Heat pump vs furnace: Can one replace your gas furnace?

Your gas furnace is getting old, and you’re considering a heat pump as the replacement. If your winters get cold, you may have heard a heat pump can’t keep up.

A heat pump can replace your gas furnace even in a cold climate, but whether it lowers your bill often depends on what fuel your existing furnace runs on. A cold-climate model that is sized correctly can heat a whole home through freezing weather.

In the coldest regions, some homes still keep a gas furnace as backup for the worst days. We cover when that makes sense below.

Heat pump vs. furnace

A furnace makes heat by burning gas, and a heat pump moves heat that already exists inside or outside your home.

How does a furnace work?

A gas furnace burns natural gas to heat air, then a fan pushes that warm air through your ducts. Furnaces can also burn oil or propane, or consume electricity (sort of like a giant toaster) to make heat.

How does a heat pump work?

Think of a reversible air conditioner. If you’ve ever felt the hot air coming off of a window air conditioner, you can understand that an air conditioner is really just sucking heat out of your home and dumping it outside. A heat pump works the same way when cooling your home, but can also reverse to suck heat out of the air and dump it in your home, even when it’s really cold outside.

Moving heat takes less energy than making it. A properly installed air-source heat pump can deliver up to two to four times more heat energy than the electricity it uses.

Cold weather lowers that ratio. Cold-climate heat pumps are designed to hold up better at low temperatures, and Energy Star's cold climate label means a model can deliver 1.75 times the heat energy at 5°F.

Heat pump vs. furnace cost: which is cheaper?

Heat pumps commonly cost more to install than a replacement gas furnace, but they provide cooling, too. If your air conditioner is also old, compare the heat pump against a furnace plus a new AC.

The cost to run each comes down to two prices and one efficiency number. In May 2026, the Energy Information Administration (EIA) put electricity at roughly 2.8 times the cost of natural gas for the same amount of energy. So a heat pump needs to deliver more than about 2.8 units of heat for every unit of electricity just to break even on fuel. Furnaces lose some heat out the vent, which tilts the math slightly toward the heat pump.

A heat pump can clear that bar in mild weather, but miss it on the coldest days. That’s part of why savings are not a given at all temperatures. The local cost of electricity and gas (not the national average) is the information that’s actually relevant to your situation.

Rewiring America found that, on average, Americans could save $840 a year when switching from a heating oil or propane furnace, $780 a year when switching from electric resistance, and $60 a year when switching from natural gas. 

Some states and utilities have offered heat pump rebates, so ask yours what is available before you sign. And, if switching to a heat pump allows you to end gas service to your home, you could also eliminate standard charges you pay every month just for a gas connection.

If the upfront price is a barrier, Palmetto offers Comfort Plan, an HVAC lease with $0 upfront cost. Your predictable monthly payments get you expert installation and HVAC sizing, maintenance, flexible end-of-term options, and most repairs, too.

Which is better?

Answering this question will always come down (at least a bit) to your personal preference and goals.

Cost: If your goal is to minimize operating cost, a heat pump is often the better choice in much of the United States. In cold climates, the math will likely be tighter or tip in a gas furnace’s favor. But, if you’re switching from a furnace that heats with electric resistance, propane, or heating oil, the research shows you typically stand to save big.

In places where the math is tighter, some homeowners opt for a dual-fuel system and use a heat pump when it’s the cheapest option, and natural gas when it’s the cheapest.

Clean energy: If you’re motivated to switch from fossil fuels for environmental or health concerns, a heat pump is the cleanest option.

Performance: Some heat pumps provide a slower, steadier heat that some homeowners prefer.

Pairing with solar: If you have solar panels providing electricity for your home and generating bill credits, the savings math might tip further in a heat pump’s favor.

Upfront cost: Replacing a heat pump with a heat pump or a furnace with a furnace can be the cheapest route. Switching fuels can easily add cost. A lease of either technology can remove the upfront cost and shift it to predictable monthly payments.

Learn more about cold climate heat pumps, or explore your HVAC options with Palmetto to learn more about whether a furnace or heat pump is better for your house.

Common questions about heat pumps

Are heat pumps efficient?

Yes. Heat pumps can deliver up to four times the energy in heat as it consumes in electricity (depending on the outdoor temperature). Furnaces, whether they run on gas, propane, heating oil, or electricity, can never deliver more than the same amount of electricity. Heat pump efficiency declines as the outdoor temperature gets lower, but cold climate heat pumps keep their efficiency advantage well below freezing.

Are heat pumps gas or electric?

Electric. A heat pump runs on electricity and does not burn fuel. Some homes pair one with a gas furnace as backup, but the heat pump part is still electric.

Why is my bill high with a heat pump?

Your electric bill goes up when your heating moves off gas, even as your gas bill should drop. Because of the price difference between residential electricity and gas, it may be more expensive to run a heat pump than a gas furnace through the winter. Poor airflow, leaky ducts, incorrect refrigerant charge, and misconfigured electric backup heat coils can contribute to a high electricity bill.

Disclaimer: This content is for educational purposes only. Palmetto does not provide tax, legal, or accounting advice. Please consult your own tax, legal, and accounting advisors.