Is Updating Your Central Air a Good Investment?

You’ve just purchased an older home with a 20- or 30-year-old central HVAC system that still works. Should you replace it right away?

To answer this, you need to dive a little deeper into the specifics of your location and your home. Let’s focus primarily on the Southeast, where the primary purpose of HVAC is cooling. You can do the same sort of calculation for colder regions, but that’s for a separate article.

 Let’s assume you’ve purchased an older home in a warm city such as Atlanta, Georgia, or Orlando, Florida. Your 1980s home has a 12 SEER, 3-ton HVAC system that works fine, but you're wondering if replacing it with a newer, more energy-efficient unit now, or wait until it dies.

The answer you’ll get from AI will be “it depends,” but I’m going to say yes, and explain why. First, let’s look at the basic building science of these mechanical systems.

What Are SEER Ratings, and Why Do They Matter?

Let’s make sure we understand what we're dealing with. SEER (Seasonal Energy Efficiency Ratio) measures the efficiency of an HVAC system. The higher the SEER, the more efficiently your unit will cool your home, which translates to less energy use and lower utility bills. Let’s compare two of the more common ratings you’ll likely encounter as you shop for HVAC replacements.

• 12 SEER: Your current HVAC system likely has this rating, standard for older units ,but now considered less efficient by today's standards.
• 16 SEER2: The newer, higher-efficiency models available today typically have this rating, although some are higher. These systems use less electricity to cool the same space, providing substantial savings over time.

Before We Talk about ROI …

I’m going to discuss the return on investment of upgrading your HVAC (ROI) shortly, but before I do, I want to toss out a few other factors for you to consider:

1. Failure May Be Imminent. Although there’s not much hard data about when HVAC systems fail, most building scientists put the retirement tenure at 15-20 years. It’s safe to say that a system installed on or before about 2004 is running on borrowed time. Replacing your system before it breaks may simply be prudent. Putting in a SEER2 16 instead off a lower efficiency model is a no brainer. The added energy saving will help offset the big replacement cost.
2. New HVAC Raises Resale Value. According to home resellers, you may recover as much as 30 percent of the installed cost of new HVAC if you sell the house a few years later. The home also may sell more quickly. Is moving a possibility?
3. Comfort is a Thing. A lot of central air systems built 20 years ago are noisy and clumsy. In technical terms, that’s their compressors operate at a single speed, instead of varying fan speed for different conditions. Also, this “one size fits all” approach typically has no way for you to “zone” different rooms, other than manually adjusting duct vents. Upgrading your system would be a good time to add in some smart zoning dampers, increasing both comfort and energy savings.

Ok, let’s move on to straight up ROI, keeping those other three factors in the back of your mind. 

Crunching the Energy and Insulation Numbers

The two things that most affect how quickly you could “pay back” an investment in more efficient HVAC are how well your home is insulated, and what your local utility charges for electricity.

Table 1: ROI Period Based on Insulation Quality

In the table below, we compare the estimated payback period (in years) for replacing a 12 SEER system with a 16 SEER2 system, based on whether your home is well-insulated or not.

Table 2: ROI Period Based on Local Utility Costs

Next, we look at how the local electricity rate affects the payback period. The higher your electricity rate, the more you'll save by upgrading to a higher-efficiency HVAC system.

Utility Caveat. The kWh rates shown are lower than the State’s overall rate, as reported by ChooseEnergy. You may want to update the data for your region if making your own ROI calculation.

How to Calculate Your Potential Savings

When upgrading your HVAC system, consider the following steps to estimate your savings:

1. Determine Your System’s Current Energy Use: Your old system’s SEER rating (12) gives you an idea of how much energy it uses. A 12 SEER system uses about 1,200 kWh annually for a 2,000 sq. ft. home in Georgia.
2. Estimate New System’s Energy Use: A 16 SEER2 system will use about 900 kWh annually to cool the same size home.
3. Calculate the Difference in Energy Use:
   • Old system: 1,200 kWh
   • New system: 900 kWh
   • Energy savings: 300 kWh annually.
4. Multiply by Local Electricity Rates: If your local electricity rate is $0.12 per kWh:
   • 300 kWh savings * $0.12 = $36 savings per month or $432 annually.

Why Buy Now? The Big Picture.

If you go strictly by the ROI tables, in well-insulated homes with high electricity rates, the best payback period for a new installed, higher efficiency HVAC works out to about 16 years. 

But as I’ve noted above, that number isn’t the whole story. It doesn’t account for other variables such as resale, zoning and comfort, not to mention the likely rise in utility costs in coming years. Then there’s the matter of inflation. Do any of us believe that HVAC prices will remain stable in the turbulent years to come? The more the price of energy rises, the more “valuable” your new HVAC will become. A more efficient home HVAC system is more resilient. On top of that, you’ll be reducing your contribution to Climate Change.

Electricity Rates by State courtesy ChooseEnergy

Publisher’s Note: This content is made possible by our Today’s Homeowner Campaign Sponsors: Whirlpool Corporation. Whirlpool Corporation takes sustainability seriously, in both their products and their operations. Learn more about building and buying homes that are more affordable and less resource intensive.