A Guide to Leasing or Purchasing a Furnace
Every now and then we get asked if we offer a furnace rental plan to reduce money upfront needed for a furnace installation. While it is true the initial payments can be less when you lease a furnace, upon closer review, it becomes evident very quickly the cost of a typical lease agreement are exceedingly high.
First let’s compare the cost of a new replacement furnace when purchased outright and the cost of a leased furnace.
Buying a New Furnace
The cost of a typical furnace replacement, not leased, starts at approximately $3000.00 (price will vary depending on furnace efficiency, size of home and any needed custom design requirements, such as ductwork, vents, etc.).
Leasing a New Furnace
The average length of a furnace lease contract in Calgary is 7 years. The cost of the lease is typically $2.80 per day (or more) which equals $1022.00 per year (cost will vary depending on the company you choose).
$1022.00 per year multiplied by 7 years equals $7154.00 over the 7 year agreement. ($1022 x 7 years= $7154 total cost)
It’s important to note that in most cases you won’t own the leased furnace when the 7 year agreement ends. When the lease ends you’ll have to choose between a few different options.
OPTION 1: Continue the Furnace Lease Agreement
This is usually the best (cheapest) option. Agree to continue to lease the equipment for another 7 year term whereby your payments never end.
Also and perhaps more importantly the agreement is transferable meaning: if you sell your home the agreement is transferred to the new home owner. The resale price of your home will be reduced but more likely you’ll have to pay the buyout price (which can be expensive) as the new homeowners won’t want to have leased furnace and/or AC equipment.
OPTION 2: Lease New Replacement Upgrade
You may have the option to upgrade or replace your leased furnace. Considering a furnaces’ lifetime is around 15 years you most likely won’t need a replacement after your 7 year agreement expires. In addition, the new agreement will be more money per month and the new agreement begins for another 7 years.
OPTION 3: Pay the Buyout to Own the Furnace
Buying out your furnace will most likely be a pricey option. It’s for this reason you need to know what the buyout options are BEFORE entering into an agreement.
OPTION 4: Cancel Your Agreement
You may terminate the agreement after 7 years but you will have to pay for the furnace and any parts that were installed to be removed from your home. In the end you will need to purchase a new replacement furnace.
Why Do People Lease Furnaces?
When you understand how furnace leases work, and how penalizing they can actually be, you wonder why anyone would choose leasing instead of owning. The answer is an upside down: “To save money”. Leasing can initially look inexpensive and the monthly payments appear affordable when compared to the purchase price of buying a new furnace.
Most furnace leases also include free repairs and maintenance as well as free replacement if the furnace ever breaks down. You don’t however get to choose the company you want to service your equipment. Furthermore the leasing company can sell your agreement to another company without the need for your approval.
When you extrapolate the cost over a period of time – leasing can be very, very expensive. If you are considering a lease make sure you read all the fine-print of the contract and understand the penalties that can be incurred.
A Better Option than Leasing
There is a better option than leasing and it is finding an HVAC company with affordable and flexible financing. Financing won’t be as good as paying in full upon completion of furnace installation but it will provide payment options with fair interest rates.
We can help finance your new furnace or heating system with available 0% Interest OAC.