Can a New Air Conditioner Reduce Your Electric Bills?

by Gary Foreman

DIY Landscaping for Less photo

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 AC technician 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 – how can we determine if a new air conditioner can lower our electric bills and be worth the cost of the new unit?

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. Depending on where you live, central air conditioning typically ranks second or third in total residential energy usage.

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.

So are new A/C units more energy-efficient? They are if they have a higher SEER than your current unit. And chances are a new unit will have a higher SEER and here’s why.

Until 1979, the average central home air conditioning system had a SEER of 6. In the ’90’s, a minimum standard of 10 was set and then 13 in 2006. As of 2023, new air conditioners installed in warmer climates must have a 15 SEER, although you may want to consider a higher SEER if you live in the south. It will cost more, but could pay dividends in areas requiring heavy air conditioning usage. Northern climates can only install new 14 SEER units. The average air conditioner has a SEER of 15 to 18, although some have a SEER as high as 30.

As you might expect, an air conditioner with a higher SEER will cost more. According to, the price difference between a 15 SEER and 17 SEER central air conditioner is between $1,500 and $2,500.

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

The Department of Energy (DOE) thinks that buying a more efficient air conditioner will save enough to pay for the increased costs. The DOE estimates that a new A/C unit could lower your electric bill by 20% to 40%, even if your current air conditioner is only 10 years old.

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. If you really want to save, you should take steps to ensure you aren’t wasting energy because of these additional factors.

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 Energy Bills by Hundreds 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?

An air conditioner that is 12 to 14 years old is nearing the 15 to 20 year average life span. You might be wise to start shopping sooner rather than later while you have time to make a careful selection. If your A/C finally dies during the summer — or during a cold winter if you have central heat and air — you may end up spending more than necessary since you’ll be rushed to replace it.

Even if the new unit doesn’t pay for itself right away, it could be a wise purchase.

Reviewed August 2023

About the Author

Gary Foreman is the former owner and editor of The Dollar Stretcher. He's the author of How to Conquer Debt No Matter How Much You Have and has been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, and

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