How HVAC Contractors Can Stay Profitable in an Affordability-Driven Market
Key Highlights
- Rising energy prices and inflation are causing homeowners to delay HVAC replacements, increasing demand for repairs and financing options.
- The labor shortage emphasizes the importance of in-house training and technology tools that improve installation quality and service efficiency.
- Growth opportunities include promoting heat pumps, bundled HVAC solutions, and expanding service and maintenance agreements for recurring revenue.
- Monitoring economic indicators, regulatory shifts, and technology trends is crucial for contractors to adapt strategies and capitalize on market opportunities.
With Americans continuing to feel pressure from rising costs for essentials like gasoline — which climbed 28% in April compared to a year earlier as the war with Iran disrupted oil supplies through the Strait of Hormuz — and higher electricity prices, affordability has become one of the defining buzzwords shaping the HVAC industry in 2026. According to the U.S. Department of Labor, rising energy costs accounted for more than 40% of the monthly inflation increase, adding even more pressure to household budgets.
Inflation may have cooled from the historic highs of recent years, but the cumulative impact of higher energy bills, rising food costs, and economic uncertainty is forcing homeowners to scrutinize every major purchase. Especially considering the average cost of HVAC system replacement in 2026 compared to years past. According to Yarbrough & Sons, their average system replacement in 2025 was $13,405, based on over 250 installs.
For HVAC contractors, that means more customers are delaying replacements, prioritizing repairs, and seeking financing options that make comfort upgrades manageable within tighter household budgets.
“At a high level, residential demand remains replacement-driven,” notes Jeff Underwood, president, RectorSeal. “Aging HVAC systems, the refrigerant transition, and weather still drive activity, but affordability is clearly shaping buying decisions. Homeowners are extending system life where possible, trading down on energy efficiency tiers, and placing more weight on total installed cost and monthly payment than on top-end features.”
Homeowners are also more cautious and deliberate, Underwood adds. “Contractor quotes are taking longer to convert, and homeowners are getting more quotes. Financing has become a core part of the sales conversation rather than an option. Contractors are also managing inventory more tightly and focusing on SKUs they know will move, rather than carrying excess depth.”
Demand has been relatively soft, according to Randy Roberts, senior vice president, Wholesale at Rheem North America. “We continue to see consumers prioritize repairing their existing systems rather than replacing when possible. We are seeing increased parts sales, which reinforces this trend. However, over the last month, there has been some strengthening in the residential space, driven by partnerships with contractors and plumbers to lower financing costs and give consumers options when their HVAC or water heaters need to be replaced.”
The repair vs. replace shift is leading homeowners to seek out contractors with the skills and expertise to accurately diagnose system issues and keep systems running as long as possible.
“Because this requires a more advanced skillset, contractors need to be sure they have the training, expertise, and troubleshooting skills to meet this demand,” says Lenny Diaddario, manager of contractor relations, Copeland. “Some contracting companies are also providing financing models to help homeowners pay for repairs.”
Additionally, Diaddario notes that younger homeowners are looking to trim costs and attempting a do-it-yourself (DIY) approach to their HVAC systems. This has led to more online purchases of HVAC products than ever before, bypassing traditional purchasing channels.
“In some instances, homeowners attempt to install the systems themselves, but often call on contractors to finish the installation. So, contractors need to be prepared to deal with this emerging business and service dynamic,” he says.
According to Jeff Tyminski, vice president of product management, Residential HVAC, and Chris Tanaka, vice president of product management, Commercial HVAC, for Trane, with the greater focus on affordability, residential and commercial customers alike are making HVAC decisions around long-term system value, reliability, and performance.
For homeowners, that means weighing repair-versus-replace decisions while continuing to invest in systems that offer clear benefits in reliability, efficiency, comfort, and brand trust, Tyminski says. And for commercial customers, investment decisions are increasingly tied to payback and operating performance, Tanaka notes.
“While some may extend the life of existing equipment, projects that lower energy, operating, and maintenance costs continue to present a compelling case for modernization,” Tanaka says.
While affordability has become the dominant theme shaping contractor and homeowner decisions in 2026, manufacturers are simultaneously facing mounting pricing pressures of their own. Rising labor costs, regulatory compliance requirements tied to the industry’s transition to A2L refrigerants, and ongoing trade policy uncertainty are continuing to drive up production expenses across the HVAC supply chain. At the same time, revised Section 232 tariffs on steel, aluminum, and copper — combined with broader commodity inflation — are expected to increase costs for HVAC equipment and components throughout the remainder of the year, Roberts notes. Manufacturers say the challenge moving forward will be balancing these escalating operational costs while still delivering competitively priced products that contractors and consumers can afford.
The Skilled Tech Gap Widens
Undeniably, the ongoing labor shortage continues to ripple across every part of HVACR contracting businesses, affecting everything from installation quality and service response times to preventative maintenance capacity and long-term growth plans.
“Unfortunately, there is no shortcut to the level of experience and expertise needed to be proficient in the field, and so the quality of installations and repairs may suffer,” Diaddario says. “However, some contracting companies are setting up their own in-house training centers, requiring their technicians to achieve a high level of education and certification. Some even benefit from available educational grants to support these programs. The result is a much higher level of installation and service quality, with a reputation of excellence to match.”
He notes that Copeland is dedicated to technician training and education for all skill levels, offering in-person, instructor-led courses and self-paced, online training options covering a wide range of HVACR topics.
Rheem has partnered with multiple trade schools and organizations to improve their programs through equipment donations and by helping provide the curriculum to train students to service more technologically advanced products, Roberts says.
“At the same time, technology is helping bridge the gap,” he adds. “Tools like Bluetooth setup through Rheem’s Contractor App and our TotalView platform enable contractors and plumbers to diagnose, monitor, and service their Rheem installs. This technology will help contractors apply the right skills needed for each repair or installation challenge. As an industry, continued collaboration is essential to simplify entry into the trades and highlight the long-term career opportunities available.”
Tyminski agrees that digital tools are helping bridge the knowledge gap by providing step-by-step guidance for installation and commissioning. “Real-time system data access helps ensure that jobs are completed accurately and efficiently. Additionally, connected diagnostics platforms allow contractors to remotely monitor systems, identify issues, and prepare for service calls in advance. By reducing unnecessary site visits and improving first-time fix rates, these technologies are enabling contractors to operate more efficiently and support growth.”
As the labor crunch continues, training is quickly becoming one of the biggest differentiators between contractors that simply survive and those that grow profitably. According to Diaddario, “Lower-GWP refrigerant training should be a top priority,” particularly as A2L refrigerants become more common in residential HVAC and CO2 systems expand in commercial refrigeration. He noted that contractors who develop expertise early in the transition will gain a competitive advantage in both installation and service opportunities. Diaddario also emphasized that many technicians still lack critical skills in wiring, controls, airflow management, and system performance verification — all of which are becoming essential as variable-speed systems, building automation, and connected technologies become standard across the industry.
Manufacturers say technical knowledge alone is no longer enough. Underwood notes that contractors also need to sharpen their understanding of consumer financing and ancillary product offerings — such as surge protection and voltage monitoring — that improve system protection as well as indoor air quality. Meanwhile, Roberts points to the growing importance of connected diagnostics and remote monitoring technologies that help contractors improve service accuracy and efficiency.
Training priorities are also expanding beyond core HVAC equipment into whole-home and electrification solutions. Tyminski says contractors are increasingly focusing on heat pumps, hybrid systems, refrigerant safety protocols, and communicating systems that require more advanced installation and commissioning expertise. At the same time, training around indoor air quality, humidity control, and customer communication is gaining traction as contractors look for ways to provide broader value while improving profitability.
Where Contractors Can Still Win Big
Even amid cautious consumer spending and continued affordability concerns, manufacturers say significant growth opportunities remain available for HVAC contractors willing to evolve their offerings and customer approach. As the industry moves closer to heating season, heat pumps continue to represent one of the biggest untapped opportunities — particularly dual-fuel systems that balance efficiency, comfort, and affordability.
“For budget-conscious customers, dual-fuel heat pumps offer a combination of affordability and comfort,” Diaddario says, noting that these systems allow homeowners to rely on traditional gas furnaces during extreme cold while still benefiting from year-round heat pump efficiency. He adds that contractors who understand regional incentives, rebates, and electrification programs will be better positioned to help homeowners offset upfront costs and close more sales.
Manufacturers also see growing opportunity in bundling solutions rather than focusing solely on single-equipment replacement jobs. Roberts notes that contractors can create more value during customer visits by combining HVAC and water heating solutions into one package.
“With our special financing rates and extended warranty coverages, we can provide comprehensive comfort solutions that maximize value for homeowners,” Roberts says. He adds that retrofit-friendly heat pumps designed to work with existing infrastructure — without requiring major electrical upgrades — are helping make electrification more accessible to a broader customer base.
Connected technologies and smart home integrations are also creating new service and maintenance opportunities heading into the second half of 2026. Homeowners are showing greater interest in remote monitoring, system alerts, performance tracking, and connected diagnostics that provide more visibility and control over home comfort systems.
At the same time, financing remains one of the most important tools for unlocking opportunity in today’s market. With homeowners closely evaluating affordability and long-term value, contractors who clearly explain financing options, rebates, energy savings, and lifecycle costs are more likely to earn trust and close projects. As Tyminski notes, customers are increasingly looking for contractors who can help them navigate not just equipment selection, but the broader transition toward more energy-efficient and electrified HVAC solutions.
Beyond equipment sales and whole-home upgrades, manufacturers say one of the biggest untapped opportunities for contractors in the second half of 2026 lies in expanding service and maintenance agreement offerings. As homeowners and commercial building owners look for ways to extend equipment life and control long-term operating costs, recurring service programs are becoming increasingly valuable for both customers and contractors. At the same time, connected monitoring technologies are making it easier for contractors to provide proactive maintenance, identify issues earlier, and strengthen long-term customer relationships.
In the commercial market, Diaddario says contractors have a significant opportunity to upsell service agreements by emphasizing the value of expert diagnostics and ongoing system monitoring. “A service contract with a dedicated team of experts is essential for maintaining optimal system performance,” Diaddario explains. While many commercial building owners are creating in-house maintenance teams, he noted those teams are often only equipped to handle basic maintenance tasks rather than advanced troubleshooting and repairs. He adds that contractors who leverage system data, establish performance baselines, and continuously monitor equipment can help customers detect performance deviations early — preventing larger, more costly failures down the road.
On the residential side, maintenance agreements paired with financing and warranty programs are creating new recurring revenue opportunities for contractors. Roberts notes that bundling maintenance plans with extended labor coverage can provide homeowners with greater peace of mind while helping contractors improve customer retention. “When paired with maintenance agreements, this creates a compelling value proposition for homeowners while generating consistent, recurring revenue streams for contractors,” he says.
Signals Contractors Should Watch Closely
As we head into the second half of 2026, success will depend on closely monitoring a mix of economic conditions, technology adoption, and shifting customer behavior. Consumer sentiment, interest rates, replacement activity, financing availability, and distributor inventory levels remain critical indicators of HVAC demand, while ongoing tariff pressures and evolving regulatory requirements could continue to impact equipment pricing and supply chains. As mentioned previously, industry experts expect heat pump adoption to remain one of the industry’s strongest long-term growth drivers, as system performance improves, cold-climate capabilities expand, and a wider range of price points makes electrification more accessible to homeowners and commercial customers alike.
“Consistent heat pump growth has become the norm in recent years, with heat pumps outselling gas furnaces since 2021,” Diaddario says. “We anticipate continued expansion of heat pump systems across the residential and commercial sectors. Copeland is supporting the development of these products with compression technologies that span the heat pump equipment landscape. Our seamless integration of compressor electronics, variable-frequency drives (VFDs), and system components provides enhanced diagnostics and communication capabilities, helping contractors streamline heat pump system commissioning, troubleshooting, and servicing.”
Rheem will continue to monitor consumer spending, interest rates, commodity prices, and unemployment rates to stay on the pulse of the marketplace, Roberts says. “Tariffs and unexpected regulatory shifts remain the top disruptors to our industry's supply chain. Efficiency regulations for commercial air and water, as well as new standards for residential furnaces, are poised for major changes. Rheem is tracking these closely for any changes so we can adjust quickly if needed.”
With so many economic and regulatory variables still in play, manufacturers say contractors cannot afford to take a reactive approach heading into the final months of 2026. Instead, the companies best positioned for growth will be those that continue investing in training, customer communication, and technology adoption while staying flexible as market conditions evolve. From refrigerant transitions and connected diagnostics to financing conversations and whole-home comfort solutions, manufacturers say contractors who sharpen both their technical expertise and customer engagement strategies will have the strongest opportunity to finish the year on solid footing.
“It’s critically important to continue your education on lower-GWP refrigerant systems and stay current with evolving heat pump technologies,” Diaddario says. “This means increasing training on variable-capacity modulating compression platforms and the controls that support them, A2L systems in residential and commercial HVAC, and CO2 and A2L systems in commercial refrigeration.”
He adds, “To improve response times and efficiency in the field, continue training your staff to diagnose systems quickly and accurately. Leveraging tools like Copeland Mobile’s HVAC Fault Finder for on-the-job support can help technicians troubleshoot quickly and locate replacement parts.”
Roberts advises contractors to continue prioritizing excellent customer education and service. “Contractors who take the time to clearly communicate system options, financing solutions, and long-term value will be better positioned to win business. At the same time, embracing new technologies and leveraging the flexibility of heat pump solutions can help address complex installation challenges.”
He also notes that aligning with manufacturer partners who are actively investing in contractor support programs, financing offerings, and training resources can provide a meaningful competitive advantage in today’s market.
Tyminski wants contractors to understand that homeowners are increasingly interested in a more consultative experience that evaluates the entire home comfort system rather than only addressing the immediate service need. “This includes considering system efficiency, airflow, indoor air quality, controls, and long-term reliability as part of the customer conversation. Connected system insights can support more informed, system-level recommendations aligned with homeowner needs and priorities. This approach can help contractors respond to evolving homeowner expectations while building longer-term customer relationships.”
Affordability pressures and economic uncertainty will continue to present challenges as the year continues, but the long-term outlook for the HVAC industry remains fairly optimistic. Contractors who adapt quickly, invest in technician training, embrace connected technologies, expand financing and maintenance offerings, and position themselves as trusted whole-home comfort advisors will be best equipped to navigate the challenges ahead.
About the Author
Nicole Krawcke
Nicole Krawcke is the Editor-in-Chief of Contracting Business magazine. With over 10 years of B2B media experience across HVAC, plumbing, and mechanical markets, she has expertise in content creation, digital strategies, and project management. Nicole has more than 15 years of writing and editing experience and holds a bachelor’s degree in Journalism from Michigan State University.