Can a New Air Conditioner Reduce Your Cooling Bills?

by Gary Foreman

A new air conditioner may or may not be the answer to lower cooling bills. Here’s what you should know to determine if a new unit will save you money…or not.

Dear Dollar Stretcher,
Our house and the central air conditioner is at least 12-14 years old. Our serviceman has told us that the compressor unit is too small for our house and the original builder should have put in a larger unit. We are considering having the A/C unit changed to a new, more energy-efficient model that would be the correct size for our house. My question is – where can I get information to determine if a new air conditioner can lower our cooling bills and be worth the cost of the new unit?
Donna, Highland, IL

It seems that more and more summers get up into scorching temperatures for most of the US. Fortunately, about half of all homes have central air conditioning. The bad news is that it does cost money to run them. Central air conditioning and heat pumps rank third in total residential energy usage. Only heat and water heating consume more.

3 Things to Consider before Replacing Your Air Conditioner

Let’s take a look at three topics: air conditioner efficiency, selecting the right size air conditioner and buying a new system.

1. SEER: Measuring an air conditioner’s efficiency

An air conditioner’s efficiency is measured by it’s SEER (Seasonal Energy Efficiency Ratio). The Department of Energy defines SEER as the total cooling in BTU’s divided by the watts consumed. A higher SEER indicates a more energy efficient system.

Until 1979 the average central home air conditioning system had a SEER of 6.0. In the ’90’s a minimum standard of 10.0 was set. New, even higher standards, are being debated now.

As you might expect, an air conditioner with a higher SEER will cost more. The DOE estimates that a unit with a SEER of 13.0 will cost about 15% more than one with a SEER of 10.0. But that 13.0 unit will provide 30% more cooling per watt consumed.

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Will a more efficient air conditioner save enough to pay for the cost of the new unit?

The DOE thinks that a more efficient unit will save enough to pay for the increased costs. They figure that operating the 13.0 SEER unit vs. a 10.0 SEER one will save $113 more than the additional cost to purchase it.

Not for Donna, but if you live in a warmer climate you might even want to consider a higher efficiency unit with an SEER of 15.0 or more. It will cost more, but could pay dividends in areas requiring heavy air conditioning usage.

Remember that SEER only measures the efficiency of the air conditioner. It doesn’t take into consideration how well your home is insulated, the condition of your ductwork or other factors that affect cooling.

2. Choosing the correct size air conditioner

Determining the correct size is a harder problem. Air conditioners are rated in Btu’s/hour or in ‘tons’. A ton is 12,000 Btu’s/hour. A bigger air conditioner is not necessarily a better air conditioner. If a unit is too big it will cost more to buy, more to operate and won’t do as good a job dehumidifying the air. According to The Consortium for Energy Efficiency (CEE), a national, non-profit public benefits corporation, a properly sized air conditioning system can reduce energy usage by up to 35%.

Determining the correct size isn’t easy. It’s not just a matter of calculating the volume of air that you need to cool. The climate, style of your home, number of windows, amount of insulation, weather stripping and shade as well as other variables all effect the size of the unit needed. It’s hard to do the calculation yourself. You really need a professional. In fact, the industry has created a formula that considers all the variables.

The easiest way to get an idea of the correct size is to get three bids on a new system. Not only will that allow you to compare prices, it will also give you three estimates of how big a system is required.

3. Buying a new unit

Before calling for estimates, you should do any insulation upgrades or weather-stripping since that will effect the calculation. (See Reduce Your Energy Bills by $450 Per Year for more information on insulating and weather-stripping.)

You’ll also want to check with the local electric company before making a purchase. Many offer rebates when you buy a more energy efficient air conditioner. Don’t forget to consider the repair record and the warranty offered by the manufacturer.

Should you replace your old air conditioner before it quits working?

Should you replace your air conditioner before it quits working? According to the DOE, a 13.0 SEER unit would only reduce the electric bill by $42 per year vs. a 10.0 SEER unit. Of course that’s an average. In Donna’s case, if her unit has a SEER of 8.0 and she replaces it with one at 12.0, she’ll reduce her cooling bills by one third.

At 12 to 14 years old, the air conditioner is nearing the 15 year average life span. Donna might be wise to start shopping now while she has time to make a careful selection. Even if the new unit doesn’t pay for itself right away, it could be a wise purchase.

Reviewed August 2019

About the Author

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com. Gary shares his philosophy of money here. Gary is available for audio, video or print interviews. For more info see his media page.

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