Whether a heat pump or a furnace costs less over its life depends mostly on three things: what you're heating with now, your local electricity and fuel prices, and whether you also need air conditioning. A heat pump usually costs more to install than a gas furnace alone but often costs about the same as a furnace plus central air, since it does both jobs. Against oil, propane or electric baseboard, heat pumps typically save money; against cheap natural gas, the result is closer and varies by province.
Key takeaways
- Compare a heat pump against a furnace plus an air conditioner if you want cooling; the up-front gap shrinks a lot.
- Heat pumps deliver roughly 2–4 units of heat per unit of electricity over a season, depending on climate and model.
- Against oil, propane and electric resistance heat, heat pumps usually win on operating cost.
- Against natural gas, the answer depends on your electricity rate and gas price; in low-electricity-rate provinces, heat pumps often come out ahead.
- A hybrid system (heat pump plus gas furnace) is a middle path worth considering.
Up-front costs
All costs below are approximate Canadian installed ranges for a typical detached home and vary with home size, ductwork condition, electrical upgrades and region.
| System | Approx. installed cost | Provides |
|---|---|---|
| High-efficiency gas furnace | $4,000–$8,000 | Heating |
| Central air conditioner | $4,000–$8,000 | Cooling |
| Furnace + central AC (together) | $7,000–$14,000 | Heating + cooling |
| Ducted cold-climate air-source heat pump (with backup) | $9,000–$20,000 | Heating + cooling |
| Ductless mini-split (single zone) | $4,000–$7,000 | Heating + cooling for one area |
| Ground-source (geothermal) heat pump | $30,000–$60,000+ | Heating + cooling |
If your air conditioner and furnace are both near the end of their lives, the difference between replacing both and installing a heat pump may be modest. If you only need a new furnace and don't want cooling, the furnace is cheaper up front.
Operating costs: compare the cost of useful heat
The fairest way to compare is the cost of each kilowatt-hour of heat actually delivered into your home. Here's an illustrative calculation, using rounded example prices (yours will differ):
- Natural gas: One cubic metre contains about 10.3 kWh of energy. A 95% efficient furnace delivers about 9.8 kWh. At an all-in price of roughly $0.45 per cubic metre (including delivery), that's about 4.6¢ per kWh of heat.
- Heat pump: With a seasonal efficiency (COP) of around 2.5, each kWh of electricity delivers about 2.5 kWh of heat. At 15¢/kWh electricity, that's about 6¢ per kWh of heat. At 8¢/kWh, it's about 3.2¢.
- Heating oil: At roughly $1.60 per litre and 85% efficiency (about 9 kWh of heat per litre), heat costs about 18¢ per kWh.
- Electric baseboard: 100% efficient, so heat costs the same as your electricity: 8–20¢ per kWh depending on province.
These numbers are illustrative only. Plug in your own rates from your utility bills to get a better estimate.
What changed in 2025
The federal consumer carbon charge on natural gas, heating oil and propane was set to zero in April 2025. That lowered gas and oil bills and narrowed the operating-cost advantage of heat pumps in provinces where the charge had applied. Future fuel and electricity prices are uncertain, so it's wise to look at a range of scenarios rather than a single number.
Lifetime cost: the full picture
Over 15–20 years, total cost of ownership includes:
- Installation, minus any rebates (check current offers by address with our rebate finder).
- Annual energy cost for heating and cooling.
- Maintenance: both need annual checkups; heat pumps have outdoor units to keep clear of snow and ice.
- Fixed charges: if switching fully off gas, you can drop the monthly gas delivery charge, which can be a few hundred dollars a year on its own.
- Lifespan: furnaces often last 15–20 years; heat pumps typically 15–20 years with good maintenance.
- Financing costs, if you borrow (see financing options).
When each option tends to win
A heat pump usually makes financial sense when:
- You currently heat with oil, propane or electric baseboard.
- You live in a province with relatively low electricity rates, such as Quebec, Manitoba or British Columbia.
- You need to replace your air conditioner as well as your furnace, or want to add cooling.
- Your home is reasonably well insulated and air sealed.
A gas furnace may still be cheaper to run when:
- You have low-cost natural gas and high electricity rates.
- You don't want or need air conditioning.
- Your ductwork or electrical panel would need expensive upgrades.
A hybrid system pairs a heat pump with a gas furnace and switches to gas only on the coldest days. Our post on hybrid heating explains how it works.
Don't forget comfort and emissions
Heat pumps deliver steadier, gentler heat than a furnace cycling on and off, and they provide efficient cooling. In provinces with low-carbon electricity, switching from gas to a heat pump can cut home heating emissions dramatically; even in fossil-heavy grids, emissions typically fall. Learn more on our geothermal and heat pumps page and our carbon page.
Frequently asked questions
Is a heat pump cheaper to run than a gas furnace in Canada?
It depends on local prices. In provinces with low electricity rates, a heat pump is often cheaper to run, while in places with cheap gas and expensive electricity, a high-efficiency furnace may be slightly cheaper.
Do I still need a furnace if I install a heat pump?
Not necessarily. Cold-climate heat pumps can heat most Canadian homes on their own, usually with built-in electric backup for the coldest days, but some homeowners keep their gas furnace as backup in a hybrid setup.
How long does it take for a heat pump to pay for itself?
Payback varies widely, from a few years when replacing oil or electric baseboard to much longer or never when replacing cheap natural gas. Rebates, whether you needed new AC anyway, and your local rates make the biggest difference.
The bottom line
There's no single winner across Canada. Heat pumps are usually the cheaper choice when replacing oil, propane or baseboard heat, or when you need new cooling too. Against natural gas, run the numbers with your own rates, consider a hybrid setup, and factor in comfort and emissions alongside cost.
Sundamentals is an independent, non-profit education platform. Program details and prices change often — check current programs for your address in our rebate finder.