Heat pumps move heat instead of burning fuel, so they use less energy to warm your home

A heat pump is more efficient than a gas furnace in most climates because it moves existing heat from outside into your home rather than generating heat by burning gas. A furnace wastes energy as exhaust; a heat pump captures heat that is already there. In practical terms, a heat pump delivers two to four units of heat for every unit of electricity it uses. A gas furnace converts about 90 percent of the gas it burns into heat — the other 10 percent escapes up the flue — so it delivers roughly 0.9 units of heat per unit of fuel energy.

The gap widens in mild climates. In places where winter temperatures rarely drop below 35°F, a heat pump runs at peak efficiency all season. In cold climates — where temperatures stay below freezing for months — a heat pump's efficiency drops as outdoor temperatures fall, and many systems switch to electric resistance heating (which is less efficient than the heat pump itself) when it gets very cold. A gas furnace performs the same way regardless of outdoor temperature.

Key Takeaways

  • Heat pumps use 50 to 70 percent less energy than gas furnaces in mild climates because they move heat instead of creating it.
  • In cold climates below 20°F, a heat pump's efficiency advantage shrinks because it must work harder to extract heat from cold air.
  • Your heating costs depend on local electricity and gas prices, not just equipment efficiency — in some regions gas is cheaper to run despite lower efficiency.
  • Heat pump installation costs more upfront, but lower operating costs recover the difference over 10 to 15 years in most climates.
  • A heat pump also cools your home in summer, while a furnace requires a separate air conditioner.

How efficiency is measured and what the numbers mean

Furnace efficiency is rated as AFUE (Annual Fuel Utilization Efficiency), shown as a percentage. A furnace with 95 percent AFUE converts 95 percent of the gas it burns into usable heat; the remaining 5 percent leaves through the vent. Most modern furnaces range from 90 to 98 percent AFUE. That sounds high, but it only measures how much of the fuel becomes heat — it does not measure how much energy you actually need to heat your home.

Heat pump efficiency is rated as HSPF (Heating Seasonal Performance Factor) or COP (Coefficient of Performance). These numbers show how many units of heat the pump delivers for each unit of electricity consumed. An HSPF of 8 means the pump delivers 8 units of heat for every 1 unit of electricity used. Because electricity is measured differently than gas, you cannot compare AFUE and HSPF directly — but the real-world result is that a heat pump with HSPF 8 uses roughly half the energy of a 95 percent AFUE furnace in a moderate climate.

The reason is thermodynamics, not marketing. A furnace must create heat by burning fuel. A heat pump borrows heat from the air or ground and moves it indoors. Moving heat requires less energy than making it.

Operating costs depend on your local electricity and gas prices

A heat pump is more efficient, but whether it costs less to run depends on what you pay for electricity versus gas in your area. In regions where natural gas is cheap and electricity is expensive, a gas furnace may have lower annual heating bills despite using more energy. In regions where electricity is cheap or gas is expensive, a heat pump will cost less to operate.

As an example: if your local gas costs $1.20 per therm and electricity costs $0.14 per kilowatt-hour, a 95 percent AFUE furnace and an HSPF 8 heat pump may cost roughly the same to run in a cold climate, even though the heat pump uses less total energy. If electricity costs $0.10 per kilowatt-hour, the heat pump wins by a wide margin. If gas costs $0.80 per therm, the furnace may be cheaper. Your utility bills show your local rates; a contractor can estimate annual heating costs for both systems in your home.

This calculation also shifts if you have solar panels or time-of-use rates that lower electricity costs during off-peak hours.

Heat pump efficiency drops in very cold climates

A heat pump extracts heat from outdoor air even when it is cold, but the colder the air, the harder the pump must work and the less efficient it becomes. Below 20°F, many heat pumps lose 20 to 40 percent of their rated efficiency. Below 0°F, the loss is steeper. In climates where temperatures regularly drop below 10°F for weeks at a time, a heat pump's efficiency advantage over a furnace shrinks significantly.

Manufacturers address this by adding electric resistance heating (a backup heater that works like a space heater) to kick in when outdoor temperatures fall below a set point — often 20°F or 35°F depending on the model. Resistance heating is less efficient than the heat pump itself, so it raises your operating costs during the coldest weeks. A gas furnace does not have this problem; it heats equally well at 0°F and 50°F.

Ground-source heat pumps (which extract heat from the earth instead of the air) stay efficient in cold climates, but they cost $15,000 to $30,000 to install because they require digging or drilling, so they are less common in residential homes.

Installation and replacement costs favor furnaces upfront

A gas furnace costs $3,000 to $6,000 installed, depending on your home's size and ductwork condition. A heat pump costs $8,000 to $15,000 installed for an air-source system. If you need a new air conditioner as well, a furnace plus AC unit costs $6,000 to $12,000 total, while a heat pump replaces both for a single price.

The higher upfront cost of a heat pump is recovered through lower operating costs over time. In a mild climate where a heat pump runs efficiently year-round, the payback period is typically 8 to 12 years. In a cold climate where efficiency drops in winter, payback may take 12 to 15 years. After that point, the heat pump saves money every year.

Federal tax credits and state rebates reduce the net cost of a heat pump in many regions. The federal Inflation Reduction Act offers a tax credit of up to $2,000 for heat pump installation in some cases; state and utility programs add more. Check your state's energy office website or ask a local contractor what rebates are available in your area.

Heat pumps also cool your home, furnaces do not

A heat pump works as both a heater and an air conditioner. In summer, it reverses direction and moves heat out of your home. A furnace only heats; if you want air conditioning, you must buy a separate AC unit. Over the life of the equipment, a heat pump that handles both heating and cooling often costs less than a furnace plus an air conditioner, even though the heat pump's upfront price is higher.

If your current air conditioner is old or failing, replacing it with a heat pump system makes the economics more favorable. If your AC is new and working well, keeping it and adding a furnace may be cheaper in the short term, but you will eventually replace the AC, at which point a heat pump becomes the single system.

Ductwork and home layout affect real-world efficiency

Both furnaces and heat pumps work best in homes with well-sealed ductwork. Leaky ducts waste heated air before it reaches your rooms, reducing the efficiency of either system. If your ducts are in an unconditioned attic or crawlspace, sealing them before installing a new heater — furnace or heat pump — will lower your heating costs more than the choice of equipment itself.

Heat pumps also work well in homes without ducts. A ductless mini-split heat pump uses a small outdoor unit and one or more indoor wall-mounted units, so it avoids ductwork losses entirely. Ductless systems are more efficient than ducted systems in the same home because no heat is lost in the ducts. They cost slightly more to install but are often the best choice for homes with poor ductwork or room additions that are hard to heat.

Frequently Asked Questions

Will a heat pump work in my climate?

Heat pumps work in all climates, but their efficiency advantage is largest in mild regions and smallest in very cold ones. In climates where winter temperatures regularly drop below 0°F, a furnace may be more practical because a heat pump's backup electric heating becomes expensive. A contractor can estimate heating costs for both systems in your specific location and climate.

How much will I save on heating bills with a heat pump?

Savings depend on your local electricity and gas prices, your home's insulation, and your climate. In mild climates, expect 30 to 50 percent lower heating costs. In cold climates, savings may be 10 to 30 percent. Your utility company can show you historical heating costs; a contractor can estimate what a heat pump would cost to run based on that history.

Can I replace my furnace with a heat pump if I have ducts?

Yes. Most heat pumps fit into existing furnace ducts without modification. A contractor will inspect your ductwork and seal any leaks before installation. If your ducts are severely damaged or undersized, they may need repair or replacement, which adds to the cost.

Do heat pumps work during power outages?

No. Heat pumps require electricity to run. A gas furnace will also stop working during an outage unless it has a battery backup for the ignition system. If power reliability is a concern, ask about battery backup options or a backup generator for either system.

Is a heat pump quieter than a furnace?

Heat pumps are generally quieter indoors because they do not have a combustion process or a flue. The outdoor unit makes noise similar to an air conditioner. A furnace is quiet indoors but has no outdoor component. Noise levels vary by model; ask to hear a demonstration unit before deciding.