Understanding the Costs of Replacing an Air Conditioner

Keeping cool isn't cheap. Air conditioners with enough power to cool down a single-family home run thousands of dollars and that's not including delivery and installation costs, taxes, permits, and other possible fees. All told, the average replacement cost for air conditioner systems in the United States is around $6,000. If you have a large home or live in an area with a high cost of living, five figures isn't out of the question.

So, what drives high air conditioner replacement costs? And what can you do to save a little cash if your home needs a new AC? We've unpacked the topic for you below.

Understanding Air Conditioner Replacement Cost Factors

The average air conditioner replacement cost of around $6,000 is just that an average. It's probably better to understand the cost as a range of approximately $2,000 to $10,000, with some statistical outliers. This range may seem unhelpfully broad, but it's hard to pin down a precise figure because of the number of factors that go into the cost of replacing a residential air conditioning system.

Here are some of the things that can ultimately influence how much you pay out of pocket for a new AC:

Cooling capacity

Think of your air conditioner's cooling capacity as its total power. It's a measure of how large a space it can adequately cool. A larger space will require a more powerful air conditioner; and a more powerful air conditioner typically costs more money.

Efficiency

Air conditioners in the United States are assigned a SEER rating, which is a way to quantify a unit's energy efficiency. SEER stands for seasonal energy efficiency ratio, and the ratio is determined by taking an air conditioner's cooling output over the course of a typical hot season and dividing that by the amount of energy the unit consumes in the same time frame. The U.S Department of Energy requires a SEER rating of at least 14 for residential air conditioners in northern states and 15 in southern states.

Most commercially available air conditioners are rated between 14 and 21 SEER. As a rule of thumb, higher SEER ratings mean higher prices up front. You might recoup the steeper initial cost of a high-efficiency appliance over time, but you have to weigh the potential year-to-year savings against the air conditioner's expected lifetime.

Size of the system

The extent of your home's air conditioning system will of course influence its cost. If your house has a large footprint, the ductwork if installing or replacing ducts is required will be extensive. If your home has multiple floors, you might need to install more than one outdoor condensing unit, inflating the overall cost. The bottomline: a bigger air conditioning system means a bigger price tag.

Salvageable parts of the system

The extent to which you are replacing your air conditioning system is certainly going to impact how much you pay. An HVAC compressor replacement cost might set you back a couple thousand. That figure will quickly balloon if you need to replace an entire HVAC system, including new ductwork, condensing units, and air handlers.

Delivery and installation

Delivery and transportation expenses factor into the cost to replace AC system components, and once the equipment arrives, you need to pay for a qualified technician to install it correctly. 

Tax credits

The federal government offers tax credits for homeowners who install qualifying equipment or make modifications to improve a home's energy efficiency. Your upfront costs wouldn't change, but you could recoup some expenses the following tax season.

Where you live

Your regional cost of living could drive up installation costs. The nature of your home is worth considering as well. Remote or hard to access property could necessitate higher delivery fees, and technicians may charge more or bill more hours if equipment needs to be installed in a challenging location, such a tight crawl space or high ceiling.

Permits

HVAC work will typically require a contractor to obtain permits from your town or city. Prices vary by location, but permit fees can easily add a few hundred dollars to your overall bill. 

Extent of your warranty or insurance protection

In some circumstances, you might be protected from some of the costs associated with an AC replacement because of warranty or insurance coverage. If your system fails while still under the manufacturer's warranty, most of the repair or replacement costs will likely be covered. You may still have to pay for some component parts or labor.

Similarly, a home warranty policy that encompasses your HVAC system could also cover some of the expenses involved, depending on the nature of the repair or replacement.

Breakdown of Costs

You'll be able to make more informed decisions regarding a new air conditioning system if you also know the extent to which each factor affecting the cost influences your overall out-of-pocket expenses. Let's break down the costs.

Equipment: $2,000 to > $10,000

The most significant contributor to the cost of a new AC system is the equipment involved, and the extent of the materials required will affect your overall expenses. An air conditioning compressor replacement cost might be somewhere in the ballpark of $1,500 to $2,000. Factor in multiple compressors, condensing units, ductwork, thermostats, humidifiers and dehumidifiers, zone control systems, and so on, and the bill quickly increases.

Luxury branding, increased cooling capacity, and high energy efficiency can also push costs to the higher end of the range. 

Labor: $500 to $3,500

Labor is the other meaningful portion of the total cost to replace an air conditioning system. It's essential to have a qualified technician install HVAC equipment, and hourly rates can be $75 to $150 or more. With elaborate or complex systems, those hours can add up.  

Permits: $50 to $800

Permit fees make for a smaller portion of the overall cost than equipment and labor do, but they can still be significant if you're making substantial changes to your HVAC system. Your technicians or contractor may need to pull multiple permits for mechanical work and electrical work.

Again, it's dependent on where you live, but you might be able to avoid purchasing permits if you're replacing all or part of your system with the same kind of equipment.

Disposal: $100 to $500

Don't forget you need to cart away the old equipment. HVAC professionals might take this off your hands for an added fee. You may be able to get rid of some equipment on bulk pickup days or at your town's dump or transfer station, but there are rules governing how certain materials can be disposed of. Your town or city might charge a fee to dispose of your old HVAC materials.

Strategies for Cost-Effective Air Conditioner Replacement

Replacing a home air conditioning system is an expensive undertaking, but there are steps you can take to curtail costs somewhat. Here are some tips to consider:

Thoroughly research brands and models. 

There are countless air conditioning units available to the modern homeowner. Do some research to determine what kind of cooling capacity your home requires, and don't buy equipment that is more powerful than you need. Also compare similar models across companies to ensure that you're paying for quality and not necessarily branding. An AC unit compressor cost, for example, could be markedly different from one company to the next, even if the part's build quality is virtually identical.

Buy at the right time. 

Air conditioner costs can spike in the summer, perhaps for obvious reasons. You might be able to find sales, promotions, rebates, and other kinds of deals if you shop for new equipment in the fall or winter.

Obtain quotes from multiple HVAC professionals. 

Labor and installation quotes can vary substantially from business to business. Look up all the licensed and insured HVAC professionals in your area and ask for quotes from as many as you can. Once you have several quotes in hand, you might be able to negotiate with your preferred provider for a better price and expedited installation or repair timeframe.

Take advantage of tax credits. 

If you install a qualifying model, the government will provide a tax credit worth 30% of your project costs, with a cap of $600. 

Consider future costs. 

Remember to weigh current expenses against future savings and vice versa. You might be able to save money in the short term with inexpensive equipment, but poor workmanship or inefficient energy consumption could lead to higher monthly bills and inevitable pricey repair costs. Conversely, you could pay more than you'd like to install a robust and energy efficient system, but it might last for 20 years and reward you with comparatively inexpensive energy bills. Think long term.

Understanding the Importance of Professional Installation

One thing we would not advise to save on costs: trying to DIY an air conditioning system installation. Qualified techs are aware of building codes and regulations and know how to install complex equipment correctly. Attempting to install major home equipment is also a quick way to void a manufacturer's warranty.

Safety is a concern as well. HVAC equipment is unwieldy and often requires specialty equipment or tools to deliver and install. The installation may also involve hazardous equipment and dangerous electrical wiring. It's not a project for the layperson.

Protecting Your Home's AC System

When your AC system eventually requires servicing, call on your home warranty provider. With a Liberty Home Guard policy, all you need to do is submit a claim from your phone or computer, and we'll have a tech there in no time. Whether you live in a single-family house, apartment, condo or townhome, we have you covered. Call (833) 566-9564 to learn more.