Why HVAC Costs Rise, and What That Means For You

Why HVAC Costs Rise, and What That Means For You
Arne Jacobsen
Residential Sales Professional

I have been in heating and air conditioning trade for 44 years. In that time, I have installed, serviced, designed ductwork, sold, and sized thousands of residential heating and cooling systems.

About This Article

Prices don’t stay the same in life, and HVAC is no different. But knowing why costs will change can help you plan for your next heating and cooling project.

“Why do HVAC costs change?” We hear this question sometimes, and usually what the person really means is “Why do HVAC costs always seem to go up?”

It’s a fair question, and it has a surprisingly complex answer. But we’re here to demystify why this is.

And why should you care? Another good question. But in this case, the answer is simple: understanding why costs rise can help you to make budgeting decisions now.

Look, HVAC projects generally aren’t cheap. So it pays to make an informed decision about when and why to start your next heating or cooling project. We’re talking about equipment that will heat and cool your home for up to (or over) 20 years! That’s worth a bit of extra research.

You’ve found the right place, though. At Fire & Ice, we’ve been educating customers for decades, and we’re here in this article to draw the curtain back on a topic that companies don’t like to talk about: rising prices.

Air conditioner parts

The Cost of Doing Business in HVAC

The HVAC industry is one of the most difficult industries to run a profitable, sustainable business. Why is this? Several reasons:

  1. Insurance. HVAC companies need to carry millions in insurance to remain financially secure, and to protect their customers from facing liability issues.
  2. Labor costs. As inflation rises, so does the cost of maintaining an expert workforce.
  3. Training Costs. As the complexity of HVAC equipment increases, the need for hands-on training increases, which is often the responsibility of the company.
  4. Equipment costs. This isn’t just for the HVAC equipment in your home. The equipment in a prepared technician’s truck can cost as much as $10,000!
  5. Materials Costs. We’ll talk more about this below, but global markets and federal decisions can (and do) affect local companies.

“Is this really my problem, though?” I hear some of you asking. You’re not starting a business. You just need reliable heating and cooling equipment, right? Well, sort of…

HVAC companies that don’t run a tight, profitable ship often fold. Seriously, the failure rate of HVAC companies is somewhat sobering. And what happens if the company who installed your equipment goes out of business? You’ll be able to receive maintenance from another company, sure, but will they honor the same agreements you had in place with your installer? These could include labor or maintenance agreements that were saving you money.

More than this, it’s a hassle to have to search for a reliable contractor. There are plenty of good companies out there but, unfortunately, just as many bad ones.

Homeowners at an HVAC estimate

The Cost of Heating and Cooling Parts & Service

We compare HVAC equipment to cars occasionally, because the analogy often works quite well.

This is another example where there are some similarities. Namely, parts and service can become trickier as your equipment ages.

Materials in Your HVAC System

As you might imagine, most major HVAC components use metallic materials. The cost of copper or steel can greatly affect pricing. This can even be true when talking about sheet metal costs for ductwork installations and repairs.

These costs are affected by global supply and demand, and are out of the hands of local contractors. Even multinational manufacturers often have to adjust pricing to compensate for these market forces.

R22 Availability and Pricing

Other times, the industry is required to change as a result of federal mandates. For example, the EPA banned new production and imports of R22, a popular air conditioner refrigerant, starting in 2019.

R22 air conditioners still exist, and you can still get R22 to “top up” your refrigerant if it springs a leak. However, since no new R22 is being created or imported, the supply of it is increasingly rare. All the R22 we have right now in the US is all we’ll ever have. So the price of that remaining supply is going to skyrocket in the coming years.

Indeed, we often reprice our services once per year, but have had to adjust the cost of our remaining R22 more frequently as a result of this dwindling supply. We simply can’t stock it as affordably.

In this case, this change is for a good reason: R22 is worse for the environment than newer refrigerants that have been developed in more recent years. But it also has financial implications for homeowners. And it means that your A/C repair might end up being a lot more expensive than you initially expected.

RELATED: The R22 Ban: How It Affects You

“They Don’t Make ‘em Like They Used To”

I’m sure you’ve heard this phrase before, and it gets used sometimes in HVAC. But it’s not always true.

Some older HVAC equipment used to last for 30+ years and you rarely, if ever, hear about air conditioners or furnaces lasting that long these days. But there’s a reason for that.

Since older equipment shared more similar parts and processes, it was easier to find replacement parts that were relatively cheap. For some systems, it didn’t make sense to get a new system when a repair was more cost-effective. Many 30-year-old systems had few, if any, of their original major components.

Nowadays, equipment is much more efficient than an HVAC system from, say, 40 years ago. But that also comes with mechanical complexities and innovations in parts, which means “one size fits all” parts replacements don’t work, so labor and manufacturing costs rise.

HVAC Equipment Efficiency, Longevity and Options

To state it bluntly, some of the rising costs in HVAC are simply because the technology is better. We’ve installed more air conditioners with 20+ SEER Rating (a measure of efficiency) in the past few years than we did in the previous decade.

This is because the technology is improving and homeowners are starting to realize the benefits. Yes, that 20 SEER A/C unit is going to run you more money than the entry-level 10 SEER system that’s currently in your home. But if you’re planning on spending the next decade in the home, it’s going to justify that cost with added comfort and increased cost savings on utilities.

Sometimes progress reduces prices, as with TVs or personal computers. But when the materials and labor continue to increase, there’s only so much HVAC companies can do.

The good news is, the number of heating and cooling options available to customers is larger than ever, and the quality of the work has never been higher either.

HVAC Brands

Are You Paying For the Brand Name?

This question sometimes comes up in regard to prices: are we just paying for the brand name on the equipment?

It’s a fair question. A generic t-shirt might run you $15, but an identical Nike one is likely to cost twice that amount. So is the same true for HVAC?

Yes and no. Yes, name-brand heating and cooling equipment is likely to cost more. But it’s not like the t-shirt example, because the increased cost almost always translates to additional efficiency, safety, or options.

What kind of options are we talking about? On either an outdoor or indoor unit, it might mean added insulation. This protects the equipment, makes it run quieter, and can decrease vibrations that cause long-term problems.

Or it could be additional casing on an outdoor unit, which will help to protect your equipment against the elements. Debris, wind, icicle or rain damage is a real thing if there are exposed parts, so this can save you thousands in the long run. Lastly, we talked about materials costs earlier, and the quality of the components themselves can be cheaper and flimsier or more expensive but more durable.

Some major brands have a secondary brand that is more budget-conscious. But it’s not just the nameplate on the outside of the unit that you’re paying for, so these secondary brands come with their share of potential risks and considerations for homeowners.

Finding Your Comfort and Budgeting Fit

In my nearly 45 years in HVAC, prices haven’t gone down. Even if they’re cheaper than the earliest days of air conditioning (when adjusted for inflation), it still seems to always be going up. So it’s a good bet they will continue to rise.

What this means for you is that, if you’re nearing a new year and considering a large HVAC project, it often makes financial sense to get the project done sooner rather than later.

With rare exceptions like the R-22 situation we detailed earlier, many companies increase their pricing to account for the materials and labor market on or near the first of the year. So that project you’re considering in the Fall might be more difficult by the Spring.

ADDITIONAL RESOURCES:

Still, if it’s not the right time for you, waiting can be the best option. But if all else is equal, knowing these things can help you make a timely decision that saves you money.

If you’re ready to get serious about determining next steps, we’re here to help. Schedule your free, no-pressure estimate below, and one of our trained professionals will be happy to walk you through your options. We’re looking forward to making your day a bit better!

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