Oil Furnace Buying Guide

Updated: Dec. 09, 2022

Are you considering purchasing an oil furnace? Let us help you make an informed decision.

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The first modern oil furnace with a high-voltage system for self lighting was unveiled in 1918. By the mid-1920s, demand for oil furnaces was high and rising. Being a liquid, oil flows and can be pumped, which made it inherently more convenient than the only practical heating alternatives at the time — wood or coal — both of which had to be moved by hand or shovel.

Today, oil heating is less popular than it used to be because of the low cost of natural gas. Only about five percent of U.S. homes are currently heated with oil. But natural gas is not available everywhere, which is one reason oil furnaces still make sense for some people.

What Is an Oil Furnace?

Any heating device called a “furnace” is typically made to heat air that’s moved throughout a building via a series of metal ducts. Oil furnaces burn a widely-available petroleum product called furnace oil, but they can also burn the kind of diesel fuel normally used in vehicles. As with any modern furnace, oil furnaces can be connected to a thermostat for automatic control of the temperature in your house.

How Does an Oil Furnace Work?

Heating oil stored in a tank drawn into the furnace by a pump. This oil is mixed with air, atomized through a nozzle, then burned. Heat is extracted from this flame through a heat exchanger that warms air. Then this warm air is distributed throughout the building by a fan. Cool air is returned to the furnace through ducts for reheating and distribution. A thermostat turns the furnace ON or OFF, depending on whether the building needs heat or not.

Oil Furnace Features

As you’re looking at new oil furnaces, consider the following technical details:

  • What is the efficiency? Today’s top oil furnaces extract 80 to 90 percent of the energy in oil and deliver it to your home.
  • How is it vented? Oil furnaces can use either a chimney or a simple vent pipe that goes through a wall. This is called direct venting and it saves the cost of installing or replacing a chimney.
  • What is the annual operating cost? Unless your home is new, it has a track record of heating energy consumption. Google “home heating calculator” and you’ll find many online tools that will help you determine how much your home would cost to heat using all the major fuel options, including oil. Compare operating costs and fuel types across the board as you’re making a decision.

Oil Furnace Considerations

As you consider if an oil furnace is in your future, ask yourself these questions:

  • What is the condition of your current furnace? Furnaces typically last 15 to 20 years before replacement is necessary. Even if your old furnace is still working fine, the efficiency boost of a new one can save enough money to pay for it over time.
  • Is the furnace big enough? Have a heat loss calculation done on your home and size the furnace accordingly. The typical danger is installing a furnace that’s too large, increasing your installation costs and possibly reducing efficiency.
  • In what furnace quality do you want to invest ? More expensive oil furnaces should last longer than cheaper models, and they’ll probably operate at a higher efficiency level, too.

How Much Does an Oil Furnace Cost?

Oil furnaces are somewhat less expensive than an equivalent natural gas furnace. But oil furnaces also need a fuel storage tank, so installed cost can sometimes be higher with oil than natural gas. Some jurisdictions require oil storage tanks be replaced every 10 years to avoid leaks, adding to the ongoing cost of ownership.

The typical cost of installing an oil furnace ranges from $5,000 to $9,000, depending on the model chosen and the degree of installation difficulty. As with all heating appliances, the cost of running an oil furnace can vary greatly depending on oil prices. Oil heat is almost always more expensive than natural gas, but oil can cost less than electric heating depending on relative market prices for oil and electric power.

How To Decide Between an Oil Furnace and Other Options

Answering these questions will help you decide if an oil furnace makes the most sense for you:

  1. Is natural gas available?: If it is, then this makes more sense than oil. Natural gas is much less expensive than oil for a given amount of heat energy produced. Oil furnaces also require more maintenance than gas furnaces. And if oil ever leaks from your tank, it poses a big environmental clean-up headache.
  2. Do you have a serviceable oil tank? If you don’t, adding the cost of the new oil tank to the price of the new oil-burning furnace makes cost a deterrent for an oil burner.
  3. Do you value energy security? Oil is like propane or wood in that it’s one of only a few heating sources where the energy is stored on site, not piped in as needed. An electric furnace won’t work from grid power during an electrical outage, and it’s possible that natural gas could stop flowing in an extreme disaster. But with a full oil tank at your place, you’ve got energy for heat right on your property.