ACHRNEWS

Tax Credit Boosts Premium Furnace Sales

November 16, 2009
A technician at Envirotech Heating and Cooling installs a furnace that qualifies for the federal tax credit.


Not that long ago the good-better-best gas furnace options that were presented to homeowners often consisted of 90 percent, 92 percent, and 95 percent AFUE equipment, respectively. Granted, there were variations in there with multi-stage and variable-speed options, but in general, these were typical offerings.

That’s all changed thanks to the federal tax credit that went into effect earlier this year. The 30 percent tax credit (with a $1,500 cap) that is available for homeowners who replace their existing heating systems with 95-percent AFUE gas furnaces has resulted in some contractors changing their sales presentations.

“Our good-better-best presentation now consists of a 95 percent single-stage furnace for the good level, then we might offer a two-stage 95 percent furnace for the better level, and a modulating or two-stage 97- to 98- percent efficient furnace would be the best level,” said James Gallet, owner, Envirotech Heating and Cooling, Shawnee, Kan. “Now that the tax credit is in effect, we basically only install 95-percent and above furnaces.”

NO-BRAINER REPLACEMENTS

Selling more ultra-high-efficiency furnaces was not a big jump for Gallet, who said that even before the tax credit went into effect, he was primarily installing gas furnaces that were above 90 percent. Now it only makes sense to install furnaces that qualify for the tax credit, as it has significantly narrowed the cost gap between low- and high-end furnaces.

“After it’s all said and done, the 95 percent or higher furnace often ends up costing homeowners less in the long run than a standard 80 percent furnace,” said Gallet. “It’s a no-brainer when you take into account the utility savings that will be achieved with a 95 percent furnace and then the 30 percent tax credit.”

Granted, the tax credit is not an instant rebate, so homeowners still need to come up with the full cost of the furnace, but Gallet said that does not usually dissuade customers from purchasing 95-percent efficient equipment. “Customers sometimes get confused about the tax credit, so we educate them on that, as well as the benefits of having the high efficiency equipment, such as the utility savings and the quick payback.”

While Gallet doesn’t believe the tax credit is the only reason why his sales are up this year, he admits that it has probably helped. “We’re right at our goal for the year. I wouldn’t contribute all of that to the tax credits, because I think it’s also due to our technicians’ extensive product knowledge and ability to educate customers. But the tax credit has been an extra advantage to the homeowner when they’re buying a new furnace from us.”

The tax credits are unquestionably a terrific option to present to customers, as long as contractors first focus on meeting their customers’ needs, ensuring that they have the most efficient, safe, and reliable equipment for their homes, said Carrol Basham, assistant product manager – residential heating, Rheem Heating and Cooling. That being said, contractors have a responsibility to make sure their customers are getting the best value for their money.

“Because there are such generous federal tax credits, local rebates, and incentives, as well as manufacturer rebates available, contractors should make sure their customers understand the full value of taking advantage of these programs,” said Basham. “When homeowners have an opportunity to install high efficiency systems at near the same cost of standard systems - that’s a win-win situation for both the contractor and the homeowner.”

James Gallet, Envirotech Heating and Cooling, states that now with the tax credit in effect, his company basically only installs 95-percent and above furnaces.

INCREASE MAY CONTINUE

Manufacturers have definitely seen an increase in the sales of premium gas furnaces with the advent of the tax credit. Jim Fisher, product manager, Goodman Manufacturing, stated that over the past several years, sales of high-efficiency gas furnaces have increased for both the Goodman and Amana brand product lines. “It appears that since the introduction of the federal tax credits, we have witnessed a more aggressive increase in the sales of tax credit qualifying gas furnace products. Currently, a high-efficiency gas furnace is our best selling model.”

Even so, Fisher believes there are other factors that are contributing to increased sales of high-efficiency furnaces. “We have witnessed a trend in our sales of higher efficiency gas furnaces as homeowners become more attuned to the energy savings and enhanced comfort levels that these products deliver. The tax credit program offers additional support relative to the benefits that high-efficiency gas furnaces offer to a homeowner with regard to energy savings. If homeowners have the perception that a high-efficiency gas furnace is too costly, it’s not likely that the tax credits program will sway them to spend additional money.”

The federal tax credits have also helped increase sales of premium furnaces at Rheem, stated Basham, and the company expects that trend to continue. “With the help of the tax credits along with utility incentives and manufacturer rebates, homeowners have the purchasing power necessary to install systems that are higher in efficiency for close to the same cost as installing a standard efficiency system. Because of the rising cost of energy and the resulting need to save money, we expect to see homeowners continue to take advantage of these combined incentives and see the 90-plus furnace market steadily grow.”

Fisher reiterated that while the tax credits have drawn attention to the benefits of high-efficiency equipment, demand for these systems will most likely continue after the credits expire. “It’s my opinion that energy costs associated with the operation of HVAC products and systems will continue to become an area where homeowners will seek the best alternative for their budget and home comfort needs.”

Gallet also does not believe that the expiration of the tax credits will affect his sales of premium gas furnaces. “After the tax credits end, there will be contractors out there who will not talk about high-efficiency equipment, and they will come in and give the customer a low quote. Our company is above that, and we’re not going to change the way we market or the products that we offer. I don’t think it will change the way we do business at all.”

Publication date: 11/16/2009