Replacement Window Cost Payback

Are you thinking about purchasing replacement windows and doors for your home simply because you feel you’ll save lots of money on your energy bills? Some salespeople count on this fuzzy emotion when they try to get you to sign a contract that commits you to spending thousands and thousands of dollars on this major home improvement.

I love numbers and used to spend my lunch break on job sites doing all sorts of calculations. One day I produced a very accurate estimation of how many 2 x 4s a lumber company sold in a year. I did this because I knew how many delivery trucks they had, how many trips the trucks could make in a day and how many 2 x 4’s were on each load. The general manager of the company was shocked at how close my estimate was.

Years ago I decided to use these same skills to see just how long it takes to see if you really save money when buying replacement windows and doors. The fun part is it only takes a few minutes to do this calculation. To get accurate numbers for you, I decided to survey all of my subscribers who get my free newsletter and who live on Long Island. I asked them to provide their actual natural gas cost figures for different months of the year. The results of the survey were astonishing.

Before I go any further, I want you to realize this column only applies to buying replacement windows and doors based on the sole reason that you think it will make financial sense because of the energy you’ll save. If you need replacement windows to make your home look better, or because your existing windows are falling apart and don’t work, your motivation to purchase is quite different.

You also need to realize that there’s a vast difference in quality in replacement windows. If you want the absolute best ones, you need to buy windows and doors that come with the American Architectural Manufacturers Association (AAMA) Gold Label. These windows and doors, and the components used to make the them, have passed stringent testing for resistance to air leakage, water penetration, and wind pressure. The only windows I’d ever put in my home would have the AAMA Gold Label.

Before we do the simple calculations, here’s what you need to think about. You only start to save money on an energy-based home improvement after you’ve paid yourself back, in actual energy savings, the amount of money you spent on the improvement.

There are sophisticated software programs that can estimate the actual energy savings, but gathering the data can be a burden. To get a real number that’s very accurate you can look at your monthly utility bills. Let’s me show you how simple it is. My method that follows assumes you use natural gas to heat your home. If you use fuel oil, you already know how much you spend each year for heating by adding up your oil bills.

If you study your monthly utility bills and look at the breakdown between the gas and electricity, you’ll be amazed at what you can determine. What you’re trying to determine is just how much money you spend on natural gas for heating only. I know this seems hard to do, especially if you cook, dry clothes and heat water using natural gas.

Here’s the easy part. You use hot water, you cook and dry clothes year round. But your furnace only operates, on average, for about six or seven months per year. The first thing to look at are your gas bills for June, July and August. Your furnace is not on then and the gas you’re using represents what you spend for all the other gas-fueled appliances.

Using the data from my survey of Long Island homeowners like you, I determined that the average gas bill for these three months is about $60 per month. This is what the homeowners are spending, per month, to heat water, cook and dry clothes.

I then asked the homeowners in the survey to tell me what they spend on gas for the months of November, December, January, February and March. After subtracting the average of $60 per month, I determined that the average Long Island subscriber of mine was spending about $600 per year on heating costs. Since some may also use central air conditioning in the summer, let’s add about $200 extra for the electricity used to power the AC units.

I then spent some time looking at different Long Island replacement window company websites. I discovered that some talk about a range of energy savings you may experience by installing new replacement windows. The range is 12 to 27 percent.

Let’s be bold and go with the 27 percent savings. Do the math, $800 X .27, and you’ll see that you may save $216 per year on energy. Now it’s time to see if it’s worth it to buy the replacement windows based on energy savings.

If you get estimates for AAMA-approved windows, remember these are the best ones, you may discover it will cost you about $600-700 per window. The average home on Long Island may have about ten windows so let’s estimate that the total cost will be $6,500.00. If this is the case, it’s going to take you 30 years before you break even and start to save money on the replacement windows. The payback term is much longer if you finance the improvement and are paying interest on the $6,500.00.

The calculations are more complex because you can factor in the savings from maintaining new windows, the cost of natural gas may go up, and several other things. But you also need to consider what would happen if you kept the $6,500 and invested it.

If you got a modest return on your investment of just five percent, you’d make $325 a year which is more money than you’d save on the energy costs. You’d also still have the $6,500 in your savings account, not that of the window company.

The bottom line is it really pays to run a few simple numbers to see at what point you really start to save money. Often it takes a decade or two before you break even. Be smart when you make large energy-savings decisions.


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