It’s summer again and as the mercury rises, it may be time to consider adding or upgrading your air conditioning system. When your HVAC contractor provides you with that bid and asks if you want a 13 seer or a 14 seer condenser, you may do what I do; a blank stare, or you can read an article I found about what the cost savings are in an average summer use. Also, don’t forget to check out the rebates that your local Gas and Electric company may be offering.
Begin by comparing the 14 SEER to the base pricing of the 13 SEER
An average difference between the two may be approximately $722.00. In order to decide if the upgrade is worth it you need to consider how long you plan to live in your current home. Let’s use 5 years because that is the number most quoted when homeowners are asked how many more years they plan to live in their current residence. (the fact that they usually stay longer is irrelevant to us).
That means that the additional (incremental) increase to purchase the 14 seer over the 13 seer is going to cost you $722.00. This is the base number you are trying to determine whether or not will be returned to you from the annual operating cost reduction achieved by the 1 point increase in SEER rating.
Let’s look at the annual cost again to determine the savings achieved by the one point advantage the 14 SEER has over the 13 SEER
13 SEER = $805.00
14 SEER $747.50
16 SEER = $632.50
23 SEER = $448.50
The 14 SEER saves $805.00 – $747.50 = $57.50 over the 13 SEER each year. Multiply this annual savings times your expected years of occupancy and you have a grand total over our 5 year assumption that equals $287.50 (5 X $57.50=$287.50). This falls way short of the total incremental increase in floor pricing of $722.00, therefore based on SEER rating alone this would not be a good investment for only 5 years of ownership.
Be sure to factor in utility rebates and federal tax credits when calculating your return as these reduce your purchase price accordingly. There are federal and local utility enticements in place to make the higher SEER rating options more attractive to homeowners. Using AC 4 Life pricing, these credits will generally smooth out the pricing difference to some degree, but that assumption can’t be made with all pricing you’ll receive elsewhere. (There is another argument that can and will be made for the 14 seer, but for our purpose here, we are strictly confining SEER rating as your selection criteria. I have also ignored the opportunity cost of incremental price increases purposely*)
*Hint – Don’t fall for another common trick whereby the 13 SEER option is prohibitively priced to make the higher SEER ratings seem like an outstanding value. The idea here is to make higher SEER ratings appear to provide lower incremental price increases, thereby unfairly enticing you to consider them. Avoid this shell game entirely by using the average of your 13 SEER estimates to establish your floor pricing, throwing out any pricing from shell game antics.
When you purchase a new air conditioning system for your home, you may be offered a bewildering maze of options, including higher SEER ratings. It is your contractor’s job to provide you with clear, concise information that will allow you make a confident, informed choice about these options without resorting to the “trust me” principle. Call us toll-free at 1-866-862-8922 if you are having trouble getting the answers you need and we will be happy to spend a few minutes with you, even if you are purchasing elsewhere.
* For you financial types out there, actuarial data and time value is ignored here primarily because most of us don’t actually invest our savings, but instead spend it in a discretionary basis on items of depreciating value. As a secondary issue, other ROI comparisons for various consumer products don’t calculate these values either, serving to skew any comparison of products (of dissimilar nature) using unlike values of comparison.
