How Does HVAC Financing Work?

By Anne Fonda

If the time has come for air conditioner replacement or furnace replacement, you may be wondering how you’re going to pay for it. If you’ve been planning ahead, you may have saved some money to put towards HVAC system replacement.

But you likely need to finance at least part of the cost of a new heat pump installation or furnace installation. There are several ways to do that. Let’s go over some factors to consider for air conditioner financing, furnace financing, and financing full HVAC system replacement.

Is it better to finance or pay cash for HVAC installation? Certainly, if you have the cash and you’re opposed to financing, you can pay cash. But if you have the cash on hand, you could put it in a high-interest savings account or CD and let it earn interest, while still making your monthly payments. 

Consider the pros and cons of paying cash. If it will completely deplete your emergency fund, don’t do it.

What credit score do you need to finance an HVAC system? That will vary based on the type of financing. For some, you will need good to excellent credit, while for others you may qualify if your credit is less than good.

Understand the total cost of the HVAC system. Be sure to get everything in writing so that you understand the total cost of the system. Your contract should include the price of the equipment, the labor costs, disposal fees, and anything else associated with your HVAC installation. Our Pricing Guide can help you get an idea of what’s involved. 

Compare the different financing options.  More on that below.

Understand the financial implications of HVAC financing. Before agreeing to any sort of financing, make sure you understand the payment requirements, interest rates, loan or payment period, etc. Read the fine print.

A great way to reduce the final cost of HVAC installation is to look for the systems and system components that are eligible for federal tax credits and HVAC rebates from your state or utility company. The HVAC tax credits are available on qualifying energy-efficient units purchased and installed between now and the year 2032.

Visit our rebates, savings, and offers page for qualifying products, available tax credits, and rebates for your area. Furnace rebates and other rebates will vary based on your state and your utility company. Federal tax credit amounts are the same for everyone, no matter where you live.

Potential energy tax credits include:

• Heat pump tax credit of up to $2,000.
• Ductless system tax credit of up to $2,000.
• Furnace tax credit of up to $600.
• Air conditioner tax credit of up to $600.

You will still need to finance your HVAC installation, but knowing that you may get some money back through a rebate, or have a lower tax bill because of the tax credits can be encouraging.

There are 4 main options for AC financing or HVAC system financing: a personal loan, a home equity loan, a HELOC, and HVAC financing through your local Trane dealer. For all of these options, you can reduce the amount of the loan or the credit card balance if you can make a down payment. Whether you have an emergency fund or a savings account, tapping some of that can help reduce your monthly payments.

Each option has pros and cons. Let’s take a look.

You can apply for a personal loan with your bank, local credit union, or an online bank - no need to look for HVAC financing near me. Interest rates will vary depending on where you live, whether you have a previous relationship with the lender, how large you want the loan to be, your credit rating, and more. 

Watch out for the following when considering applying for a personal loan.

• High interest rates
• Loan amount 
• Extra fees
• Prepayment penalty
• Repayment term

While a longer loan repayment period will mean lower monthly payments, you will pay an increased amount in interest. If you default on the loan, it can seriously damage your credit score, and if the loan was secured with collateral, the lender can seize that to help pay what they are still owed.

As a homeowner, you may also choose to look at the pros and cons of a home equity loan. If you have lived in your home for several years and made on-time monthly mortgage payments, you will have likely built up some equity in your home. Home equity is the amount your property is currently worth, minus the mortgage amount (if any).

This loan is essentially a second mortgage on your home. To qualify for a home equity loan, you generally have to have at least 15% equity. Home equity loans generally have a fixed interest rate. 

Watch out for the following when considering a home equity loan.

• Look for competitive interest rates and terms from your mortgage lender to other lenders.
• A high income-to-debt ratio can disqualify you.
• You may have to pay closing costs and other fees.
• If you default on the loan, the lender could foreclose on your home.

Similar to a home equity loan, a HELOC, or home equity line of credit, uses your home as collateral. It’s a second mortgage on your home. A HELOC is like a credit card. There’s a total loan amount, but you only borrow what you need, then pay it off and borrow again as needed, typically over a 10-year draw period and 20-year repayment period.

Watch out for the following:

• HELOCs have adjustable interest rates, so your payments could go up as interest rates rise.
• A real estate market crash could result in you owing more than your home is worth.
• If you default on the HELOC, the lender could foreclose on your home.

Using a HELOC can be a good solution to finance a new heating and cooling system if you have a lot of home equity and steady employment.

A fourth option, where you don’t have to worry about high interest rates or home foreclosure, is to obtain HVAC financing through your local Trane dealer. More on that, next.

Trane currently has a special HVAC financing offer to make getting the high-efficiency, energy-saving system you want more attainable. We’re partnering with Wells Fargo Bank N.A. to offer a special Wells Fargo Home Projects credit card with 0% APR for 60 months with equal payments. This offer is available exclusively through participating Trane dealers through December 31, 2024.

To qualify, you need to apply with Wells Fargo and have approved credit. The 0% APR makes this method of financing HVAC projects very attractive as long as you can make your monthly payments, and pay the card off before the promotional period (60 months) ends. 

In general, consumers with good or excellent credit (690 or higher scores) may qualify for a credit card with a zero-interest promotional period. 

Let’s look at some hypothetical monthly payments. For example, assuming you didn’t use the card for any other purchases:

$10,000 HVAC installation = 60 monthly payments of $167.

$20,000 HVAC system installation = 60 monthly payments of $334.

$30,000 HVAC system installation = 60 monthly payments of $500

$40,000 HVAC system installation = 60 monthly payments of $667.

Since 2009, we’ve worked with Wells Fargo Bank, N.A. to offer homeowners flexible financing options. With on-the-spot credit decisions and convenient monthly payments, you can breathe easier when you choose secure financing options from Trane.

Rolling your installation and payment plan together can be a convenient HVAC financing option if it's also the most affordable one. If you have an aging air conditioner or furnace, replacing both units with a more efficient matched system is a smart decision for comfort as well as for your wallet. Because of the increased energy efficiency, you’ll likely see a decrease in your monthly energy bills.

Since this is a credit card that will be fully maxed out when you receive it, your credit rating might take a small hit. But your numbers will improve as you begin to make monthly payments. 

Be sure to pay the card off before the promotional period ends. If you don’t pay it off on time, you will be hit with interest charges at an APR of 28.99%. The interest rate will apply to any unpaid balance and any future purchases.

Ready to purchase a new HVAC system? Contact your local Trane Comfort Specialist for product recommendations tailored to your home and your needs. Once you decide on the specifics, you can apply for financing directly through your dealer with s secure online credit application.

Anne Fonda, Content Writer

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A Content Writer with Trane Technologies, Anne Fonda researches topics and writes for Trane® and associated residential HVAC brands. She works in collaboration with Trane Technologies subject matter experts, offering easy-to-understand, informative content on complex topics. Her goal is to help consumers make informed decisions on the products and services they need.

She has written for HVAC and other service provider websites for over 16 years. Before transitioning to web content writing, Anne had a 14-year stint as an award-winning journalist. She graduated cum laude from the University of Missouri-Columbia School of Journalism.

When she’s not working, Anne enjoys playing word games, reading, gardening, spending time with family, and visiting gardens and museums.

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