Heat Pump vs. Furnace: Which is Best for Your Home?
Last edited
Author
Andrew Blok
Electrification and Solar Writer and Editor
Editor
Andrew Giermak
Solar and Electrification Writer and Editor
Deciding between a heat pump vs. furnace isn't just about picking a new HVAC system — it’s about balancing your home's long-term comfort, energy efficiency, and your monthly utility costs.
While furnaces have long been the standard, heat pumps are rapidly gaining popularity for their ability to provide both heating and cooling in one highly efficient unit. We’ll break down the differences between the two to help you determine which system is the best fit for your home and budget.
See how much you can save with a new HVAC system from Palmetto
How does a furnace work?
Furnaces probably work the way you think.
Furnaces burn a fuel — often gas or propane — to generate heat. A fan blows that heat throughout your home via its system of ducts. It’s a relatively simple process.
Furnaces can vary by fuel type, efficiency, and size.
How does a heat pump work?
Heat pumps differ from furnaces in a fundamental way: They don’t generate heat; they move it.
Using the same basic technology as an air conditioner or a refrigerator, heat pumps move heat into your home to warm it and move heat out to cool it. Their ability to both heat and cool makes them unique among all HVAC options.
In heating mode, air source heat pumps grab heat from the outside air, even at very cold temperatures. Geothermal heat pumps grab the heat from underground. The stable temperature below the surface makes them more efficient. Central heat pumps use your home’s duct system; ductless mini-split heat pumps heat and cool the air directly in the room.
Heat pump vs. furnaces: key differences
How do these different technologies compare?
Efficiency
The most efficient modern furnaces turn about 98.5% of the fuel they consume into heat. That’s pretty good!
Heat pumps, though, can provide multiple times the heat energy than the electricity they consume. That means heat pumps can effectively be 300% efficient, or more. Geothermal heat pumps can deliver five times as much energy in heat as they consume in electricity.
Air source heat pumps get less efficient as it gets colder, but cold climate heat pumps can maintain high efficiency rates well below freezing.
Operating cost
It’s difficult to say definitively whether a furnace or heat pump will cost more to run. Because they use different fuels, a heat pump’s efficiency advantage doesn’t always translate to a cost advantage. Your local cost of natural gas and electricity will inform your choice, and whether any of the electricity for your heat pump comes from your solar panels.
A study by the Department of Energy found that most Americans could lower their heating bills by switching to a heat pump, especially if you were switching from a propane or electric furnace.
Installation cost
Furnaces are generally a bit cheaper to install than heat pumps, though your total cost will depend on which system you’re replacing. Switching fuels will likely add expense.
Climate compatibility
Conventional wisdom used to say that for very cold climates, a heat pump would leave you chilly. But cold climate heat pumps perform well down to very cold temperatures, and are widely used in places with hard winters.
Furnaces never had cold weather concerns.
Heating and cooling both?
It goes without saying: A furnace only heats.
A heat pump can do both, which can be an advantage. One system to maintain instead of two can reduce maintenance and repair costs.
Comfort
Some heat pumps provide gentle even heating and cooling, as opposed to the all-or-nothing on-and-off nature of a furnace.
| Heat pump | Furnace | |
|---|---|---|
| Efficiency | Effectively 300% to 500% efficient | Nearing 100% efficiency |
| Operating cost | Depends on local rate of electricity and gas | Depends on fuel and local rate of electricity and gas |
| Installation cost | Depends. Can be a bit higher. | Depends. Can be a bit lower. |
| Climate compatibility | Works in cold climates. | Works in cold climates. |
| Heating and cooling ability | Heats and cools | Heats only |
| Fuel | Electricity | Gas, propane, or heating oil |
See how much you can save with a new HVAC system from Palmetto
Cost of heat pumps vs. furnaces
New heat pump sales (4.3 million) surpassed new gas furnace sales (3.9 million) in the US for the first time in 2022 according to the Air Conditioning, Heating, and Refrigeration Institute. Rising energy costs and the growth of heat pumps into more climatic and geographic regions are the main reasons. That trend has continued. In 2025, for the first time, more than half of new apartment buildings used heat pumps and 48% of new houses did.
Purchase and installation of a heat pump is generally more expensive than a gas furnace, although that’s not accounting for the two-in-one, heating and cooling capability of a heat pump vs. a furnace. A heat pump’s upfront cost spans from $5,000-$25,000 according to a range of online consumer sources, depending on type of heat pump, home size, heat pump size, efficiency ratings, brand, and installation work (e.g. ductwork, renovation, electrical work). The range for a new gas furnace is $3,800-$12,000 according to similar sources.
The likely savings with a heat pump come in the long run. According to the National Renewable Energy Laboratory, 62%-95% of US households would have lower energy bills with a heat pump. For the 49 million US homes using electricity, fuel oil, or propane for heat, the average annual savings range from $300-$650, depending on the heat pump's efficiency. An air-source heat pump’s average lifespan is about 15 years. A geothermal heat pump can last 25 years or longer.
Power a heat pump with solar electricity from your roof and you could save even more.
Is a heat pump or furnace better for your home?
Choosing a heat pump vs. a furnace for your home's heating depends on your priorities. Weigh the upfront cost of a new system and its installation and your area's electric and gas rates and work with a knowledgeable installer to find the best solution for your home.
Finally, if you have solar panels, a heat pump is more likely to be an ideal choice. Running your heat pump on solar power can maximize your savings and clean energy usage.
If the upfront cost of a new HVAC system is a barrier, leasing your next HVAC system could be a solution. An HVAC lease, like the Palmetto Comfort Plan, swaps the upfront cost of purchase and installation for predictable monthly payments that also covers maintenance and many common repairs.
Explore your options with the Palmetto Comfort Plan.
See how much you can save with a new HVAC system from Palmetto
Frequently asked questions
How is a heat pump different from an electric furnace?
A heat pump and an electric furnace use electricity, however, a heat pump moves heat in or out of a space whereas an electric furnace is generating heat from the electric power. A heat pump is much more energy efficient than an electric furnace.
What is a heat pump?
Heat pumps can heat or cool an indoor area, such as your home, by moving heat from outside to in, or it cools indoor space by moving heat from indoor air to out. A heat pump uses electricity to move heat, but it doesn’t consume electricity or another fuel source to create heat.
Do heat pumps work in cold weather?
Modern heat pumps work better in cold weather than ever before. Specifically, cold climate heat pumps are built and certified to maintain high efficiency at 5° Fahrenheit or colder.
Is a heat pump gas or electric?
There are heat pumps that use waste heat from gas systems, but residential heat pumps are electric. In some cases, homeowners choose to keep a gas furnace and an electric heat pump, but cold climate heat pumps make this a less necessary option.
