Cost to Convert Oil Furnace to Propane: Typical Expenses and Considerations

Converting an oil furnace to propane is a common home heating upgrade that can improve efficiency, reduce maintenance, and affect long-term fuel costs. This guide outlines the expected cost to convert oil furnace to propane, key factors that influence pricing, necessary equipment changes, permits, and practical steps for homeowners to evaluate whether conversion makes financial and operational sense.

Item	Typical Cost Range (US)
Basic Burner Conversion Kit & Labor	$500 – $2,000
New Propane Furnace Installation	$3,000 – $8,000+
Propane Tank Installation (Aboveground)	$800 – $2,500
Propane Tank Installation (Underground)	$2,000 – $6,000
Piping, Regulators, Permits	$300 – $1,500
Full Conversion (Average)	$2,500 – $10,000+

Why Homeowners Convert Oil Furnaces To Propane

Homeowners consider converting an oil furnace to propane for several reasons: higher clean-burning efficiency, lower maintenance, easier fuel delivery logistics, and potential environmental benefits. Propane typically produces fewer particulates and less sulfur than heating oil, which can lead to fewer service calls and cleaner boilers or furnaces.

Primary Cost Components

Burner Conversion Or Replacement

Many oil-fired furnaces can be converted by replacing the oil burner assembly with a propane-compatible burner or installing a conversion kit. A conversion kit plus labor generally ranges from $500 to $2,000, depending on model compatibility and local labor rates.

Full Furnace Replacement

When an existing furnace is near the end of its service life or incompatible with conversion, homeowners often install a new propane furnace. New units vary widely by AFUE rating and capacity, with installed costs typically between $3,000 and $8,000 or more for high-efficiency models.

Propane Tank Purchase Or Lease

Propane service requires a storage tank. Aboveground tanks are less expensive, commonly $800 to $2,500 installed. Underground tanks cost more due to excavation and safety measures, often $2,000 to $6,000 installed. Many providers offer lease or free tank programs, affecting upfront costs.

Piping, Regulators, And Safety Devices

Conversion requires regulated gas piping, a pressure regulator, fittings, and potentially new venting. Expect to pay $300 to $1,500 for piping and associated parts, depending on the distance from the tank to the furnace and local code requirements.

Permits And Inspections

Local building permits and safety inspections are typically required for fuel conversions. Permit costs vary by jurisdiction, commonly $50 to $500. Professional contractors usually handle permit submissions as part of their service.

Factors That Affect The Total Conversion Cost

Several variables change the final price. Understanding these helps homeowners get accurate estimates.

• Furnace Age And Condition: Older equipment may need replacement rather than conversion.
• Home Size And Heating Load: Larger homes require higher-capacity furnaces and tanks.
• Tank Type And Location: Aboveground vs underground and proximity to the house affect installation complexity.
• Local Labor Rates: HVAC and plumbing fees vary by region.
• Code Requirements: Local codes determine venting, clearance, and installation specifics that can add costs.

Conversion Process: Step-By-Step

Assessment And Quote

A certified HVAC or fuel technician inspects the oil furnace, chimney or venting, and the home’s heating needs. They determine whether a burner conversion is feasible or if full furnace replacement is recommended.

Tank Installation Or Sourcing

If the home doesn’t have a propane tank, the homeowner chooses between buying or leasing a tank. The installer determines placement, clearances, and whether excavation is necessary for an underground tank.

Equipment Conversion Or Replacement

Technicians install the propane burner or a new propane furnace, configure the fuel train, and install regulators and safety devices per manufacturer recommendations and code.

Piping, Venting, And Controls

New gas piping is routed from the tank to the appliance with appropriate regulators and shutoffs. Venting is inspected and modified as needed to ensure safe combustion air and exhaust removal.

Testing, Inspection, And Commissioning

After installation, the system is pressure-tested for leaks, fired up, and tuned for proper combustion. Local inspectors may perform final checks before the system is approved.

Comparing Conversion Versus Replacement

Choosing between converting the existing oil furnace and installing a new propane furnace depends on cost, expected lifespan, efficiency, and reliability.

• Conversion Pros: Lower upfront cost when compatible; shorter disruption; reuses existing equipment.
• Conversion Cons: May not achieve the highest efficiency; older components remain; possible higher long-term maintenance.
• Replacement Pros: Modern propane furnaces can reach AFUE ratings of 95%+, lower operating costs, better warranties, and improved home comfort.
• Replacement Cons: Higher upfront cost; longer installation time.

Estimated Cost Examples

Scenario	Typical Total Cost	Notes
Simple Burner Conversion, Existing Tank	$700 – $2,000	Labor and conversion kit only
Conversion Including New Aboveground Tank	$1,500 – $4,000	Includes piping and basic tank
Full Furnace Replacement With Aboveground Tank	$4,000 – $10,000	Mid-range new furnace, installation, permits
Underground Tank And New High-Efficiency Furnace	$7,000 – $15,000+	Higher end equipment and excavation

Operational Costs And Fuel Pricing Comparison

Fuel price and furnace efficiency determine operating costs more than installation expense. Propane often has a lower BTU cost compared to heating oil per usable heat when paired with a high-efficiency furnace.

Homeowners should compare historical local prices for heating oil and propane and factor in the efficiency (AFUE) of their current oil furnace versus expected AFUE of a propane system to estimate payback time.

Incentives, Rebates, And Financing Options

Federal and state programs sometimes offer incentives for cleaner heating systems. Local utilities or propane suppliers may provide rebates, discounts, or low-interest financing for conversions to propane or new high-efficiency furnaces.

Homeowners should research state energy office programs, local utility incentives, and manufacturer rebates to reduce net costs.

Safety And Code Considerations

Propane installations must comply with NFPA 58 and local building codes. Safety requirements include proper tank setbacks, ventilation, emergency shutoffs, and leak detection. Licensed technicians should perform conversions and installations to ensure code compliance.

Questions To Ask Contractors

• Are You Licensed And Insured For Propane Conversions And Installations?
• Can You Provide References And Recent Job Photos?
• Do You Handle Permits And Inspections?
• What Warranties Cover Labor And Equipment?
• Will You Provide A Detailed Written Estimate Including All Fees?

When Conversion May Not Be Advisable

Conversion may not be recommended when the oil furnace is near failure, when venting is incompatible, or when expected long-term savings do not justify replacement costs. In these cases, a direct replacement with a modern propane or other fuel-efficient system is often the better investment.

Practical Tips For Homeowners

• Obtain Multiple Quotes From Licensed Contractors To Compare Scope And Pricing.
• Check Local Fuel Prices And Projected Trends To Estimate Operating Costs.
• Ask About Tank Lease Versus Purchase Pros And Cons For Long-Term Ownership.
• Request A Clear Timeline And A Detailed Scope Of Work Before Starting The Project.

How To Estimate Payback Period

To estimate payback, calculate the total conversion cost, then subtract incentives. Next, estimate annual heating cost savings by comparing current annual oil bills to projected propane bills with the new system efficiency. Divide net cost by annual savings to get the payback period in years.

Resources And Further Reading

Homeowners can consult local propane suppliers, the U.S. Department of Energy resources on residential heating, and the National Propane Gas Association for safety and planning guidance. Licensed HVAC contractors and local building departments provide jurisdiction-specific code information and permit requirements.

If additional clarification or a tailored estimate is needed, contacting a certified HVAC or propane technician for an on-site assessment is recommended.