Heat Pump Cost: Purchase, Installation, and Operation

A heat pump offers an all-in-one solution for heating and cooling your home with exceptional efficiency. Both of these benefits can mean savings on monthly energy bills and in the long run. 

Looking at a heat pump’s cost is a more complicated question than seeing an upfront purchase price. You should also understand the operating and installation costs, as well as the implications of buying or leasing a heat pump. Here’s what you need to know.

Heat pump 101

A heat pump, unlike an air conditioner or a furnace, gives you both heating and cooling in one system. It’s the most energy efficient HVAC system for most homes because it moves heat into an interior space or out of it instead of generating the heat by consuming electricity, gas, propane, or another fuel source. 

In heating mode, an air-source heat pump grabs heat from the outdoor air and moves it into your home, even on really cold days. Ground-source, or geothermal, heat pumps grab heat from underground. 

Residential heat pumps are in use in all 50 US states. Modern heat pumps are about 3-4 times more energy efficient than gas or electric furnaces. According to the US Department of Energy, heat pump heating reduces the energy used for heating by up to 75% versus furnaces or electric resistance heat systems. If all US homes switched to a heat pump, 98% of households would reduce carbon emissions, according to Rewiring America.

Purchasing a heat pump

What does a heat pump cost? It's an obvious question. 

The upfront cost of a heat pump will be affected by system size, system efficiency, and any incentives you can claim. Partnering with the right experts can ensure you get a heat pump that’s the right size for your home and climate and performs well in all weather . 

Looking at the purchase of a heat pump (without installation and labor), the price range spans from about $2,000 for a standard 1.5-ton single-speed ducted air-source heat pump to about $12,000 for a premium 5-ton variable-speed ducted air-source heat pump, according to our survey of commercial sites. Ductless mini-split systems cost from $700-$2,500 per unit before installation costs.

The efficiency ratings of a heat pump should also match your home and your climate. Heat pumps, particularly Energy Star-certified models, qualify for the federal Residential Clean Energy Credit (a tax credit up to $2,000 expiring at the end of 2025) and some state or local utility rebates. 

Installing your new heat pump

The total cost of a new purchase and installation can range widely, from about $3,000-$30,000, depending on factors such as home size, your climate, the type of heat pump, local labor, permitting costs, and additional construction, ductwork work, or components needed for a new system.

According to our survey of commercial sites, installation costs, along with typical costs for components, labor, permitting, disposal of an old system, can go from $4,000 to $25,000 or more depending on heat pump size and factors such as the state or existence of a home’s ductwork. With a mini-split system, installation generally costs $1,500-$4,500 per unit or zone.

The basic installation steps are:

1. Old system removal: Disposing of the old unit, which includes recovering old refrigerant.
2. Component installation: Setting the outdoor unit on a level, elevated pad and installing the indoor air handler.
3. Connection: Connecting all new refrigerant lines, electrical wiring, and the thermostat.
4. Testing: Performing a full system test to ensure the system runs correctly in heating and cooling modes and meets manufacturer efficiency ratings.

Choosing a professional installer is important as incorrect installation can negate the system’s energy benefits, your projected savings, and warranties. 

Furthermore, Palmetto’s Comfort Plan leases cover all service, maintenance, and repairs for the lease term, removing the burden of unexpected costs and ensuring your system operates reliably and efficiently year-round.

Operating costs of a heat pump

While the initial purchase and installation cost of a new heat pump system is typically higher than a gas furnace or central air conditioner, the long-term heating and cooling costs can be significantly lower, making it a smart financial choice over a heat pump’s lifespan – about 15-20 years for a modern, energy-efficient heat pump.  

By replacing two separate, less-efficient machines (i.e., a furnace and an air conditioner) with a two-in-one heat pump system, most homeowners can expect lower energy bills and reduced maintenance costs, according to the US Department of Energy.

Heating season is the biggest energy-saving and bill-cutting period for most heat pump users. An energy-efficient heat pump is three times or higher more efficient when heating than a gas or electric furnace, or an electric resistance heating system, or a gas or oil boiler. Air-source heat pumps generally have a COP of 3.0-4.0, meaning they produce 3-4 units of heat energy for each unit of electricity consumed. A furnace generally ranges from .8-.98 and a resistance heater can reach 1.0, but none of those systems can surpass a 1.0 COP.

Geothermal heat pumps often have a COP of 5.0 or higher. Depending on factors such as climate, your usage, how a system is zoned, and home layout, ductless mini-split heat pump systems can have better efficiency than ducted air-source heat pumps.

According to reports by the Department of Energy, homes in Arizona saved about $300 a year going to a heat pump. Homes in Michigan – with a much longer, tougher heating season – saved up to about $1,500 a year. According to Rewiring America, the average US household would save about $370 a year with higher than average savings when switching from propane, fuel oil, or older electric resistance or furnace heating to a new heat pump.

The benefits of leasing a heat pump

If heating and cooling with a heat pump seems intriguing, but the upfront costs aren’t, a heat pump lease, such as with Palmetto’s Comfort Plan, is a great option. For no money down, you can have energy-efficient heating and cooling, and all service and maintenance covered, for a set, budget-friendly monthly payment. 

The potential for savings and energy independence is increased when a heat pump is paired with home solar panels. Since a heat pump is an all-electric appliance, running it on electricity generated by your own rooftop solar panels allows you to cover some or all of your heating and cooling energy consumption. 

This integration can also be a key step in home electrification and maximizing your energy and utility bill savings with clean, renewable energy.

The new Palmetto app lets you easily track your energy usage, your utility costs, and see ways and devices, up to going solar and a new heat pump, which will lead to savings. You can also use our Savings Maximizer or contact us today. 

Frequently asked questions

Can I estimate the total savings of a heat pump’s lifespan?

The Federal Emergency Management Program calculated possible savings of over $5,000 over a span of 15 years with a new Energy Star-certified heat pump depending on region, climate, efficiency, and annual energy usage. 

What should I do ahead of having a heat pump installed?

Before a heat pump installation, you can help an installation team by having the indoor space where an interior unit will go (often an attic, utility room, or basement) cleared and easy to get to and work in, and have the outdoor space where the exterior unit will go cleared of debris and vegetation.

Can I install a heat pump myself?

In the vast majority of cases, unless you are a licensed contractor and electrician, installing a heat pump is not a DIY job. You need a licensed professional for legal, safety, and warranty reasons. Installing a heat pump, along with the electrical and construction work, requires specialized training, specific tools, and following laws and codes.