may be available.
• Expert guidance through the AC or heating system replacement process.

 

Disadvantages of HVAC Manufacturer or Contractor Financing

• Higher interest rates after the promotional period may be quite high. Be sure to understand the full scope of the financing plan.
• The potential for hidden fees is possible. Be sure to review the fine print.
• Dependence on one provider can potentially complicate both the financing and installation process if any issue arises.

 

Assessing Using HVAC Manufacturer or Contractor Financing

Financing an HVAC purchase directly through the manufacturer or contractor is likely the most convenient option and offers promotional rates including 0% interest among other specialized options. For these reasons, it’s well worth considering but be mindful of the terms after the promotional period ends to ensure the payment plan works for you.

There are a lot of reasons to finance through your HVAC contractor or manufacturer, yet there are still a couple more options including using a credit card.

 

4. Credit Cards

For those with sufficient credit limits, credit cards can be used to finance an HVAC replacement. High interest rates can make this an expensive option if the balance is not paid off quickly.

 

Advantages of Using Credit Cards for HVAC Financing

• Immediate access to funds can streamline the installation process.
• Rewards points and cash back are offered by many credit cards that can offset some of the cost.
• Promotional financing offers are available with some credit cards, including 0% interest for a limited time.
• The convenience and flexibility of credit cards provide a straightforward way to finance.
• Consumer protections are widely offered by many credit cards that can protect you during any dispute resolution.

 

Disadvantages of Using Credit Cards for HVAC Financing

• High interest rates are generally associated with credit cards, meaning charges can add up.
• Impact on credit score resulting from debt accumulation, increased credit utilization ratio or potential missed payments may occur.
• Potential for debt accumulation can also be significant for these purchases and can make it harder to manage other expenses.
• Limited repayment terms can be more challenging to manage than a fixed repayment plan without disciplined payment habits.

 

Assessing Using Credit Cards for HVAC Financing

Using a credit card to finance an HVAC system offers immediate access to funds that will cover the purchase, however it also comes with risks. High interest rates, the potential for debt accumulation, and the impact on your credit score are all factors to consider before choosing this option. If you do choose to finance your heating or AC purchase with a credit card, be sure to make regular payments to see substantial interest savings.

Using a credit card has its own set of pros and cons, but you should also be sure to explore any available rebates or incentives through government programs or your utility company.

 

5. Government & Utility Rebates/Incentives

Some government programs and utility companies offer rebates or low-interest financing options for energy-efficient HVAC systems. These incentives should be taken advantage of if investing in a high-efficiency system, and can reduce the overall cost of the investment. These rebates and incentives are made separate from your HVAC installation company.

 

Advantages of Using Govt. & Utility Rebates/Incentives for HVAC Financing

• Stackable savings are possible by combining federal, state, and local incentives with manufacturers’ promotions.
• Lower monthly utility bills come with heating and air conditioning systems that consume less energy.
• The environmental sustainability and reduced carbon footprint that comes with a high-efficiency system.

 

Disadvantages of Using Govt. & Utility Rebates/Incentives for HVAC Financing

• The eligibility requirements for government and utility rebates and incentives must be met, and not all HVAC systems qualify.
• The application process can be lengthy and submitting required paperwork and adherence details can be time-consuming.
• Regional differences can vary widely and may affect the availability and rebate amount offered in your area.

 

Assessing Using Govt. & Utility Rebates/Incentives for HVAC Financing

Any rebates and incentives made through government programs and utility companies should be capitalized on to reduce the total cost of your HVAC installation. While HVAC installation companies won’t always be able to help you directly with this, they should be able to provide resources to find the steps to take to get rewarded for your energy-efficient HVAC purchase.

 

Balancing The Upside and Risks of Financing Your HVAC Replacement

Financing your AC or heating system replacement can help make the HVAC upgrade immediately affordable. Compared to your existing system, you’ll experience a refreshingly air-conditioned or comfortably heated home, all made possible by financing the purchase. You’ll also likely see some immediate savings on your monthly utility bills.

Despite the upsides, take some time to measure the risks involved by ensuring you can afford the monthly payments and by choosing a financing option that works for you. HVAC investments can be sizable, so take advantage of low or 0% interest plans, rebates, and incentives, and be disciplined in making each payment to avoid any financial stress stemming from the purchase.

Deciding whether to finance your HVAC system replacement is a personal decision influenced by your financial situation, long-term goals, and immediate comfort needs. Financing can provide immediate comfort and potential energy savings, while also involving interest costs and long-term commitments. By carefully evaluating your options and considering available incentives, you can make a choice that best suits your circumstances.

To further understand all your AC replacement options, check out our Homeowner’s Guide to AC Replacement.

Remember, an efficient and reliable HVAC system is an investment in your home’s comfort, energy efficiency, and overall value. Whether you choose to finance or explore other options, taking action to replace an outdated or failing system can provide significant benefits for years to come.

For any questions about how to make your HVAC replacement more affordable, reach out to the Mattioni team at 610-400-8510 or schedule a consultation online.