What Is an HVAC Payback Analysis?

By Anne Fonda

An HVAC payback analysis determines the number of years needed for energy savings to offset the initial upgrade cost. This is called the HVAC payback time or payback period. This analysis helps in evaluating the financial benefits of upgrading an HVAC system.

It considers the balance between the cost of the upgrade and the energy savings it will generate. The goal is to determine if the long-term savings justify the upfront investment in the HVAC system upgrade. A quick take: If a unit costs $5,000 and saves $1,000 a year, the payback period is 5 years.

In general, yes. Your savings will vary based on the system and your heating and cooling preferences. A new system may also increase your comfort level. When you replace an old HVAC system with a new, efficient one, you can save more energy and maximize your savings. 

That is especially true if you use a programmable or smart thermostat to raise or lower the temperature when you’re not home. The more efficient your system is, the more you can save on energy costs.

Look for an air conditioner or heat pump with high SEER2 ratings and a high HSPF2 rating for the heat pump. Look for a furnace with a high AFUE rating. The higher the numbers, the more efficient the unit is.

To calculate the payback time or payback period of a new HVAC system,  you need to know the initial cost of the system upgrade and the predicted cost savings of the upgrade. To determine your annual energy expenses, add up your monthly heating and cooling bills from your energy provider's website or app. This will give you a clear picture of how much you spend on energy each year. 

Your HVAC dealer can help you do these payback calculations. You can also look at HVAC units online. They may list the predicted annual savings (in a percentage) based on the energy efficiency ratings of the system when compared to an older system. For example, when it’s part of a matched system, our most efficient air conditioner, the AccuComfort™ Variable Speed Platinum 20 Air Conditioner has an estimated yearly energy savings of 55%. 

The calculation is Initial Cost / Annual Savings = Payback Period. For example, if you spend $20,000 on a new HVAC system that is predicted to save you $3,600 per year on energy bills, the payback period is a little more than five years.  The shorter the payback period, the more attractive the investment. 

This calculation does not include utility rate increases, savings during the warranty period, equipment lifespan, or HVAC maintenance costs.

Think of it as a return on investment (ROI) of the HVAC system. You get increased comfort (priceless), use less energy (good for the planet), and reduce your energy bills (good for your bank account.)

Work with your local American Standard dealer to conduct a payback analysis on different HVAC upgrades. This can help you compare upfront costs with annual and total savings over the life of your system. Be sure to consider the value of energy tax credits, rebates, and other offers to offset the higher cost of a more efficient system.

A Content Writer with Trane Technologies, Anne Fonda researches topics and writes for Trane® and associated residential HVAC brands. She works in collaboration with Trane Technologies subject matter experts, offering easy-to-understand, informative content on complex topics. Her goal is to help consumers make informed decisions on the products and services they need. 

She has written for HVAC and other service provider websites for over 16 years. Before transitioning to web content writing, Anne had a 14-year stint as an award-winning journalist. She graduated cum laude from the University of Missouri-Columbia School of Journalism. When she’s not working, Anne enjoys playing word games, reading, gardening, spending time with family, and visiting gardens and museums.

Expert review by Kimberly Sexton, Senior Systems Engineer