On Fri, 02 May 2008 21:28:08 -0300, Paul M. Eldridge
wrote:

On Fri, 2 May 2008 14:31:47 -0400, wgd wrote:

My townhouse has the original York Champion heat pump from 1983....

The service guy had been busy trying to sell me a new heat pump. That's
all they want to do. My two closest neighbors in this section still
have their original York heat pumps. They were just good units....

Separate from its physical condition, your system is twenty-five years
old and likely well past its economic life. The SEER ratings of
today's new units are double that of your current system, so your
cooling costs could very well be a lot higher than they need be --
ditto your heating costs. Depending upon local climate, your home's
heating and cooling loads and utility rates, it might make sense to
replace your system now, especially if those rates are steadily moving
upward.

Heat pumps have advanced considerably over the past twenty-five years
and in the last two to three years in particular. Again, you might
want to take advantage of those gains now, especially if your current
system is starting to show its age. Whatever you decide, good luck!

Just to expand on my previous point. I don't know what you pay in
heating and cooling costs now, but for argument's sake I'm going to
assume it's something in the range of $1,200.00 a year. If a new heat
pump can cut those costs in half (and a 50 per cent reduction is the
bare minimum I would expect compared to a twenty-five year old
system), your savings are $600.00 a year.

If the cost of the replacement heat pump is $5,000.00, say, and your
first year savings are $600.00, you will have earned a 12 per cent
return on your investment. Furthermore, if electricity rates increase
at a higher rate than either your cost of borrowing or the return you
earn on your other investments, your financial gain continues to
improve over time. Also bear in mind that you pay for electricity
with after tax dollars, so the $600.00 you spend on additional
utilities represents perhaps $800.00 or $900.00 in pre-tax income.
And unlike other cash generating investments, your savings in utility
costs are not taxable -- this money is all yours to keep or spend as
you wish.

Going forward, I expect electricity costs to move sharply higher and
an investment like this greatly lessens your exposure to this upside
risk. In addition, as someone else pointed out earlier, delaying your
purchase by one or more years could hurt you badly -- copper prices
have shot through the roof and so too freight and all the other
expenses of running a business. These cost increases far exceed the
rate of inflation and are ultimately borne by the consumer.

If the numbers I've used above are fairly representative and you delay
your purchase by just TWO years, your additional out-of-pocket
expenses could exceed two thousand dollars. For example:

1) forfeited electricity savings: $636.00 + $674.00 = $1,310.00
(assumes a 6% increase in years one and two)

2) equipment and labour increases: $400.00 + $432.00 = $832.00
(assumes an 8 per cent increase in years one and two)

The combined two-year loss in this example is $2,142.00 and that
number doesn't include the cost of any future repairs.

You say the service guy just wants to sell you a new system,
presumably in your mind because he wants to make a quick or easy buck.
Well, I can't speak to this individual's motivations, but I can tell
you that keeping your current system could very well cost you a lot
more than you realize and that rather than dismissing his advice
outright, you should explore all options. As a final note, there are
members of this group who are far more knowledgeable about these
systems than me and would be happy to offer their own two cents; but
please don't assume they're steering you in one direction or the other
simply because of some hidden or ulterior motive. Again, good luck!

Cheers,
Paul