Should You Replace an Oil Furnace with a Heat Pump?

Discover the benefits of replacing an oil furnace with a heat pump system and whether it’s the right decision for you.

Published:
February 6, 2025

According to the U.S. Energy Institute, about 4% of American households heat their homes with an oil furnace, and the majority of those homes are in the Northeast. If your old oil furnace is costing more and more to repair, or you’re tired of high home heating oil prices, you may not realize that you can replace an oil furnace with an electric heat pump.

The truth about heat pumps

Heat pump technology has come a long way in the last 10 years. While many people in northern states don’t think an air-source heat pump system can keep them warm in cold weather, this couldn’t be further from the truth. It’s why states like Maine have gone whole-heartedly for heat pumps.

Rather than burn a fossil fuel to generate heat, air source heat pumps transfer heat from the air. A heat pump uses the refrigeration cycle to heat and cool your home. Even in frigid winter air, heat energy is present.

The heat pump extracts heat from the air and transfers it inside during the heat exchange process. When it’s warm outside, it reverses the cycle and acts like an air conditioner, removing hot air from your home.

Both split-system heat pumps and ductless mini-split heat pumps can do a great job heating (and cooling) your home. If you’ve heard a lot of buzz about electrification and heat pumps but don’t know much about them, we have some reading for you. Each of the following blogs addresses some of the most common heat pump topics.

Why switch from an oil furnace to a heat pump?

There are several reasons, including:

You get quiet, even heating, with no furnace noises.
With a variable-speed system, you’ll get more even heating (and cooling).
No furnace burning smells or carbon monoxide danger.
Electricity is cheaper than home heating oil.
Heat pumps are more efficient than any furnace. Sometimes 2-3 times as efficient.
Big federal tax credits and heat pump rebates can help pay for a traditional heat pump system or mini-split system.
You reduce your carbon footprint.
You gain back the space taken up by the oil tank

Plan ahead for best results

Converting from an oil furnace to a heat pump system is no small task. If making the switch is even on your radar, start getting quotes from experienced HVAC professionals now. Don’t wait until the dead of winter when your oil furnace fails – then you may cave and go for a straight oil furnace replacement -replacing your old oil furnace with another oil furnace because it’s the easiest and fastest thing to do.

Then you’re locked into paying high home heating oil prices for another 15+ years.

Weatherize your home before making the switch

If you have an older home with sub-par insulation along with drafty doors and windows, fix those issues first by weatherizing your home. You want to avoid wasting energy by letting heat escape.

Sealing up cracks, improving insulation, and even replacing old windows and doors will enable your heat pump system to operate at peak efficiency.

How much does it cost to replace an oil furnace with a heat pump?

We’re not going to lie. Replacing an HVAC system isn’t cheap. It’s one of the biggest home improvement projects there is. The good news is that there are tax credits and rebates to help you pay for the system, and HVAC financing as well.

But by replacing an oil furnace with an electric heat pump and air handler or ductless mini-split system, you will see very real cost savings on your heating bill.

Your electric bill will most certainly go up, but you won’t have the yearly cost of ordering home heating oil.

The best way to find out what a ducted heat pump system or a multi-zone heat pump system for your home will cost is to get estimates from several local HVAC companies. Not sure who to call? Check out our tips for choosing the right HVAC contractor.

Work with the heat pump and mini-split experts

If you’re ready to ditch dirty and expensive oil heat and embrace electrification, be sure to work with an HVAC company with expertise in designing and installing electric heat pump systems. Whether you have ductwork to accommodate a traditional split system or you have an older home without ductwork and need a ductless mini-split system, you need to partner with experienced HVAC contractors.

Contacting your local Trane dealer (or dealers) is a good place to start. Trane has been at the forefront of heat pump technology and our partnership with Mitsubishi Electric means we install Mitsubishi mini-splits – the best in the industry.

Browse Trane heat pumps

Anne Fonda, Content Writer

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.

Expert review by Kimberly Sexton, Senior Systems Engineer